The following information answers many of the main concerns prospective buyers have when looking to invest in property in Costa Rica. We have tried to make this a comprehensive guide to the general rules and regulations, but if you have other questions, please e-mail us and we get back to you.

WHAT KIND OF PROPERTIES DO YOU SELL IN THE BAHAMAS AND WHAT ISLANDS ARE THEY ON?

Costa Rica Tropical is a full service real estate company. We sell both residential and commercial properties. These include vacant house and land, acreage, single-family homes, condominiums, resort properties, office/retail buildings, shopping centers, Costa Rica Luxury real estate and Vacation rentals.

WHY SHOULD EXPATS PROPERTY INVESTORS CONSIDER BUYING A HOME IN COSTA RICA?

Costa Rica has attracted a very wide range of property investors (expats and locals) from the very rich who have purchased large multi-million-dollar Costa Rica estate properties to those who have purchased modest condominiums or homes in the $100,000 – $500,000 price range. The old axiom that states that location, location, location is a major determinant of demand and value has pushed the price of properties in specific areas of Guanacaste and San Jose to very high levels, but even at these levels prices are on par with other similar beautiful destinations. It is still possible to purchase waterfront and beachfront property in Costa Rica for as little as $100,000.

HOW IS TITLE TRANSFERRED?

In Costa Rica, property is transferred from seller to buyer by executing a transfer deed (escritura) before a notary public. Unlike common law countries, such as the United States and Canada, where the role of the notary is limited to authenticating signatures, in Costa Rica the notary public has extensive powers to act on behalf of the state. The notary public must be an attorney and she or he may draft and interpret legal documents, as well as authenticate and certify the authenticity of documents.

In order to close on the property, the buyer and seller must select a notary/attorney who will draft the transfer deed and register the sale in the Public Registry (Registro Nacional). the local custom is that the buyer may select his or her notary/attorney to draft the transfer deed if paying cash for the property. If the purchase price is financed, there are generally three alternatives for selecting the notary/attorney.

1. If a large percentage of the purchase price is being financed by the seller and a mortgage needs to be drafted to guarantee payment, then the seller may request that her or his notary/attorney draft the transfer deed.
2. If a property is purchased 50 percent cash and 50 percent financed, it is common for the buyer’s attorney and seller’s attorney to jointly draft the transfer deed and mortgage in a single document. This is known as co-notariado.
3. Finally, the buyer may insist that his or her notary/attorney draft the transfer deed and let the seller’s notary/attorney draft a separate mortgage instrument. In this case, because the mortgage is being drafted separately, it carries a higher registration fee. The registration fees are discussed below in the section on closing costs.
At your option, the property can be purchased in an individual’s name, jointly with other persons, or in the name of a corporation. the decision as to ownership should be based upon your particular situation and after consultation with your attorney.

HOW CAN I ENSURE THAT I HAVE CLEAR TITLE TO THE PROPERTY?

Costa Rican law requires that all documents relating to an interest and/or title to real property be registered in the property section of the Public Registry (Article 460 of the Civil Code). Most properties have a titled registration number known as the folio real, and the records database can be searched with this number or by name index. The Public Registry report (informe registral) provides detailed information on the property, including the name of the title holder, boundary lines, tax appraisal, liens, mortgages, recorded easements, and other recorded instruments that would affect title.
Since Costa Rica follows the doctrine of first in time, first in right, recorded instruments presented to the {Public Registry are given priority according to the date and time in which they are recorded. Obviously, every situation differs and in some cases a review of the Public Registry record will not be enough to uncover all encumbrances. That is why it is important that the buyer have her or his own attorney conduct an independent title search and investigation rather than rely on the seller’s attorney.

HOW ABOUT CLOSING COSTS?

The general custom is for the buyer and seller to share equally in the closing costs. this can be modified by agreement and usually depends upon the particular transaction. Closing costs involve three things: government taxes and fees, notary fee, and mortgage costs, if any.
Government taxes and fees. This includes a real estate transfer tax of 3 percent; a registration fee of 0.5 percent; and documentary stamps (agrarian, hospital, municipal, bar association, national archive and fiscal stamps) totaling approximately 0.55 percent.
Notary fees. the notary who drafts the transfer deed is entitled by law to charge 1.50 percent of the first one million colones of the sales price, and 1.25 percent on the balance.
Mortgage costs. It is customary for the person who is receiving financing to pay the costs of drafting and registering the mortgage instrument. A mortgage can be created simultaneously at the time of sale by adding a mortgage clause in the transfer deed. Or, a separate mortgage instrument can be drafted. both have separate costs. A mortgage within a transfer deed pays registration fees of 0.25 percent in registration fees and approximately 0.53 percent in documentary stamps. The notary will also charge for drafting the mortgage instrument and that fee can range from approximately 0.525 percent to 1.25 percent of the amount of the mortgage, depending on the circumstances involved.
The buyer should be aware that Costa Rican real estate transactions commonly operate on a two-tiered system. since Costa Rican properties have a low property tax appraisal base in relation to market value, it is a customary practice to run property sales through at the registered value, which may be substantially less than the actual sales price of the property. In such a case, all transfer taxes and fees discussed above would apply to the registered value as opposed to its sales price, with the exception of the notary fee. Buyers should consult their attorney about the potential risks of this practice.

WHAT ‘S THE REGISTRATION OF THE TRANSFER DEED?

Once all the fees have been paid, it is the obligation of the notary who drafted the transfer deed to ensure that the deed is presented (anotado) and registered (inscrito) in the Property Section of the Public Registry. I have stressed the words presented and registered to highlight the importance of following up with the notary to ensure registration. Although presentation guarantees your priority (i.e., first in time, first in right), it does not automatically guarantee registration. The Public Registry will not register a transfer deed unless all taxes and registration fees are included; a certified copy from the Finance Ministry (Ministerio de Hacienda) is provided certifying that the seller’s property tax (impuesto territorial) payments are current; and a municipal certification is provided from the municipality where the property is located certifying that both buyer and seller are current on municipal tax payments. Likewise, any prior instruments that encumber the property (i.e., mortgages, liens, judgments, etc.) must be lifted before your transfer deed will be registered.
Once a transfer deed is accepted for registration, the Public Registry will return the original document with all the documentary stamps affixed to it and properly sealed. Assuming no defects in the transfer deed, it should be registered by the Public Registry with 45 to 60 days after presentation. It is therefore important to follow up with the notary to ensure registration, otherwise you will run into problems in the future when you decide to resell the property and find out that your sale was not registered.

ARE ELECTRICITY AND WATER AVAILABLE IN RURAL AREAS OF COSTA RICA?

This largely depends on the location, but most properties have electricity and water brought to the property boundary. It is the responsibility of the owner to connect those utilities on the property itself.

ARE HOME INSPECTIONS COMMON?

They are not common, but they are extremely useful. We highly recommend contracting an experienced home inspector, or at the very least a trusted contractor, to examine your potential purchase from top to bottom and provide a quote for necessary repairs.

ARE SQUATTERS A PROBLEM?

According to Costa Rican law, a squatter can acquire rights to a property if the property owner allows that person to use or maintain possession of the property for more than a year. Once the property has been acquired it cannot be taken away, except for reasons such as eminent domain, and then only with proper compensation. To guard against this possibility, hire a caretaker to live on the property.

CAN FOREIGNERS OR NON-RESIDENTS OWN PROPERTY IN COSTA RICA?

Yes, according to the Costa Rican Constitution, foreigners and non-residents have full legal rights to purchase and own property.

CAN I BUY HOMEOWNERS’ INSURANCE?

Homeowners’ insurance is available for a very reasonable rate. You may choose various options and add-ons, such as earthquake or theft insurance.

CAN I GET FINANCING IN COSTA RICA?

Bank financing is very complicated due to local laws and bureaucracy, and interest rates are high – usually around 10-12%. However, many sellers offer partial financing, usually with a down payment of 40-50%.

CAN I HAVE A HOME BUILT IN COSTA RICA TO NORTH AMERICAN STANDARDS?

There are numerous Canadian and American builders and architects that work in Costa Rica and build homes using U.S. standards. Many have adapted their building methods to take advantage of local building materials and labor.

CAN I HIRE A PROPERTY MANAGER WHILE I’M AWAY?

Yes, caretakers are affordable – generally less than $500 per month plus lodging – and offer excellent protection for your property.

CAN I PURCHASE TITLE INSURANCE?

Yes, several companies provide title insurance in Costa Rica; most are backed by U.S. title insurance companies. The cost is calculated at around 3% of the property purchase price.

DO I NEED A LAWYER?

A lawyer is an important aspect to purchasing real estate in Costa Rica. Find a lawyer who speaks your language and answers questions promptly; this will ensure the smoothest transaction possible. Your attorney will help you through several steps of your purchase, including a title search, contingency releases, distribution of funds, title transfer, and more. Lawyer and notary fees are assessed as percentages of the sale price, not the declared property value. Attorney fees amount to 1.5% of the first $2,000 and 1.25% of the remaining sale price.

DOES COSTA RICA COLLECT PROPERTY TAXES?

Costa Rica collects property taxes, though they are very low compared to taxes in the United States. Typically, properties are taxed at 0.1% of the property value.

DOES COSTA RICA HAVE A CENTRAL MULTIPLE LISTING SERVICE (MLS)?

There is no central MLS in Costa Rica. Several websites advertise an MLS search, which is usually a collaboration between several real estate agents to list their properties in one location.

DOES COSTA RICA HAVE ZONING LAWS?

Yes, there are zoning laws in Costa Rica, although San Jose is the only area with prominent zoning.

HOW CAN I FIND A GOOD BUILDER?

Recommendations and references are extremely important in Costa Rica. Ask around, check with friends, and inquire on online forums and message boards for good recommendations. Your embassy may also be able to help.

HOW CAN I FIND THE IDEAL PROPERTY FOR MY NEEDS?

We have both commercial and private properties for sale and lease; just let us know your preferences, price range and location and we will do our best to locate the right property for your lifestyle and budget.

HOW IS THE TITLE TRANSFERRED?

Your lawyer will help prepare the title transfer, also known as a conveyance deed (“escritura de traspaso”), which will effectively transfer the property to your name.

HOW MUCH ARE CLOSING COSTS?

Typically, the buyer and seller share the closing costs, which are calculated as a percentage of the property’s value; registration fees, notary and attorney fees, documentary stamps and transfer taxes will amount to no more than 6% of the property’s declared value. Though it used to be common practice to artificially lower the property’s declared value, this is a dangerous game that could cause future repercussions.

HOW MUCH IS THE AGENT COMMISSION, AND WHO PAYS IT?

Per Costa Rican law, real estate commissions may range from 3-10% of a property sale price. Unless the buyer agrees to split the costs, the seller is legally responsible for paying the entire real estate commission.

I FOUND AN ONLINE LISTING I LOVE. WHAT NEXT?

Since there is no central MLS, only the agent listing the property is authorized to show it. Contact your real estate agent, or, if you do not have one, contact the listing agent.

ONCE I DECIDE ON A PROPERTY, WHAT ARE THE STEPS TO BUYING A HOME IN COSTA RICA?

Begin the process by making an offer of purchase. Have your lawyer draft up the purchase agreement, and make sure you’re clear on all the details. When the seller accepts your offer, you will make a deposit on the property. Now it’s time to order a survey of the property, run a title check and, if desired, purchase title insurance and hire a home inspector. When you’re ready to proceed, your lawyer will help complete the sale and make sure all legal requirements are fulfilled.

SHOULD I LIST THE PROPERTY IN MY NAME, OR UNDER A CORPORATION?

The benefits to purchasing a property in a company name include greater options regarding taxes and liability.

SHOULD I USE A REAL ESTATE AGENT?

A real estate agent can help you navigate the Costa Rican real estate market and the language barrier. However, bear in mind that agents are not required to be licensed or pass a test, so anyone can legally advertise himself as a real estate agent.

23 - WHAT DOES IT COST TO BUILD A HOME?

In most cases, new construction runs $40-$100 per square foot ($430-$1,076 per square meter). Very simple construction starts around $30 per square foot ($315 per square meter), while luxury homes can climb to more than $200 per square foot ($2,152 per square meter).

24 - WHAT IS CONCESSION PROPERTY?

Concession property is beachfront land leased by the local municipality, and must be approved by the Costa Rican Institute of Tourism (ICT). Concessions generally last for 20 years, at which point they may be renewed for another term.

25 - WHAT IS THE LUXURY HOME TAX AND TO WHOM DOES IT APPLY?

The luxury home tax is collected by the Finance Ministry and is not related to existing property tax. The tax applies to anyone with homes valued at more than 106 million CRC (about $212,000 at the current exchange rate). The tax is based on a sliding scale and depends on the property value. A home valued at $212,000 is taxed at .25% percent of the property value, and a $1.5 million dollar home is taxed at .40%.

26 - WHAT REGULATIONS GOVERN BEACHFRONT PROPERTY?

Costa Rica’s Maritime Zone Law protects the first 200 meters of land stretching inland from the ocean. If a potential property is located within 200 meters (about two blocks) of the beach, check public records for a municipal lease. Without a lease from the local municipality, any existing or future structures may be illegally located.

27 - WHAT’S A BETTER DEAL: BUYING OR BUILDING?

That depends on what you want. If you find your dream property already built, chances are you can negotiate a great deal. However, purchasing your ideal land and building can also prove an amazing value, so it all depends on your preferences and needs.

29 - WILL I BE ABLE TO HIRE HOUSEHOLD HELP?

Household help is very affordable. Housekeepers, who often double as nannies and cooks, earn $2-$3 per hour. Handymen and gardeners charge about the same.

28 - WILL COSTA RICA CHARGE ME CAPITAL GAINS TAX?

The Costa Rican government does not collect capital gains tax.