Top 10 Costa Rica

- Costa Rica Real Estate

Real Estate in Costa RicaReal estate in Costa Rica is booming. This country has an amazing landscape and peaceful atmosphere which is tough to resist. In fact, media in many countries are propagating Costa Rica as a country for the retired to live in peace leaving back all commotion and stress of daily life. Hence, many people, retired and working, are investing in real estate in Costa Rica. Though this land has a magical aura to it, it is important to understand certain aspects while investing your hard earned money to purchase real estate in Costa Rica.

Why is Costa Rica a good place to invest or live?

There are several opinions on what makes Costa Rica a great place to visit, invest and live. Many will answer it’s the laid back lifestyle and pace of things. Others will tell you that it’s because Real Estate in Costa Rica is “Booming”. Some will tell you that because of low taxes it is appealing. The absolute natural beauty of the country is an obvious answer. The best advice is to form your own opinion. Spend some time here and find out what makes Costa Rica such a wonderful place for you.

The Costa Rican government takes a lot of measures to ensure that this beautiful, ecological paradise remains just that. It is a difficult teeter totter when you balance the ecological preservation of Costa Rica (which drives nearly all of the tourism) with the explosive development and investing that’s occurring here in Costa Rica. Therefore, the government of Costa Rica, in regards to real estate in Costa Rica, has a strong department to regulate the development of their country.

When looking at purchasing real estate in Costa Rica, there are many things you need to take in consideration. Most decisions concerning real estate in Costa Rica are very similar to those decisions to purchase land anywhere. You want to ensure that your property in Costa Rica is in an area where you want to live and you want to ensure that your Costa Rica real estate is going to be able to do what you dream it to do.
Nearly all of the real estate in Costa Rica that you find will have a title and will be free and clear of any liens and encumbrances. Similar to what you’d find in your home country. One key element that we highly suggest is obtaining local, legal representation. It will save you a tremendous amount of time and effort employing someone who has a full understanding of the Costa Rica real estate laws, codes and systems. A good attorney in Costa Rica can really streamline a lot of things concerning your property and should be able to completely cover any issues and answer all questions you could ever have about buying property in Costa Rica.

Due Diligence: Before purchasing any property or even before seriously considering buying it is advisable to perform a detailed study before the Public Registry. Such study should include not only the folio real with it measurement, boundaries, ownership, location, survey plan, annotations, encumbrances and liens, but also a study of the transfer chain since the property was originally registered.

Pending registration (“Anotaciones”) may be due to filing of incomplete or erroneous documents, lack of payment of taxes, etc. A document filed on a property while an annotation appears will not be registered until the annotated document or documents are either registered or removed following a special procedure.

Registration System: Costa Rica has a centralized registration system called National Registry (“Registro Nacional”) where corporations, vehicles, mortgages and real estate transactions are registered. The Costa Rican registration system is very advanced and the Registry records not only documents (like other Registries all along other countries), but it also registries rights inherent of those documents. A very timely and strict system records the transactions presented giving legal certainty to the legal acts.

Property transfer require for buyer and seller to sign a deed before a Costa Rican Notary Public (whose concept is different than the one in many other countries such as the United States or Canada and is required to formalize all transactions dealing with real estate) and for such deed to be recorded at the Public Registry.

Corporations: Although titled land can be purchased in Costa Rica in the name of an individual as well as in the name of a company, and foreign ownership is fully permitted, it is advisable to purchase property through a corporation. This structure allows having flexibility and more predictability on areas ranging from estate planning, tax management, and representation.

Buying Property trough acquiring the corporation (share transfer). Buying the shares of the company that owns the property instead of transferring it through the Register is a common practice. This way the seller transfers the shares of an existing company that owns the property to be purchased, instead of transferring it through the Public Registry to a third party. In this case a transfer deed is not necessary but other legal documentation such as: a purchase sale agreement of the shares, change the board of directors (so the buyer can take control of it), several entries to the legal books and endorsement of shares, among others must be performed.

The typical limited liability company (“Sociedad Limitada” , “LT DA. ” or “S.R.L”.) must be incorporated by at least two people before a Costa Rican Notary Public. After such incorporation, the shares may be transferred and it is legally feasible to have a corporation in which one person is the sole owner of all shares.

The incorporators must choose a name and a Board of Directors (which, by law, must have a minimum of three members, denominated: President, Treasurer and Secretary) and a Comptroller.

Other crucial issues to be decided are the social capital of the corporation; the number of shares composing such capital, (it is advisable to have a number of shares that would permit future distributions of the participation in the company) and the representation of the newly formed company (there must be at least one representative of the company with powers of attorney to act on its behalf).

Corporate Taxes: The Fiscal Year (“Período Fiscal”) in Costa Rica goes from the 1 of October to September 30. Local S.T.T.H corporations do not always need to file income tax statements at the end of each fiscal year (September 30), especially if there are only for holding purposes. A case by case study should be performed in order to determine this.

Nevertheless, whether a company declares and pays income tax or not, and applicable to all Costa Rican corporations, a special tax called “Timbre de Educación y Cultura” must be paid each year. This tax is relatively low (20 dollars a year). If payment is not made, penalties apply and the corporation will not be in good standing.

In Costa Rica there is not Capital Gain tax as it is in United States. The only cost on selling property is the transfer tax of (2.5% indicated above) that is usually carried out by the buyer. Regarding the income tax if the corporation is for holding purses or estate planning, it won’t be subject to income tax, but if the buyer carries a business such as renting the property and having an income with it, the company might be subject to the payment of this tax. In such case a specific consultation is advisable to determine if other taxes like: sales tax or tourism taxes are also applicable. The corporate rate for income tax goes up to 30% (the highest bracket).

The incorporation deeds, as well as all changes to the company’s By-Laws are recorded in the Public Registry, where any person has access to them. However, all transfers of the company’s shares are recorded in the Shareholders Registry Book, which is kept by the corporation and is only available to company’s shareholders and officials; all other parties can only review it with a Court order.

Although the share transfer system may sound attractive at first sight, since it allows you to save money in transfer taxes, we do not always recommend to take this path and advise to transfer property through the Registry under the standard procedure of a notarized deed. When you acquire the shares of a corporation in Costa Rica, as in most other countries, you do not only get the company’s assets (in this case, mainly, the property) but also its liabilities, and there is no mechanism to satisfactorily list them or rule out their existence. Such liabilities, if existent, would directly affect the property being acquired.

Cost of property transfer. In general, the cost involved in a real estate transaction are divided in 3 categories: a) Transfer Tax (1,5% of the purchase price); b) Transfer Stamps (1% of the purchase price) and c) Legal Fees (1,25% of the purchase price). So the cost are: 2,5% in tax and stamps plus a 1,25% legal fees. If you purchase shares of the owning entity the only charge for the transfer is the legal fees.

Property Taxes: Every property owner is obligated to pay its property taxes; otherwise they might be putting their investment at great risk. The Costa Rican Government recently passed a law that expedites all judicial collection procedures (including taxes) and might be subject to a foreclosure.

In Costa Rica, land taxes are collected by local governments corresponding to the county where the land is located, which are denominated “Municipalities” (“Municipalidades”), and these moneys are directly used by them. These taxes are paid at a rate of 0.25% of the declared value of the property. This tax is due quarterly and a strict record of payment should be held by each owner. The payment of taxes do not require physical presence of the owner in the country, the payments can be made with the help of your lawyer.

We advice that prior to the purchase of the property the buyer makes sure these taxes are paid up to date, if not the new owner must have to cover them for the lack of payment of the previous owner. Furthermore if what you are buying is an apartment or a lot in condominium property you must check if the taxes are included in the monthly condo fees, since they are usually not included in such fees and the buyer must pay the property taxes directly to the Municipality.

Title Insurance: Title Insurance works the same as Canada and United States and although it is not necessary it is advisable. In Costa Rica some of the title companies are: Chicago Title, Land America, Stewart Title, among others, you can get this service trough your lawyer in Costa Rica.

Maps: Each property must have a registered map or survey (“Plano Catastrado”) to locate the property in the field with exact measurement, actual boundaries, and description of buildings or structures. No property transfers can be made if the land does not have a registered map, and such map must be quoted in the transfer deed. If such map does not exist, it must be made by a specialized registered surveyor (“Topografo”), and then the transaction can be effectively achieved.

Waterfront Property: One of the conditions is with the usage of the coastal lands and properties of Costa Rica. The government has claimed that the first 50 meters from high tide are to be public domain, ALWAYS! If someone tries to sell you a shack on the beach or the first 50 meters of beach, be careful because they do not own the land. The government has taken it a step further. The government also owns the next 150 meters (roughly 450 ft) of coastline beyond the first 50 meters deemed “Public”. So, in this regard, the government of Costa Rica owns the first 200 meters of coastal land (approx 600 ft). The government of Costa Rica has devised a department of records and an entity to control and monitor the usage of this specially-zoned 200 meter boundary (called the Mari-time zone). This department has devised a system for investors to obtain this special coast line zoning. The system consists of two zoning requirements. The first is the “Right of Possession” and the second is the “Concession”.

Right of Possession: Most property in Costa Rica you find that is along the coast will have the “Right of Possession” but very few have the full blown Concession. Without the Concession, you can’t construct anything. There are those who build without the Concession and those properties are in danger of having their buildings razed. And it most certainly happens. The government of Costa Rica has made it very clear that the system in place is the system to be enforced.

In regards to development and building, the Costa Rica government also has in place certain environmental impact studies which control certain elements that are key to the eco-systems in different areas. Some of these restrictions would be in regards to water systems such as rivers, streams, ponds and lakes as well as protected trees, plants and groves. There is an abundance of “Green” zoning in Costa Rica and most investors look for parts of their property to be “Green” zones. Green zone restricts any and all building. Also, dependent upon the region, tampering with water ways or systems is also not allowed. Usually, you are not allowed to build, alter or construct within 15 meters (30 feet) of either side of a water system.

Property in Costa Rica is a very straight forward transaction with the exception to purchasing land on the coast or the beachfront. It is important that you know, understand and comply with all government laws and regulations. In every business there are professionals and there are amateurs.

You do own the property forever if the property is “Titled” property. Most the property you encounter will be fully-titled, meaning that the land deed will be signed over to you in full allowing you to develop, sell, rent, trade or will the property to your next generation.

FAQ

How difficult is it to obtain residency or citizenship?

The Costa Rican government has focused their immigration department to aid those in retirement. If an individual with a fixed income would like residency in Costa Rica, the forms and procedures are pretty straight forward. With the assistance of a residency specialist like Johanna, you can process this paperwork with ease. Johanna can assist you with the preparation, organization and submission of the documents required to obtain either permanent or temporary residency in Costa Rica.

Call Johanna at 8373 2085 or email her at Johanna@gapinvestors.com

How long can I stay in Costa Rica if I’m not a resident?

You can stay 90 day at a time. It is common practice for foreigners in Costa Rica to exit the country to either Panama or Nicaragua before the expiration of their 90 day Visa. By Costa Rican law, if you exit the country for at least three days you may be allowed to re-enter the country and will have successfully renewed your 90 day Visa.

How do I make sure there are no Squatters on my land?

Squatters are people who find a nice little place for a farmstead or home for themselves on land that they do not own. The problem arises when their presence is found and they have certain legal rights to obtain that piece of land due to the improvements made on the land (i.e. garden, home, small farm, livestock, coral). Squatters are legally recognized by the Costa Rican government because it is a law that dates back to the times when common stakes for land were common and routine. The theory states that a person can really only make use of so much land. So, if another family moved to the opposite end of a 500 acre farm, that family had rights to their home and livelihood. In present times do squatters exist? Yes, they certainly do but present laws and awareness have made it very difficult for squatters to possess land. By law, a squatter must occupy land under the pretenses that no one else owns the land. A sure way to settle this matter is to put up a fence around the perimeter of your property. It’s difficult to believe that the property belongs to no one when the potential squatters have to cross a fence. The law also states that the squatters must be notified of their eviction within 90 days. Most investors find a friendly neighbor, caretaker or renter to look after the property if the property will be left unattended for long periods of time. There are companies such as Stewart Title who offer Squatter’s Insurance to protect against this type of situation. All in all, it is good to know that the property doesn’t contain squatters but, too, it is a fairly simple thing to keep your property clear of Squatters.

Costa Rica’s so-called “squatter law” was devised to keep huge landowners, such as those still found in South America, from holding vast territories that are not used for productive purposes. The idea was that if a city-dweller sat on more land than he could manage, small farmers could move in to cultivate it. This law kept strife between classes from breaking into civil unrest and the rise of radical movements. It has contributed to the more than 150 years of political stability in the country. In addition, safeguards exist to counteract abuse of the law.

The property owner should:

• Thoroughly inspect the property and talk to the neighbors before the purchase.

• Make sure the property is completely fenced, and keep the fence and fence corridor in good condition

• Inspect the property at least every three months (take time stamped photos or videos for evidence).

• Keep the property clean at all times. A clean property shows there is someone around. An unclean property shows abandonment. In rural areas you can sign a lease with a neighbor who will use the property for grazing or planting. That will keep your property tidy and squatters away.

• Check the Registro Nacional every one to three months to monitor for activity.

• If you have a caretaker, make sure you have a labor contract and pay the Caja (so the caretaker doesn’t try to claim any rights to the property).

• Keep the property taxes paid up to date (shows “good faith” and “act of ownership”). In most countries the city or county will take your property if you don’t pay property taxes. Most absentee owners who have problems in Costa Rica have not paid their property taxes for many years.

Do you suggest I use the services of an Escrow company?

Although it is not mandatory to use and Escrow company for purchasing your property, it is highly recommended. The nominal fee for these services can’t be bickered over considering the overall protection that you receive. And, most Escrow companies have conducted thousands and thousands of real estate transactions. They are true professionals. In Costa Rica, we suggest Stewart Title.

How does Title insurance work?

Title insurance is offered to ensure that the property in question has no liens or financial encumbrances. In Costa Rica when you purchase a property you inherit all aspects of that property. For example, if a property was ever used for a financial loan in the past and the mortgage has yet to be paid, you, as the new proprietor of that land, would inherit that mortgage. Good attorneys will automatically research a title for you to ensure the property is clear and available to sell. If not, feel comfort that escrow companies, such as Stewart Title, can do the background check for you. To most, this step of the negotiation seems basic but there have been instances when a property wasn’t properly researched and issues have been inherited. What happens if you find that the property you are interested in DOES contain financial liens? Your attorney should include a clause in the contract that the sum owed be paid from the monies given as the selling price for the property. Again, a good attorney will instruct you on all of these matters.

If I own a lot, can I divide it up to sell again?

Yes you can In fact apply for that through the government (if your property is large enough). There are a couple of stipulations, though. If the land that you own doesn’t connect to a public road then the smallest you can divide your land is in 5000m2 lots (approximately 1 acre). If your property is connected to a public road you can divide your property in to lots of any size. When planning a large development, make sure to keep in mind things like roads, drainage for the roads, water supply and power. Proper planning can eventually save you time and money!

Concession Land: Like in many other countries the maritime zone (“Zona Marítimo T errestre”) land is owned by the Government and given in lease to third parties, this is known as concession. This concession grants the authority to a private party to use the land for a renewable period of time. Almost the 95% of maritime zones in Costa Rica are concessions and therefore have special requirements regarding the zoning, occupation and density, among others.

Are there any Capital Gains taxes in Costa Rica?

Currently there are no capital gains taxes in Costa Rica. Capital Gains taxes are taxes on monies earned above and beyond the buying price of your land… i.e. profit. When you purchase a piece of land for (example) $100,000 and you sell that property two months later for $150,000, you will not be taxed separately as Capital Gains. However, there are several tax laws and regulations that you should understand both in Costa Rica and your home country.

Are there regulations against tearing down trees and destroying rainforests, rivers and wildlife?

Costa Rica realizes that the heart and soul of their tourist industry relies on the natural beauty and wonder of Costa Rica. The wildlife in this country is so special and so diverse that it is mind blowing. To preserve this beauty for generations to come, the government of Costa Rica has implemented many laws to protect the habitat and the wildlife. Here are some examples of those laws. If there is any type of running water on the property; know that you cannot build within 15 meters from either side. Too, there are certain trees that exist in Costa Rica that are protected, such as the “Pochete” tree and the Guanacaste tree. These trees are very important to the ecology of Costa Rica and cannot be molested or destroyed for any reason. Mostly, they are loved habitat for the monkeys, birds, lizards and other animals that inhabit the country.

Do I need to speak Spanish to buy land in Costa Rica?

Of course you don’t have to speak Spanish to purchase land in Costa Rica (although it is recommended you work with someone that is bilingual and you trust). A difference in language can be a pretty intimidating thing, especially when you’re conducting business of this magnitude. The important thing is to be surrounded by those you trust who are bi-lingual to assist you. Easily found are attorneys. Most attorneys are bi-lingual and can really assist you through the processes. A bi-lingual realtor will also be a large help. All in all you’ll find that now a large number of Ticos are picking up the English language with some incredible proficiency. Hopefully, you’ll find that one of the incredible parts about living in Costa Rica is learning and using another language! It’s a challenge but it should be a fun one!

Is there financing for those investing from other countries?

Most of the transactions that occur in Costa Rica are cash transactions. And by “cash”, we’re referring to wire transfers. Most money is wired into an escrow account of some sort. Once the money is in the country, then the escrow company will transfer the funds to their appropriate destinations. If a foreign investor is looking to have financing, it is provided by Gap Investors of Costa Rica. You would need to contact Gap investors at (506) 2262-6114 and ask for more information on their financing options.

Are there advantages of owning real estate through a Costa Rica Corporation?

The process of purchasing Costa Rica real estate is not excessively sophisticated, yet it might require some time from you, often longer than what you have anticipated. This is the reason why those who want to own real estate in this country choose to do it in a manner that is collateral, i.e. through a Costa Rica company. It is a profitable manner of managing the purchase and the subsequent operations related to the proprietorship of the corresponding Costa Rican share of real estate, also guaranteeing the legality of your ownership. A Costa Rica company that owns real estate enjoys several rights from which a single individual could not benefit.

For instance, if owning takes place through a Costa Rica company (of the type Sociedad Anonima), its owners will benefit from a higher degree of privacy, since we are talking about an anonymous corporation. It is the type of opportunity that any outside, non-resident entrepreneur would appreciate positively. Currently, if you opt for selling a Costa Rica property through a Costa Rica company, you will not be a subject to land transfer taxation, although you offer online courses to pay a number of legal fees attached to the transfer. However, if you choose to undertake the entire transfer procedures as an individual, you do have to do the payment of land transfer taxes every time you opt for selling a Costa Rica property.

Why does this happen? The reason is simple and obvious: when the transaction takes place, the process occurring is a mere transfer of shares from the company offer online courses buyer. In addition, if you decide to set down your ownership of real estate in this country as a Costa Rica corporation, the risk of personal liabilities in case something goes wrong obviously diminishes.

When does this Costa Rica Corporation enter in your ownership?

The registering lawyer will hand you over the company. The next step is your registration as president, main shareholder and signing officer of the company. Of course, you can have online courses other person as a shareholder in your company – this matter is entirely in your hands. When your registration, as indicated previously, takes place, you have become the legal owner of the company and of anything included in its ownership. In the end, this is one advantageous manner of securing your real estate ownership in Costa Rica. Be sure to check out Costa Rica’s Gap Investors for more investment ideas

How do I know if a property is titled?

All property in Costa Rica should be registered in the Public Registry, whether the property is fee simple or concession. Your attorney will be able to confirm that the seller possesses ownership of the property, and to determine if there are any restrictions, encumbrances or liens. Avoiding the purchase of unregistered property is strongly advised.

How much are property taxes?

Property taxes in Costa Rica are very low, only .25 % of the registered property value.

How much are closing costs?

Closing costs are approximately 5 % of the declared value of a property. About 2.25% goes to the government in the form of stamps and taxes. About 1.25% goes to your attorney. In private sales between an individual Buyer and Seller, closing costs are often split equally. When purchasing from a large project, the Buyer often pays all the costs.

Will I need a Lawyer or Notary?

Yes. We strongly recommend that you have your own representation in any transaction. The closing costs as noted above include the fees for your attorney.

Is there Title Insurance?

Title insurance and escrow services are available through recognized companies such as Stewart Title and First Costa Rican Title Company. The fees for services are generally 1% or less.

What is the proper measurement in Costa Rica

Costa Rica uses meters squared also seen as (m²). Sq m or m² are the same.

Real Estate Conversion Table

Quick View Real Estate Conversion Chart
1 meter	3.28 feet
1 foot	0.304 meters
1 square meter = m²	10.76 square feet
1 square foot	0.093 square meters
1 square vara	0.70 square meter
1 acre	0.405 hectares
1 hectare	2.47 acres
1 manzana	1.73 acres
1 acre	4,049 square meters
1 manzana	10,000 square varas
1 hectare	10,000 square meters

 

Certain investors purchase properties which are very large (like 3-4 acres). What you need to keep in mind while purchasing such properties are the over head costs that you will eventually incur, like getting electricity connections, building roads which lead to your property and even fencing your property. It is better to consider the overall cost that you will incur and then finally, negotiate with the owner on giving the best price possible.

Engage the services of a local attorney who can help you with the entire process of buying a property. This is very important since you need to run legal checks as well to ensure that the property will be legally yours post purchase.

Avail the services of an engineer who can check the structural stability of the house you intend to buy which includes the sewage pipes, electrical wiring and roofing of the house.

Information about New House Construction in Costa Rica

New house construction in Costa Rica can be a real challenge to a person from the United States. The Costa Ricans, by nature, have a very relaxed and laid back attitude. Hence, you cannot expect the kind of efficiency and time keeping abilities that is very common in the United States. This article talks about a few points that will come handy when you plan to construct your dream home on the Costa Rican soil.

Firstly, you need to purchase the right kind of place to build your dream house. If you are a person who would like all commodities of life accessible or if you are a retired person planning to settle in Costa Rica, then, you might want to look at some plots available close to the city. If you are a person who would like privacy, seclusion and tranquility, then, you might want to purchase a plot close to the beach.

You also need to services of a good architect who can guide you through the entire process. The plans that you come up with for constructing your house has to be signed off by a professional architect who has good reputation in Costa Rica. An architect can also help you redesign your plans to suit Costa Rican standards in case you have drawn it up based on American standards. The architect also needs to get all the permits needed for building your house.

The primary challenge to begin constructing a house in Costa Rica is finding a good trustworthy builder. You cannot choose a builder blindly by just taking the suggestions of the locals. This is because the way locals prefer their houses to be constructed and the way Americans would want their house constructed are very different. So, just because “ticos” (natives of Costa Rica) hold the builder in high regard you cannot just recruit him.

The actual challenge starts once the place for construction has been decided upon. Electricity in Costa Rica is very expensive. In this country, electricity is more of a luxury than necessity. The electrical wiring in Costa Rica is not properly grounded, which can be potentially dangerous and can give rise to a lot of complications later. Hence it is necessary to ensure that the electrical wiring is properly grounded.

Another aspect is that most of the homes in Costa Rica do not have very high voltage supply. Using electrical appliances like a hair dryer can be virtually impossible. The electrical voltage provided for the entire house can be just 15 amps which can be quiet shock to Americans who use appliances, which need high voltage, very often.

The amount of voltage supplied to each house in Costa Rica by the government is just 120v or 15amps. This can come as a total stunner to most Americans since they are used to running electrical appliances which consume more power. They would not be able to do the same in Costa Rica.

Finally, work in close connection with the architect and the builder to ensure that your house is being constructed as planned. Communication is a key aspect to constructing a new house in Costa Rica. Ask the builder to give you an estimate of the cost of construction including the materials to be use. Ensure that you communicate to the builder that you will select the finishing materials needed like tiles, flooring, paint, etc. New house construction in Costa Rica will not be as much as burden if you keep these few points in mind. There will be hiccups and obstacles to overcome but not as much as if you had not kept the above points in mind.

DISCLAIMER: The content of this document is not intended to be a legal advice, they are for informational purposes only and do not constitute any type of advertisement. The accuracy, completeness or adequacy of such contents is not warranted or guaranteed. We recommend asking for an advice of a specialized professional in the legal area.