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Costa Rica Property
Costa Rica Property Buying Information
Property Ownership in Costa Rica and other Common Forms of Possession
Just like in the US, Canada, and Europe, there are different types of property in Costa Rica. Understanding the various types of property that are available for purchase is critical in the evaluation process. This section of our guide on buying property in Costa Rica highlights the property types that can be purchased and the implications of each type of ownership for the buyer.
a. Fee Simple:
The most comprehensive form of property ownership in Costa Rica is fee simple ownership. Fortunately for foreigners, the conditions for this type of ownership are the same for Costa Rican nationals as they are for foreigners. The concept of fee simple ownership is the same in Costa Rica as in the US. Basically, fee simple ownership gives the owner of the property the absolute right to materially own the property, use it, enjoy it, sell it, lease it or improve it, subject only to conditions outlined in the Costa Rican Laws. Fee simple also means that if the property owner is obstructed from enjoying any of their rights to the property, they have the right to be made whole, in other words, have the property restored in its original condition. Buyers who purchase fee simple title have the most rights under to law to enjoy and use the property as they see fit.
b. Concessions in the Maritime Zone:
Concession property is more commonly known as beachfront property. In Costa Rica, 95% of beachfront property is considered concession property and is governed by the Maritime Zone Law and other specific regulations including but not limited to special dispositions stated by municipalities and the ICT (Costa Rican Institute of Tourism). These legal dispositions set forth the conditions under which foreigners and local residents can own concession property. A concession in Costa Rica is defined as the right to use and enjoy a specific property located on the maritime zone for a pre-determined period of time. The state, through its respective municipality, grants this right. Note that the first 200 meters measured horizontally from the high tide line defines the boundary of the maritime zone. This zone also includes islands, pinnacles of rock, mangroves, estuaries, small islands and any small natural formation that overcome the level of the ocean. This 200 meter zone is divided into two areas:
1. Public Area: In the Costa Rica Maritime Zone the first 50 meters of land, measured horizontally from the high tide line is considered a public area. This zone is not available for ownership of any kind and development is not allowed except those approved by governmental entities. Further, this area is deemed a public area and any individual wishing to utilize this area for enjoyment has the right to do so. In other words, there are no truly private beaches in the Maritime Zone.
2. Restricted/Concession Area: The next 150 meters of land is available for Concessions to be granted. A concession is in essence a "lease" on the property granted to the lessee for a specific period of time. Normally the concession period is granted for 20 years. An owner of a concession may build on that concession, subdivide the concession and perform other acts to the property. However, appropriate permits from the local municipality must be obtained.
3. Ownership Limitations: Unlike fee simple property, foreigners do not have the same rights as Costa Rican citizens when it comes to purchasing concession property. The law establishes that foreigners cannot be majority owners of a concession property. A foreigner can, however, enter into a partnership with a Costa Rican citizen where the ownership is divided 49% / 51% between the foreigner and Costa Rican respectively. One exception is if a foreigner has resided in Costa Rica for at least five years, then they may be majority owners of a concession. Both foreigners and Costa Ricans alike are required to purchase all Maritime Zone property through concession.
c. Properties in Condominium:
When US citizens think of Condominiums, they normally think of large apartments or townhouses. In Costa Rica, however, there is a specific law called "Condominium Law" that provides certain benefits to developers of many different types of properties, including single family residence projects, finished lot projects, condos, etc. This set of laws allows a developer to restrict and regulate certain aspects of the development. Each Condominium development has its own by-laws containing all of the restrictions, limitations and privileges that can be enjoyed by individuals who purchase a property in such a development. Ownership of property "in condominium" is fee simple ownership, but usually carries with it a few additional restrictions set forth by the developer. It is advised that you require the owner of the property to give you a copy of the by-laws to check for architectural guidelines, land use restrictions, and other limitations that may be placed on your property. Most often, developers use the condominium laws to allow them to build private roads in a development and set architectural guidelines. For the most part, condominium laws are designed to protect the integrity of a development and maintain the "look and feel" of the project.
d. Untitled Property :
There are properties in Costa Rica that are not recorded at the Public Registry of Properties. Families have inhabited some properties of this type for generations while others have never been occupied. In either case, it is possible that someone claims that they "own" the property and may put it up for sale. They may even have fence lines or other boundary markers that separate "their" property from a neighbour's. Regardless of the time that an inhabitant has lived on the property or to what extent they have demonstrated ownership, unless that property is registered at the Public Registry, there is no official owner. i.e. the title is unclear. It is strongly recommended that this type of property be avoided at all costs because there is no way to prove that the "owner" has the right to transfer the property, or even worse, what the dimensions of the property really are.
e. Time Share:
This option allows an owner the right to use a property for certain weeks of the year. In most cases the time-share ownership grants similar rights as implied in the condominium regulation except that in the time-share it is limited to certain weeks during the year. In this manner one single unit is subdivided into parts and sold individually. Time-share resorts are not common in Costa Rica.
Costa Rica Property - How to Buy Property
A. Basic Terminology
Feeling comfortable with the purchase process starts with understanding the most common terminology. While the purchase process may seem very simple, there are some keys ideas with which a buyer should be familiar. The following defines the most common vocabulary used in real estate transactions in Costa Rica.
a) Folio Real:
This is the "social security" number of properties. It is the unique number assigned to each property to identify it and distinguish it from other properties. This number is comprised of three parts: the first number indicates the province, the second group of six numbers is the number of the property itself and the last group of numbers indicates how many co-owners the property has. All titled properties MUST have this number in order for clear title to be obtained.
b) Transfer or Conveyance Deed: (escritura de traspaso):
This document contains all of the stipulations regarding the transfer of real estate including basic information about the buyer, seller, the property, and any special terms of sale, such as easements or mortgages. An attorney who is also a Public Notary must prepare this document and the deed must be recorded in his/her Notary Book as well as at the Public Registry of Property. Stewart Title provides this service through our underwriters who are also attorneys. Once the deed has been prepared and signed at the close, it is the attorney's responsibility to record the deed immediately at the Public Registry. The recording process consists of two phases. In the first phase, the notary presents the deed to the public registry for its annotation; from this moment the property is protected against any third party interest. After the registry verifies the deed is structurally correct, the second phase of registration begins and the property is recorded in the name of the new owner. Because Costa Rica operates on a "first in time, first in right" system, registering the deed immediately is critical to ensuring that the new buyer's rights to the property are ahead of any other claims by third parties.
c) Public Registry of Properties :
d) Public Notary:
Attorney licensed by law to perform legal acts with Public Faith. All transactions performed by a Notary are recorded in his/her Notary Book. A public notary is necessary in order to purchase a property. Most attorneys in Costa Rica are also Public Notaries.
e) Power of Attorney ( Poder ) :
(1) This document authorizes a person to act on behalf of another to perform specific actions such as the purchase of a property. This tool is especially useful for clients that wish to close on their property without returning to Costa Rica. It is best to sign the power of attorney before leaving the country because the law requires that the power of attorney be signed in the presence of a Costa Rican notary. Thus, a visit to a Costa Rican consulate in the US is necessary. One exception to this rule, however, is if the property is being purchased through a corporation. In this case, a signed proxy letter will suffice and there is no need to visit a consulate.
(2) Powers of Attorney come in two forms, general and special. General power of attorney allows a representative to sign on behalf of an individual for multiple transactions and must be recorded at the Public Registry. A specific or special power of attorney allows the representative to sign ONLY for the item specified in the power of attorney contract and under the conditions specified there. It is highly recommended that only a specific power of attorney be granted for property purchases to limit the rights of the representative to sign only for the property in question and nothing else. Additionally, The specific power of attorney does not have to be recorded at the Public Registry, however it should be granted before a public notary.
f) Survey Plan ( Cadastral Department ):
In addition to the Public Registry of Properties, which holds all property deeds, Costa Rica also has a Cadastral Office that holds all of the property surveys. In order to transfer, mortgage or acquire a property, a survey must be recorded at the Public Registry. When dealing with property segregations, a municipality authorization is also required to be inserted on the survey. The official drawing of the property is validated through an approval process by the Public Registry of Properties as well as by the municipality in which the property is located. Because the Public Registry and Cadastral Office are separate entities, it is not uncommon for old property surveys to be on file at the Cadastral Office. If this is the case, it is recommended that a new survey plan be registered with the Cadastral Office so that there can be no dispute over boundary lines.
B. Purchasing Methodologies
1. Acquiring Properties through direct transfer: A purchase process whereby one or more physical individuals acquire a property in their personal name.
2. Acquiring Properties through corporations: A common practice in Costa Rica is to acquire properties through a new corporation or through an existing corporation that currently owns the property of interest. The process of setting up a corporation is not complicated, but does require a knowledgeable attorney who understands the exact protocols and procedures necessary to properly set up the corporation. The advantage of this system is that it allows a buyer to protect their asset anonymously. Further, if a purchaser acquires a property through an existing corporation that already owns the property, there are no government transfer taxes and stamps to pay. The reason is that transfer taxes and stamps must be paid anytime that there is a change in the ownership of the property. If a buyer acquires the shares of an existing corporation, technically there is no change in the recorded owner of the property (i.e. the corporation still owns the property). However, if a property is acquired through forming a new corporation to buy the property, the transfer taxes and stamps must be paid because the name of the property owner has changed. The risk for the buyer in acquiring an existing corporation is that the corporation might have other liabilities and there is no way to verify 100% that the corporation is clean. When buying a Costa Rican corporation, it is important to keep in mind that there are other obligations and responsibilities that must be addressed. Examples include yearly tax declarations (even if the corporation is inactive), payment of income taxes if any, and keeping the legal books of the corporation up to date and in order.
C. Step-by-Step through the purchase process (Using Title Guaranty & Escrow Services)
1. Once a buyer has seen a property of interest, the next step is to understand the process of acquiring the property. The following are the basic steps that a purchaser follows when buying a property in Costa Rica :-
Step 1: Sign an Option to Purchase/Sale with seller
Step 2: Deposit funds into escrow
Step 3: Title research performed and Title Commitment issued
(review if property is free and clear of defects)
Step 4: Closing - Execution of Transfer Deed, Endorsement of Shares and/or Mortgage Deed and disburse funds
Step 5: Register new owner with Public Registry
Step 6: Receive official Title Guaranty
D. Fee Structure
Transfer taxes, stamps and other charges: In order to record the transfer of the property, the government charges 1.5% of the purchase price and an additional 1% is charged for other stamps at the Public Registry
Notary Fees: Notaries are required by law to charge 1.25% as their legal fees.
Survey fees: If you require or demand a new survey for your property, there are qualified surveyors available to perform this function. Pricing depends on the location and size of the property.
Mortgage registration fees: The government charges .6% of the mortgage value to register the mortgage deed on the property
Title Guaranty fees: Guaranty fees are typically based on a sliding scale depending on the purchase price.
Escrow Fees: Fees are dependant on the escrow provider.
Incorporation: Fees for purchasing a corporation typically run between $500-$1000.
Working in Costa Rica
Most people want to be able to come to Costa Rica to live and work here, or at least supplement their income with a part-time. Regrettably For the most part, but with a couple of exceptions, you cannot work at all in Costa Rica unless you have gained Permanent Residency or are a citizen of Costa Rica..
Laws here, as in many countries (including the USA) are designed to protect workers here from foreigners who would take jobs that would otherwise be filled by a Costa Rican.
The only exceptions to this rule is an annual work permit or two specific types of residency.
Legally Working in Costa Rica
If you are highly skilled in an area where that job cannot be filled by a Costa Rican, the employer can apply for a work permit for one year. This is very difficult to get. Costa Rica is not a third world country. There is a large pool of highly literate and well trained people to fill nearly every job category. Teaching English, for example, is NOT a skill, so do not think you will get a work permit for that job regardless of what you may read.
In order to work here, you must either be a citizen of Costa Rica or have legal Permanent Residency. With any other residency (rentista, pensionado, etc), you CAN own a business but you can not work in that business. You must hire Costa Rican labor and your responsibility must be limited to management of your business. No labor can be done by you that could be done by a Tico.
Finally, plan to earn about 10 to 15% of what you are earning now for the same job. If you are earning $100,000, you will maybe make $15,0000 here. Example: Journeyman auto mechanic making $90,000 in the USA will make maybe $15,000 here. Almost all jobs will require fluent (not tourist) Spanish.
Want an idea of what you will be paid (presuming you DO have legal Permanent Residency)?
Costa Rica has a minimum wage scale revised and published every six months by the Ministerio de Trabajo. Nearly every conceivable occupation is covered on the list. You may see this list HERE. It is in Spanish, of course, but is pretty easy to figure out. Remember, near fluent knowledge of Spanish will almost assuredly be a requirement of employment.
More and more popular are people who actually want and are able to "telecommute" internationally. By this I mean those who work for a company in their home country, i.e. USA, Great Britain, etc over the Internet. They are paid by their company, but physically reside in Costa Rica. Is this legal? YES! If you can talk your company into letting you work in a foreign country, you can work here and not violate the work laws. TWO CAVEATS!
The paycheck or deposit must come from outside Costa Rica and your work must be unrelated to Costa Rica. Medical transcription or or computer programming might be good examples. The test would be if you are still employed by the foreign company doing the same job as you were in that company.
You STILL must apply and be accepted as a legal resident. Under no circumstances can you just come here to work and not posses some form of legal residency, no matter from where cometh your paycheck. Younger people probably would apply as rentistas, then convert to Permanent Residency after 4-5 years.
OK...So who can work here? Generally, only those with Permanent Residency. Perhaps this graph will help clarify.
Costa Rica Properties
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Please note that the information on this page is subject to constant change and revision and may not be fully up to date. Users are advised to verify any information that could effect their decision on buying a property, visiting this country or any other matter of importance.
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