By: Lic. Gonzalo Viquez Carazo Jr.
Viquez Oreamuno & Associates
Tel: 506-8161681
Email: costaricanlegaladvice@gmail.com
Website: www.viquezoreamuno.com
Why should you invest in Costa Rica by purchasing a piece of property or develop your own real state project? The answer to this question my vary in accordance to each specific case, nevertheless many if not all aspects that motivates your decision are basic; Costa Rica is a small country full of wonders around each corner. Costa Rica is well known for its rainforests, private reserves, volcanoes, mountains, beaches, well you name it and we have it.
Costa Rica gives an opportunity that other countries don�t, and this is diversity of locations and properties to choose from in a considerable traveling time. There is a simple principal you should follow: "A piece of land can be compared to gold, meaning that its value will increase in time, real state is a worth while investment if all the correct legal steps are taken in consideration."
LAND OWNERSHIP
Any foreigner can own land in Costa Rica, you are not required to be a resident to purchase property. You can also purchase land through a corporate name, you may constitute a Costa Rican company (Sociedad Anonima (Anonymous Corporation( or Sociedad de Responsalidad Limitada (Limited Liability Corporation)) to record the property in a corporate name. The benefits of constituting a corporation to hold your Costa Rican assets are numerous.
Our laws and constitution are based on Democracy and freedom, protecting the basic rights for the private ownership of land. Such laws are of equal conditions to any foreigner as per to any resident or citizen.
Sales and Purchase Agreement (SPA)
In most cases you will need time to organize your portfolio or funds in order to purchase the land you have fell in love with. What can you do to tie the property or take it off the market? A SPA can be signed between the Seller and the Buyer, this agreement will serve as a legal instrument that will bind you to buy and bind the Seller to sell, as per all terms and obligations will be drafted set forth before closing. A guarantee deposit of good faith is customary to render upon signature, there is no percentage stipulated by law nevertheless it is recommended a percentage not exceeding 10%, yet it will depend on each particular negotiation.
National Registry (property recording entity)
Costa Rica has one or why not the best recording procedure for landownership of Central America, almost all the land in Costa Rica is duly recorded. This gives security when you plan to purchase a property. In almost all cases you can track down the origin of the property starting from the �mother property or property of orgin�, such documents are public and are easily found by microfilmed and recorded documents. Any movement or transaction regarding the property is duly annotated on time upon its presentation; property movements are updated every day, facilitating the detection of any anomaly.
Those who wish to purchase property in Costa Rica should seek legal counsel and or professional advice. A real state attorney and Notary Public is the person who will draft all closing documents or �escritura de traspaso�. The Notary Public is the professional in charge to search the title (measurements, boundaries, location and current owner) in the National Registry, as to confirm if there is any existing liens or encumbrances, annotations, restrictions or easements, and to establish its proper ownership. Once the closing has been done, the Notary Public will be solely responsible to pay all transfer taxes and stamps on behalf of its client or purchaser and file the �escritura de traspaso� or deed for recording in due time.
Municipal or Property Taxes
Property taxes in Costa Rica are based on the declared value of the property. The Costa Rican Revenue Department or Tributacion Directa as per the corresponding Municipality has a recorded value of the land lower than the purchase price in some cases, if not all.
Closing Costs
Closing costs for a purchase include: a) land transfer tax, b) stamp tax or �timbres de traspaso�, (a and b total around 2.5% aprox.) c) and attorney fees (1.25%). Transfer and stamp taxes as per legal fees are calculated upon the real purchase value.
Can a foreign investor obtain financing?
In many cases, Banks or Financial Institutions in Costa Rica may be reluctant to finance a percentage of the sale price, even though they will have a real guarantee in case of non-compliance. Being a legal resident may facilitate financing with local Banks. Nevertheless each case in particular will be studied by the corresponding applicant entity. There is an existing market of private lenders that will be willing to provide such financing in Costa Rica. For second home investments in Costa Rica, Southern National Bank of Texas (a US bank) has recently opened a second home mortgage program. www.snbtx.com
Title Guarantee
You can obtain title guarantee through a US Title company, STEWART TITLE. The cost for title guarantee is 1% of the sales price. There are Attorneys-Notary Publics who are authorized representatives and members of Star System, Stewart Title that could handle all legal closing documents as per all title guarantee documents at the same time in Costa Rica. Title guarantee is optional in Costa Rica.
Beachfront Regulations
In Costa Rica the corresponding municipalities have the obligation to administrate beachfronts. With out a doubt these properties are the most desirable of all. Beach front properties are located in what is known as the maritime zone a 200 meter strip starting from high tide, divided into 50 meters strip closest to the shore know as public zone and the remaining 150 meters that can be applied for concession in the corresponding Municipality.
If you plan to purchase property in beachfront you need to take in consideration certain aspects. The first is to understand that these properties are given in concession for periods of time, renewable in most cases, this does not reflect true title, but a permit to manage and administrate such property. As per you need to keep in mine that in some areas there are regulatory plans or special zoning, meaning that you have to make sure that the property you are applying for concession has been designated or granted such specific zoning you are looking for. If there is no regulatory plan you will have to proceed with such presentation, patience is required as per hiring professionals to complete this procedure. With adequate organization and a professional working group you can accomplish your goal to obtain a concession land or beach front property in due time.
The above state information is a brief introduction to some of the relevant aspects to consider upon the purchase of a property in Costa Rica, if you have farther questions please feel free to contact the author.
Lic. Gonzalo Viquez Jr. specializes in real estate law and represents individuals and investors throughout the legal closing procedures, from due diligence stage until closing as per the constitution of Costa Rican Corporations to own property.
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