Local Market 101
Important Facts When Buying Land In Costa Rica
At Costa Rica Realty we believe in the ethics, honesty and transparency of every real estate transaction carried out with our clients. This is why we want you to know important facts before buying land in Costa Rica.
Ownership Of Land
Costa Rica laws and Constitution protect private ownership of land and foreigners enjoy the same rights as citizens. There are almost no restrictions to ownership of private land, except that given or sold to Costa Rican citizens as part of government programs, which can be freely trade or acquired by foreigners only after the original owner has held it for certain period of time. Neither citizenship nor residence or even presence in the country is required for land ownership.
Costa Rica boasts of a safe form of title registration to protect buyers from hidden claims. It is centered in the Registro de la Propiedad (Property Registry), where both title documents and survey palted for every property are recorded. 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.
Those who want to buy land in Costa Rica should get professional advice, which include a search of the title in the Registry, so as to confirm there are not liens on it, and to establish its proper ownership. Once the deal is completed, you should also secure documents from a lawyer to prove that the sale was registered, for your own safety and to prevent to somebody else.
Due to the current world economic condition, conventional loans are a little tough to come by. Terms are not very favorable from Costa Rican banks, but there are private lenders available and also Sellers are offering Owner Financing more and more to compete with other sellers…Sellers in general are open to offers contingent upon some kind of creative financing, etc.
Knowledgeable lawyers agree that zoning regulations in Costa Rica are reasonable and logical, although far less stringent that in countries such as United States. A registered local engineer must sign all building and subdivision plans and they also require approval by the local municipality, the Ministry of Health, and the government Housing Department.
Real Estate Brokers
It is highly recommended that buyers work with a professional realtor when making a purchase in Costa Rica. A well reputed company or realtor is a good idea. Also it’s a good idea to seek the advice of an agent who has not only been in the area for many years, but also preferably an agent who has experience in ethics and client representation, etc. Make sure that the broker belongs to the Costa Rican Chamber Of Real Estate Agents (Camara Costarricense De Corredores De Bienes Raices). Always ask for their credentials.
The taxes paid on properties in Costa Rica are very low…Yearly property taxes vary from 0.25% to 1.5% 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 lower than the sales practice.
It is also recommended to use a registered Escrow Service in Costa Rica as a third party that can mediate between the buyer and the seller. In this way transactional transparency is ensured.
Closing costs for a sale include a transfer land tax, a stamp tax, and legal fees. Closing costs typically run 5% to 6% of sales price and are usually split 50/50 between buyer and seller. Buyers will often absorb the seller’s closing costs in order to get a better sales price! The transfer and land taxes are assessed based on the declared value, while legal fees are charged based on SALES PRICE of the property.
Costa Rica has recently made a radical change, for the better, in the currency law. While until recently sales negotiated in dollars had to be written in colones, it is now possible to have contract in dollars give both buyer and seller a peace of mind previously unavailable. There need be no worry with regard to serve devaluation of the colon, for example, or other difficulties introduced by having to translate back and forth between dollars and colones. Another major effect is the possibility of having mortgages in dollars. These mortgages are still seller-leveraged more often than not, but can be written by another attorney and guaranteed by the property. Once sellers understand the implications of being able to offer this type of mortgage, it will likely become the most common type of financing, tempered by the buyer’s desire to keep his property taxed lower, as a mortgage will automatically raise the declared value of the property to the amount of the mortgage.
Regulations For Beachfront Property
When buying beachfront properties, one must be aware of regulations Costa Rica’s coastline is all public. By law, the first 50 meters above the mean high tide line are inalienable public; define by what is known as the 50-meter line. No one can restrict access or have a totally private beach. There are some exceptions, but they include port areas, old land grants, and some title prior to 1973.
On 80% to 85% of the coast, the next 150 meters are government owned lease and also known as the maritime-terrestrial zone (or just maritime zone). Restrictions on maritime zone land for foreigners are that one must establish five years residency to own more than 49% of the rights to a lease. Two loopholes include holding the lease with a corporation that is wholly owned by a foreigner, or by having a Costa Rican hold 51% of the lease in name only. Development of the maritime zone does not discriminate against foreigners. A regulation plan must exist for area where the land is or just for the parcel itself.
If one does not exist the developer must make one, then have it approved by ICT (the Tourist Board), INVU (the Urbanization Institute), and local municipality. Such a regulation plan will call for “zoning of land” includes public use areas, road, water, electricity and more.
The other 15% to 20% of the coast is land that is title to the 50 meters line. That is to say that no maritime zone exists and the landowner may develop without inconvenience of filing a regulation plan. Tourist development must, of course, be approved by ICT, but almost anything else would require only building permits.