Buying Real Estate

Buying Tips - "Buying Real Estate in Costa Rica"

The natural beauty, pleasant climate, and friendly people of Costa Rica, are luring investors from around the world. Land values in Costa Rica have been steadily rising over the past 10 years, and there is every reason to believe it has only just begun for this tropical destination. Costa Rica’s economic growth ensures that Real Estate investors will continue to enjoy an excellent return on their investments and re-sale market, both in terms of increasing land values, and an ever-increasing amount of qualified buyers.

Ownership of Land

Costa Rica’s laws and constitution are based on a well-developed tradition of Democratic government and include secure property rights for the private ownership of land. These laws are extended equally to foreigners as well as foreign residents. Neither citizenship, nor residency, nor even a presence in the country is required for land ownership. There are almost no restrictions to the ownership of land in Costa Rica, with the exception of beach front property.

Owning Beachfront Property in Costa Rica

The most desirable and expensive land in Costa Rica is beachfront. The majority of coastal resorts are located on the beach in what is known as the "maritime zone" or "zona maritima". The maritime zone is a 200 meter wide strip of land running parallel to the coast, starting at the high tide line. This 200 meter strip is divided into a 50 meter strip closest to the shore ("inalienable zone") where no development can take place, and the remaining 150 meters, which can be leased from the local municipality, and developed after the filing of a regulatory plan with the government. Most vacant beachfront land does not have a regulatory plan filed, as this is usually done just prior to development of the property. The regulatory plan is the most time consuming and costly phase of obtaining the land lease, known as a "concession", and is best accomplished through professionals. With proper planning, a concession can be obtained during the time that the proposed development is in its planning stages. For those interested in developing land within the maritime zone, professional assistance is a must.

Few countries in the world welcome foreigners as well as Costa Rica and have such magnanimous laws that allow for, and protect, the property rights of foreign investors the same as their citizens. Costa Rica’s open door policy to foreign investment combined with secure property rights, has made it an excellent choice for foreign investment.

Land Records

Costa Rica has a very unique form of title registration used to protect Buyers from hidden claims. All documents are centered in the National Registry, where both titles and surveys are recorded.

Records are kept in Costa Rica's central computer system as well as on microfilm, and in their original form. Duplicates of all records are updated daily, and sent to two separate fireproof vaults in locations separate from the National Registry. Any change in the status of a title, or any claim that might affect it, must also be noted on the title registry page, thus making it easy to verify any new changes.

Property Taxes

The annual Property Tax in Costa Rica is very low. Property taxes are based on 0.0025% of the declared value of the property. This declared value is a common law practice in which a property’s value according to the government is very low, almost always much lower than the sales price.

Related Buying Tips

Buying Real Estate in Costa Rica

Property Purchase Process

Using a Real Estate Agent

Home Inspections

Making an Offer

Making a Counter-Offer

Closing the Deal

Registry & Title

Land Conversion Chart

Purchase Contracts

Costa Rica’s legal system is based on a "civil code" system, as opposed to the "common law" system in the United States. Under Costa Rica’s civil code, there is less interpretation of the law by judges, because the civil code is more restrictive. For this reason, land contracts in Costa Rica are far lass comprehensive, than the common law contacts most foreigners are used to. Under the civil code system, the contact covers only what is not regulated by law, and thus can be very simple.

In Costa Rica a land purchase contract is achieved through an "option to purchase". An option to purchase gives the Buyer the right to purchase a described property in a set amount of time. Typically 10-20% of the purchase price is paid to the Seller through a broker or attorney (after verifying the property can be legally transferred), for the purchase of the option. Most closings can take place in a matter of days if the property is already registered in the National Registry; however, most options are written for 30-90 days.

A Purchase Agreement, or Option to Purchase, under civil code has far less components but should include:

The names and identification numbers of the buyer and seller, whether held by a corporation or personally.
A description of the property, which includes boundaries and size (if know at time of sale) and all numbers identifying the property in the National Registry. Properties being subdivided from a larger property can be sold based on agreed upon boundaries, or based on the square meters of land to be divided off.
The price in either colones or dollars.
The dates for the option period.
Terms or mortgages to be recorded at closing, if any.
An agreement to the payment of closing costs; usually split 50/50 between the parties.
An agreement to provide for a registered survey prior to the closing, usually the Seller’s responsibility.
Any other agreements or clauses.

Title Insurance

Due to the laws of the civil code in Costa Rica, title insurance is not necessary. The Buyer’ attorney should make a thorough title search prior to closing. Additionally, when a property is transferred to a new owner in Costa Rica, all past claims that were not properly registered in the National Registry, can not be placed on the new owner. Many properties are held by corporations (S.A.), and in these cases, more thorough research is required if the new owner wishes to assume the existing corporation, which can save money on closing costs.

After the sale, the Buyer should verify, through his broker or attorney, that the property was properly registered in the National Registry, and he should receive originals or copies of the documents showing all the proper stamps from the process.