COSTA RICA REAL ESTATE LAWS

Ownership of Land
Costa Rican laws and the constitution protect private ownership of land. 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 traded or acquired by foreigners only after the original owner has held it for a certain period of time. Citizenship, residence, nor even presence in the country is required for land ownership.
Ensuring Clear Title
Costa Rican law requires that all documents relating to an interest and/or title to real property 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, and the records database can be searched with this number or by name index. The web site for the National Registry is www.registronacional.go.cr
The registry report (informe registral) provides 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. Since Costa Rica follows the doctrine of first in time, first in right, recorded instruments regarding land for sale presented to the Public Registry are given priority according to the date and time in which they are recorded. For purpose of the transfer of real estate, this means that any mortgages or liens, which are not recorded at the time that title is transferred, are invalid. Since the certificate of title issued by the Public Registry is prima facie evidence of the condition of title on the date issued, any instrument not recorded at the time the certificate is issued is invalid. This eliminates the need for title insurance since any instrument omitted from the report is deemed invalid.
Obviously, every situation differs and in some cases a review of the Public Registry record will not be enough to uncover all encumbrances. That is why it is important that the buyer have her or his own attorney conduct an independent title search and investigation rather than rely on the seller's attorney. And some buyers feel more comfortable purchasing title insurance, in which case the title guaranty company will take care of the search.
The title transfer process of land for sale
In Costa Rica, the seller transfers land to the buyer by executing a transfer deed (escritura) before a notary public. Unlike common law countries, such as the United States and Canada, in Costa Rica the notary public has extensive powers. The notary public must be an attorney and may draft and interpret legal documents, as well as authenticate or certify the authenticity of documents.
In order to close on the property, the buyer and seller must select a notary/attorney who will draft the transfer deed and register the sale in the Public Registry (Registro Nacional). Locally it is customary for the buyer to select the notary/attorney who will draft the transfer deed if paying cash for the property.If the purchase price is financed, there are 3 options for selecting the notary/attorney:
If the seller is financing a large percentage of the purchase price and a mortgage needs to be drafted to guarantee payment, then the seller may request that her or his notary/attorney draft the transfer deed.
If a property is purchased 50 percent cash and 50 percent financed, it is common for the buyer's attorney and seller's attorney to jointly draft the transfer deed and mortgage in a single document.
Finally, the buyer may insist that his or her notary/attorney draft the transfer deed and let the seller's notary/attorney draft a separate mortgage instrument. In this case, because the mortgage is being drafted separately, it carries a higher registration fee.
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 that 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 present to somebody else.
Registration of the transfer deed
Once all the fees have been paid, it is the obligation of the notary who drafted the transfer deed to ensure that the deed is presented (anotado) and registered (inscrito) in the Property Section of the Public Registry. You should be very sure to follow up with the notary to ensure registration! Although presentation guarantees your priority (i.e., first in time, first in right), it does not automatically guarantee registration. The Public Registry will not register a transfer deed unless all taxes and registration fees are included; a certified copy from the Finance Ministry (Ministerio de Hacienda) is provided certifying that the seller's property tax (impuesto territorial) payments are current; and a municipal certification is provided from the municipality where the property is located certifying that both buyer and seller are current on municipal tax payments. 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 to it 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 that your sale was not registered.
Closing Costs
Closing costs for a sale include a transfer land tax, a stamp tax, and legal fees. Closing costs typically run 5 – 6% of sales price and are usually split 50/50 between buyer and seller. The transfer and land taxes are assessed based on the declared value, while legal fees are charged based on sales price of the property. If the property is held by a Costa Rican corporation (often the case) a large portion of these costs can be avoided
Beach Property Use Caution
An investment in shoreline property regulated by the Maritime Zoning Law requires extra caution and thorough investigation. The reality is that ambiguities exist within the written law, so that as regulations are created and amended, rights to property may also change. There are no guarantees and there is no foolproof way around the law. Even if you get a concession, there are no guarantees that the concessions will be renewed or that the price of the concession or the yearly canon will be within reason. The fact remains that you are not purchasing property, you are leasing it and you must be willing to accept that risk. Also, see information about squatters in Costa Rica, because in certain cases a foreigner has made it through the concession process only to lose all or a portion of the property later to squatters. Make sure your attorney examines the Municipality Records, verifies the seller's ownership status, and also verifies general tax and leasing records. Keep in mind that if you are opening a business on the beach, it may be worthwhile for you to have a concession. But if you are looking to purchase a beach home or recreational property, then you would probably be better advised to purchase titled land outside of the Maritime Zone.
The Maritime Zone runs for more than 1,500 km. (932 mi.) along both coasts. More than one third of this (590 km. (367 mi.) is open to legal development. The rest is invested in mangrove swamps, National Parks, mouth of rivers and other protected areas.
Most of this land is already developed, much of it illegally. Only a small fraction is still open to development. For instance, the local municipality of Santa Cruz, Guanacaste has leased to developers 40% of the 50% of the land allotted to it in the Maritime Zone.
According to the law, land can be acquired only through temporary 5-20 year concessions, and must be developed according to a detailed regulatory plan consisting of a zoning plan, showing what is going to be built and where, and a construction implementation framework, showing in detail how all this is going to be handled.
Currently, only three hundred building concessions are recorded in the Registro Publico, and only two hundred of these are current and in accordance with the law. However, there are fifteen THOUSAND hotel and tourist developments along Costa Rica's coasts which received government approval but, for mysterious reasons, were able to bypass planning controls required by law.
Most coastal lands under concession are leased at very low prices.
It has been a common practice, through bribery or influence, to take beach land illegally. The land is then sold to foreign investors who believe they are taking legal title to the property. Use Caution.
Beach Homes:Understanding the difference between beach property and Maritime Zone Property
To begin with, not all beach property is maritime zone property. You can purchase fully titled land in front of the beach or overlooking the beach or within walking distance to the beach and never have to worry about the Maritime Zone.
However, if you want to purchase land ON the beach, it will not be titled (as a rule). As in nearly every country in the world, Costa Rica’s beaches are public property. So, if you would like build or buy a beachfront home or business, you should familiarize yourself with the special rules regarding beach property in Costa Rica.
The Maritime Zoning Law for beach property
The 1977 Maritime Zoning Law (Ley sobre la Zona Marítimo-Terrestre - Ley Numero 6043) regulates the ownership and usage of beachfront property in Costa Rica. The law creates two zones along Costa Rica's Pacific and Atlantic coasts. Islands are also subject to this law. The national government owns this "Maritime/Terrestrial" restricted zone and local governments (municipalities) administer it. You measure from the high tide mark inland.
The two zones total a width of 200 meters along the beach:
The Public Zone (Zone Publica): a 50 meter wide strip of beach between the high tide line and the outer line of the "Restricted Zone" (Zona Restringida). This beach zone is open to the public. Private possession or occupation of this area is strictly prohibited. However, no one may trespass private property or the restricted zone in order to reach the public zone.
The Restricted Zone (Zone Restringida): a 150 meter wide strip of beach from the limit of the Public Zone inland. The law allows the government to grant leases called concessions for the occupation and use of this area for terms that range from 5 to 20 years. This is the beachfront land that homes or business may use for personal or monetary gain. Certain buildings are allowed in this zone, but these will revert to the municipalities (local Governments) at the termination of the lease, unless the lease is extended.
How the Concessions Work for maritime zone beach propertyThe National Geographic Institute (Instituto Geográfico Nacional) marks the maritime zone. If the zone is not marked and a development plan has not been drafted and approved, the authorities are unable to grant building permits for development of the area.
The Instituto Costarricense de Turismo (ICT) authorizes leases on the Restricted Zone, but the local Municipal government grants and administers the government concession for possession of land in the maritime zone. The Registry of Concessions in the Public Registry in San José records all concessions. Before a concession can be granted, the particular beach where the property is located must have an approved Zoning Plan (Plan Regulador) in place. Only the actual Concession will clearly define the rights and terms of ownership that the occupant has to the property.
These concessions or leases are granted for five to twenty year terms. Once the concession (lease) has been approved, it is registered in a special Concession Registry in the Public Registry. A yearly fee must be paid to the municipality for the duration of the lease to keep it current. Failure to pay may terminate the lease and result in the loss of any buildings on it. The lessee applies for an extension of the lease concession at the Municipality. Extensions are normally granted with the previous approval of the ICT.
Beach property restrictions
There are certain restrictions for concessions held by foreigners. If personally held, the foreigner must first have five years of legal residence in Costa Rica. For this reason, most foreigners purchase the rights to beach property by first forming a Costa Rican corporation, a simple process that takes about 30 days and can cost from $150 to $500. The cost depends upon your attorney and the characteristics of the corporation registered. Your Costa Rican corporation must have at least fifty percent of its shares held by a Costa Rican resident. Most people are not comfortable with this so at the time of closing the sale, the "token" Costa Rican shareholder, simply signs over their shares to the foreigner so that the foreigner is holding 100% of the shares. This is common practice.
Exceptions
The Maritime Zoning Law was not applied retroactively. Any shoreline property previously titled can be freely transferred. Of course this titled property is very rare. These cases are those involving rights registered in colonial times, and certain urban property on the beach. In areas where the 150 meters of restricted zone does not have an approved zoning plan (plan regulador), you may find an “arriendo”. You may occupy and develop the zone after you purchase the rights from the legal occupant. These rights are registered at the corresponding local government or municipality. There is no time limit for arriendos. Not until the land is property zoned (which may never happen!). Many beach lands have an arriendo. The arriendo allows transfer of ownership and low impact development. Building a house or small tourist project is no problem but larger projects must go through a zoning approval with the government.
Precautions Beach home and propertyAlthough local governments will collect a land use tax known as a canon from occupants of land located in the maritime zone it does not mean that a concession has been granted. As such, the payment of a canon is simply recognition of the right to possession.
Here are other points of law you must abide by in order to safeguard your concession.
Concessions for maritime zone beach property cannot be granted to:
Foreigners who have not been residents for five years
Companies with bearer shares
Foreign companies based abroad
A company set up in Costa Rica exclusively for foreigners.
A company with more than fifty percent foreign capital (ZM Art. 47)
Concessions on maritime zone beach property can be forfeited for the following reasons:
Failure to apply for an extension of a concession in a timely manner
The forfeiture of rights by the interested parties
The death or legal absence of the concession holder with no heir
Not abiding by the established obligations of Article 51
Cancellation of the concession (ZM Art. 52)
The ICT can cancel a concession on maritime zone beach property for:
Non payment of the yearly canon or royalty
Breach of contract (e.g. use of the land for purposes other than those expressly stated by ICT)
Violation of the ordinances of the law that grants the concession
Impediment of the use of the public right of way
Other causes that this law establishes (ZM Art. 53)

COSTA RICA REAL ESTATE LAWS 2008-07-24T02:12:00-07:00 Rating: 4.5 Diposkan Oleh: Merlyn Rosell