1 stop Real Estate

Housing Regulations and Restrictions:

 

• • Along both the Caribbean and Pacific coasts, the first 200 meters (656 ft.) above mean high tide is owned by the government. No building is permitted within the first 50 meters (164 ft.) above this mark. Note: This regulation is very important when purchasing oceanfront property. Be sure to purchase legal land only.

• • 50-200 meters (164-656 feet) above mean high tide may be leased from the local municipality pending approval from the Costa Rican Tourism Board (Instituto de Turismo). Per Costa Rican law, foreigners cannot legally lease this area.

• • You cannot build a house within 50 to 100 meters (164 ft. to 328 ft.) of a river.
• • Most municipalities require new properties to leave space for sidewalks. Check with local authorities for your area’s specifics.
• • The ICT discourages the construction of any building over three stories high in beach areas.
• • Housing developers should keep in mind that Costa Rican law allows only 60-70% of your land to be used for building lots. 20-25% must used for roads and 5-20% for parks.

 

Building Tips:

 

• • Contractors get a discount on materials. They may be tempted to purchase materials with the best discounts. Double check to be sure that they’re using the materials you agreed upon and paid for.
• • If you have a nice view from your property, play it smart. Purchase the land around it to preserve that view.
• • Get a bilingual Costa Rican friend to talk to sellers about property and prices. Foreign accents can raise prices. • Many homes in Costa Rica have only 120-volt service to the home.  Often, even the 120-volt service is low capacity, perhaps as low as 15 amps for the whole home. If you plan to use heavy duty appliances (such as a dryer) or need more amperage, talk with your construction foreman in advance.
• • Costa Rican law does not require electric wires to be earth grounded. If you plan to use expensive appliances – televisions, computers, etc. – you should arrange for your electrical system to be earth grounded
• • Water faucets are often reversed here: in Spanish, caliente means hot, so many contractors confuse the C-labeled faucet knob (“cold”) for hot.
• • Insist on higher-quality, wider plumbing. Often, narrow pipes are utilized for their affordability, but this can cause plumbing problems in the future.
• • If you rehire people who worked for the previous owner, make sure s/he paid them properly. You, as the new owner, could be liable for a previous owner’s debts.
• • If a telephone line comes with the property, hang on to it. New telephone lines may take months to arrive to a new home.
• • If you are a landlord, you can evict tenants only if you can prove that you need the property for personal use. You cannot evict tenants as long as they pay their rent on time. By law, rent in colones can be increased only by 15% annually, unless stated otherwise in the lease. Rent in dollars may only be increased every three years.

Making sure you have a clear title to the property

Under Costa Rican law, all documents relating to an interest and/or title to real property must be registered in the property section of the Public Registry (Article 460 of the Civil Code). Most properties have a titled registration number known as the folio real, which you can use to search the records database. The Public Registry report, or informe registral, gives detailed information on the property, including the name of the title holder, boundary lines, tax appraisal, liens, mortgages, recorded easements, and other recorded instruments that would affect title.

Recorded instruments presented to the Public Registry are given priority according to the data and time in which they are recorded. Every situation differs, and in some cases a review of the Public registry record will not be enough to uncover all encumbrances. It’s important for the buyer to have his or her own attorney conduct an independent title search rather than rely on the seller’s attorney.

How much does Real Estate closing cost in Costa Rica?

Generally, the buyer and seller share closing costs equally. This can be modified by agreement and typically depends on the particular transaction. Closing costs include government taxes and fees, notary fees and mortgage costs.

Government transfer tax and registration fees include the following:

1. Real estate transfer tax. The government collects a property transfer tax, or impuesto de traspaso, equal to 1.5% of the registered value of the property. The Public Registry won’t transfer a deed unless the transfer taxes and documentary stamps have been paid.
2. Documentary stamps. The government also requires that documentary stamps be affixed to the deed. These include the Municipal stamp (timbre municipal), legal bar association stamp (Timbre del Colegio de Abogados), Agricultural stamp (Timbre Agrario), National Archives Stamp (Timbre del Archivo Nacional), Fiscal Stamp (Especie Fiscal). The Public Registry also places its own tax of .05% on documents presented for recordation to the Public Registry (Derechos de Registro).

Notary Fees in Costa Rica

The Notary that drafts the contract for sale and carries out the closing is entitled by law to a fee equal to 1.5% of the first one million colones of the actual sales price and 1.25% on the balance.

Mortgage Costs in Costa Rica

Normally, the person who is receiving financing pays the costs of drafting and registering the mortgage instrument. A mortgage can be created simultaneously at the time of sale by adding a mortgage clause in the transfer deed or a separate mortgage instrument can be drafted. A mortgage document pays registration fees of 1.00 colon for every 1,000 colones. The mortgage document also pays documentary stamps. The notary public will also charge for drafting the mortgage instrument, and that fee can range from approximately .625 percent to 1.25 percent of the amount of the mortgage, depending on the circumstances involved.

The buyer should be aware that Costa Rican real estate transactions commonly operate on a two-tiered system, since Costa Rican properties have a low property tax appraisal base in relation to market value, it is a customary practice to run property sales through at the registered value, which may be substantially less than the actual sales price of the property. In such a case, all transfer taxes and fees discussed above would apply to the registered value as opposed to its sales price, with the exception of the notary fee. Buyers should consult their attorney about the potential risks of this practice.

Registration of the transfer deed in Costa Rica

Once all the fees have been paid, the notary who drafted the transfer deed is obligated to ensure that the deed is presented and registered in the Property Section of the Public Registry. Presentation guarantees your priority, but it does not automatically guarantee registration. The Public Registry will not register transfer deeds unless all taxes and registration fees are included, a certified copy from the municipality where the property is located is provided certifying that the seller’s property tax and municipal assessments have been paid through the date of closing. Likewise, any prior instruments that encumber the property (i.e. mortgages, liens, judgments, etc) must be lifted before your transfer deed will be registered.

Once a transfer deed is accepted for registration, the Public Registry will return the original document with all the documentary stamps affixed and properly sealed. Assuming no defects in the transfer deed, it should be registered by the Public Registry with 45 to 60 days after presentation. It is therefore important to follow up with the notary to ensure registration, otherwise you will run into problems in the future when you decide to resell the property and find out your sale was not registered.

Beach Front Property

In most cases, beach front property is untitled property. In Costa Rica the ownership and possession of the shoreline is governed by the Maritime Zone Law which restricts the possession and ownership of beach front property. By law, the first 200 meters of beach front starting at the high tide markers is owned by the government. Of the 200 meters, the first 50 are deemed public zones, and no one may possess or control that area. On the remaining 150 meters, the local municipal government will lease by way of concessions the land to private individuals. The Maritime Zone Law creates some restrictions on foreign ownership or possession of beach front property, so a more thorough study is required when considering beach front property in Costa Rica.