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If you are ready to invest in Costa Rican real estate, then here is a helpful review of the purchase process.

Costa Rica Real Estate Purchase Process

Prepared by: AmberLamb – Global Property Investment Reports    www.amberlamb.com

The Costa Rican real estate purchase process is relatively simple, straightforward and well regulated and an investor contemplating making an investment into the property market in this stunning Central American country will benefit from a well developed title registration system as well.

There are a number of specific laws and rules relating to the purchase of real estate in Costa Rica that an investor needs to be aware of however, and this article covers this information together with a break down of the entire real estate purchase process in Costa Rica for foreign buyers.

First things first there are restrictions on the sale and use of beach front land in Costa Rica.  The vast majority of beach front land is owned by the government and while it is possible to purchase a lease on the land it is not possible to own freehold title to land or property on or near the seashore in Costa Rica.

The specific laws relating to this land in the maritime zone are: - 95% of beach front property in Costa Rica is known as ‘concession property’ and it is all governed by the ‘Maritime Zone Law’ and effectively owned by the Costa Rican government.

Concession property is real estate or land that can be bought for a specific period of time and for a specific purpose by either foreign investors or local purchasers - basically concession property is real estate on which one can purchase the equivalent of a lease.

Concession property covers the first 200m of beachfront land measured horizontally from the high tide line in Costa Rica.  The first 50m are considered to be public and are not available for lease or development which means that there is no such thing as a private beach in Costa Rica.

The next 150m of land in the maritime zone is available for concessions to be granted upon.  An average concession period is 20 years and is renewable.  Those who purchase a concession are generally allowed to develop the land or real estate and even subdivide the concession as long as permissions and permits are applied for and granted.

The majority of the rest of the land in Costa Rica is technically available for legal sale to foreign investors and foreign investors have the same legal property rights in Costa Rica as Costa Ricans do.

Many international real estate investors who choose to buy real estate in Costa Rica do so though a limited liability company structure, known locally as Sociedad Anonima or S.A. for short.  By incorporating a company in Costa Rica for the specific purposes of owning land or property an investor may find the whole purchase process and ongoing ownership of real estate in Costa Rica is simpler to manage. 

Furthermore, it is common for property to already be owned by a limited company and for an investor to purchase that company rather than the property directly.  By doing this transfer tax and stamp duty can be avoided - however there is a risk involved because it is not possible for a real estate investor to ensure that the company he is buying is 100% free of debts of claims.

The first and most obvious step a property investor needs to take when buying real estate in Costa Rica is to find land or property that meets their specific investment objectives.  Once property has been located it is essential that a title search is performed before an offer to buy is made.  The majority of properties in Costa Rica are recorded in the Folio Real system in the Public Registry Offices in San Jose and these records are available to search via the internet.  A real estate investor should inform his lawyer of his intention to make an offer and ask that title searches are performed to ensure everything is in order with the land or property, that the vendor has the right to sell, that there are no outstanding mortgages or claims against the property etc.

If a property is not listed in Folio Real it may be awaiting listing and then it can be searched for manually in the Public Register, alternatively it may have no title deed, be unlisted and despite the fact the vendor and his family may have inhabited the land or property for generations, legally they have no right to sell and an investor has no right to buy.  It is therefore imperative that correct and complete title searches are carried out before a real estate investor makes an offer to purchase.

Assuming all is in order with the title deeds an investor may then make an offer on the property which, if accepted by the vendor will result in the investor making his intention to purchase official by signing an ‘Offer to Purchase’.

A deposit is then due and the majority of transactions that take place in Costa Rica between local vendors and international purchasers are handled via an escrow account.  A deposit made will be held in this secure escrow while the purchase process proceeds.  If a title search has not yet been carried out (it should have been!), it will now be completed by the real estate investor’s lawyer and if no problems are found closing can take place.

Final contracts are signed, final monies exchange hands and the title deed transfer is executed.  All fees and taxes are due at this time.

Fees and taxes an investor should factor into the real estate purchase process in Costa Rica include but are not necessarily limited to the following: -

• Transfer tax and stamp duty - circa 2.5%
• Notary fees - circa 1.25%
• If a mortgage is being used to purchase the property the Costa Rican authorities ask for 0.6% of the total mortgage amount for registering the mortgage deeds on the property
• Escrow fees
• Survey costs
• Independent lawyer’s fees
• Limited liability company incorporation fees in the region of USD 1,000
• Insurance

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Source: AmberLamb – Global Property Investment Reports    www.amberlamb.com

For a more technical and detailed review of the buying process, see the Guide to Buying Real Estate, prepared by Stewart Title.