Purchase Real estate in Costa Rica. ☎️ A Legal Guide to buy land.
Are you interested in buying real estate in Costa Rica? If you wish to purchase or sell real estate, be it land, a home, or a vacation rental property, our legal team is here to help you. Can foreigners buy land in Costa Rica? This article will provide you with links and information. I am a real estate attorney in San José, Costa Rica, and I will gladly help you purchase property and ensure your investment is secure. Real estate purchases begin with due diligence and escrow coordination. Then comes the property closing and registration with a secure real estate title from the Public Registry. You should never rush to buy or sell real estate properties if due diligence is not done first. As your real estate attorneys, we will ascertain if the property for sale has any legal issues, so you can avoid any problematic situation.
What are the first steps to take, in order to buy real estate in Costa Rica?
The first thing is to figure out which property you’d like to buy. At your request, the seller will give you the property identification number called the “Folio Real”. With this number and acting as your real estate lawyer, we can identify the property in the Public Registry of Costa Rica. This lets our real estate attorneys know about property size and cadastral plan number information. We can assess its boundaries and the nature of the property. Most importantly, we will be able to ascertain who the owner of the property is as well as the encumbrances. These initial steps are part of the due diligence service we offer you to ensure you purchase real estate safely.
It’s important to note that the first digit of the property´s identification number, also known as the folio real, corresponds to the province in Costa Rica where the property is located. This can be one of the following: San Jose, Alajuela, Cartago, Heredia, Guanacaste, Puntarenas, or Limon. The province number is followed by several other identification numbers, which together form the property’s unique identification. Finally, a sequence with three numbers, often zeros, indicates if the property is owned by a sole person. For instance, if the sequence is 000, it suggests sole ownership. Different sequences may suggest ownership by a tenancy in common, such as 001 or 002, or 003, depending on the number of ownership rights.
What other relevant information does the Registry show, as to the property title?
With the land title number, our real estate law firm will be able to ascertain all types of information. The Registry will show us, who the owner of the property is, and the type of ownership. (Is the landowner a trust or privately owned by a corporation? Is it in the name of a physical person?) The Registry will also show, the size of the property, its boundaries, and the cadastral plan number, to see it. Most importantly, your property lawyers will be able to see if the property has any encumbrances. All of this is part of due diligence, a necessary step if you wish to buy a home in Costa Rica. I covered all of this in the due diligence section, which I highly recommend reading if you wish to buy property in Costa Rica.
How does the property transfer happen?
All land in Costa Rica must be purchased through the services of a Notary Public. As notaries, the law grants us “public faith,” which is a power given to us under the laws of Costa Rica. So when you purchase land in Costa Rica, you must always hire a notary public. We will draft the public sales deed in a special book called a “protocol”, which both you and the seller will sign. At that moment, through consent, the sale is consummated.
This notarized sales deed is called an “escritura pública”, or “public scripture.” This notarized document is read to both parties, and you must both sign in wet ink. Once the notary public gets paid for his notary fees, land transfer costs, and transfer taxes, he will file a certified copy of the public scripture at the National Registry. As you can see, the original document is not the one that gets filed at the Registry, but rather a special certified copy of it. In this copy, the Notary Public gives “faith”, that it is a faithful copy of its original.
How much are the property transfer costs and taxes?
Basically, you are looking at land transfer costs and notary fees. The property transfer taxes are 1.5% of the sales price, or according to the fiscal value, whichever is higher. So if the purchase price for the property is less than the fiscal value, the latter will be used to make the calculation, and vice versa. The Notary must pay the transfer tax to the Public Registry. This, however, is not the only thing you must pay.
The buyer must also pay for registration costs, which include the stamps that must be paid to the Public Registry. These stamps include the National Registry Stamps, agrarian stamps, fiscal stamps, and other fees. In total, you pay around 2.5% of the property value in property transfer taxes and stamps when you buy or sell real estate in Costa Rica. You must also pay the legal fees calculated according to the property value. Ask our real estate law firm, to provide you with an estimate.
How can I make sure the property is indeed registered properly?
This is another reason why you should hire us for your land transactions. We are a group of honest and law-abiding real estate attorneys and notary publics, and we greatly care for our clients. In my 20 years of experience, I have seen many things. I´ve had to litigate against a nefarious notary public chosen by the purchaser who didn´t bother to register the property. So how do you make sure, that the real estate property got registered properly? By hiring us, since we will even give you a certification by the Public Registry, that you are the new landowner, once the registration process is concluded..
When you buy real estate in Costa Rica, the notary public files the property purchase agreement in the Public Registry. Once we file, we will get a receipt stating that the documents were filed. This receipt is used to track the property registration process. Once the property is in your name, you can access the public registry and corroborate that you have a secure title with the corresponding property number (folio real). We always show this to our clients once everything is done, so you can rest assured that the land transaction was closed properly.
My real estate agent asked me to sign a letter of intent (LOI). What is this?
The LOI or letter of intent, is a document usually drafted by your real estate agent. It’s more of an outline for the future real estate transaction. This document is helpful because it relays initial information regarding the buyer, seller, and the property for sale. American brokerage firms in Costa Rica use them a lot to initiate negotiations.
Should I sign an option to purchase agreement to secure the property for sale?
An option to purchase agreement is a pre-contract because it paves the way for the future sale. Through this contract, the potential purchaser promises to buy the real estate property. This promise is usually backed by an earnest money deposit, given to the landowner. In return, the landowner saves the property as is, to be bought by the potential buyer, in a determined time frame.
Under no circumstance do I recommend, you sign an option to purchase agreement, if due diligence has not been finalized on the property. If you pay earnest money first, you may regret it if the property has issues. The real estate transaction must be done following the appropriate steps. If the landowner wants you to sign an option to purchase agreement, we will gladly revise it, or even draft one. But, only after we have finalized due diligence and give the OK to continue with the property purchase.
Is escrow a good idea to purchase real estate in Costa Rica?
Once we conclude due diligence, then we can begin working on setting up the financial aspect of the real estate transaction. Things can be more manageable if you already have a Costa Rican bank account. However, remember that as a buyer, you will have to show the bank the origin of the funds. Escrow is always a good idea if you don´t have a Costa Rican bank account open. If you have your money overseas, then I highly recommend using escrow for the closing. As a real estate attorney in Costa Rica, I have been involved in countless real estate closings with escrow agents.
I can recommend a few distinguished escrow companies for a secure real estate transaction. The escrow agent holds the purchase money in Escrow until the notarized purchase agreement is signed. When it is, the funds will be released to the seller, and the real estate transaction will be concluded. According to these guidelines, property transfers will be done smoothly, whether you are the seller or the buyer.
Can Americans own property in Costa Rica?
Yes, for sure! Land in Costa Rica is usually posted for sale online through a real estate agent. You should contact your real estate agent with your sale price and place the property for sale. You should also know that, except for voting, all foreigners have the same rights as Costa Rican citizens. Thus, you can buy real estate, sell property, mortgage it, and modify it. So yes, you can definitely own real estate in Costa Rica, with the full protection of the law. It´s important to know your rights, in regards to private property, which is protected under our Constitution.
Are there any legal requirements for foreigners to purchase land in Costa Rica?
No. The only legal requirement for buying a home in Costa Rica is to have their identification documents up to date. In this case, your valid passport will suffice for identification purposes. A minor detail is an affidavit, usually inserted into the notarized sale, in which you indicate the origin of the money you are using to purchase the property. You don´t even have to be a resident to be able to purchase property, and you can even establish a corporation to own it.
Can you recommend a good real estate agent in Santa Teresa, Guanacaste?
I sure can. Santa Teresa is a beautiful location known for excellent surfing spots and astonishing sunsets in Guanacaste. Other beautiful locations in Guanacaste are Tamarindo, Pagagayo, Flamingo, Samara, Nosara, Playa Potrero, Playa Hermosa and Conchal. Many real estate agents speak perfect English and have listings that you can look at. As attorneys, we can coordinate with your real estate agent for initial contact. This is necessary to begin with due diligence and finalize the property closing. Langston Realty in Santa Teresa, Guanacaste, is a company with real estate agents and property listings that you should look into.
Can you help me buy real estate in the Pacific side of Costa Rica?
Yes. As real estate attorneys, we can assist you with property purchases all over the country. In the Pacific areas of the country, you will find beautiful beaches and excellent properties to invest in. Such areas include: Santa Teresa, Cobano, Malpais, Nosara, Nicoya, Flamingo, Papagayo, Hermosa, Jaco, Tamarindo, Montezuma, Catalinas, Manuel Antonio, Dominical, and Osa.
Can foreigners create a corporation and place the property in its name?
Yes, our real estate law firm, can create a corporation for you, to own the property investment. You can either have us open a Limited Liability Corporation or LLC, or a Standard Corporation. There are, however, some setbacks. Every year, the corporation must pay a corporate tax, just to be able to exist. After three years of payment defaults, the company will be automatically dissolved. You must also inform the Central Bank of the final beneficiaries of the corporation. It´s important to know, that the corporation requires a shareholder´s assembly, in which the corporation grants the authorization to sell, per governance regulations.
Can I buy property using power of attorney?
You sure can. A power of attorney can be used to buy or sell real estate property in Costa Rica. You should know, that in order to do so, the power of attorney must be notarized in a public scripture as well. So, if you are not in Costa Rica, and you don’t want to travel down here, then you have two possibilities. The first is to go to travel to the nearest Costa Rican Consulate. The Consul acts as an overseas notary public. The second is fly a notary public to you, and have it done.
Once the real estate property title is registered to my name, what else should I do?
As a real estate attorney, I always ensure my clients know their property rights as landowners. You should also be aware that property title theft is a global issue. Costa Rica is not immune to it. After the asset is in your name, there are several things you can do to prevent it. You should click on the following link to learn how to prevent property fraud and what to do if this happens to you.
Sell real estate or buy property in Costa Rica: what about land transfer taxes?
As I stated previously, it’s customary for the buyer to pay for all real estate transfer costs. So if you sell property in Costa Rica, you won´t have to worry about this. However, you will be responsible for paying the “Capital Gains Tax”, but this is another matter. If you have a real estate agent, you will need to pay his realtor comission. It´s customary for the seller, to pay for the realtor´s comission. Once you become the real estate owner, you should learn about several property taxes that must be paid.
What expenses and taxes must I be aware of if I buy real estate in Costa Rica?
When the public scripture (escritura de traspaso) is signed, you must pay for several things. First come the notary public fees. These are the legal fees he charges you, for his services. You must also pay the corresponding property transfer taxes and the Registry Stamps. All these things must be paid to have the property you bought duly registered to your name. Sadly, there have been instances where unscrupulous notary publics do not register the properties. This is why the choice of a notary is essential. This is why as a buyer, you must always choose the notary public when you buy properties in Costa Rica.
Can you recommend good places to buy real estate in the central and south pacific side?
Most certainly. Good places to purchase real estate near the beaches are Jaco, Manuel Antonio, Dominical, Uvita, Ballena, and Osa. If you are planning to buy beachfront properties, it´s important to know about the maritime zone regulations.
How can I avoid problems if I buy real estate in Costa Rica?
By hiring us. Property transactions are a process that entrails due diligence, escrow coordination, correct notarized services, and proper registration. You should always hire the right real estate attorney to register the land transaction correctly. The notary public you choose is essential to acquire the real estate property for sale that you wish, and get a secure property title as a landowner.
Can you summarize the steps to follow to buy land in Costa Rica?
- We perform Due Diligence on the property: This is the initial step. Click here to learn about due diligence in Costa Rica.
- We contact escrow and an escrow account is opened.
- Money is transferred to the escrow account by the buyer.
- Purchase closing. We set up a date to sign the notarized purchase agreement.
- The escrow agent will transfer the money held in escrow, to the seller or to other parties that were designated as recipients in the escrow contract.
- Know the closing costs. Taxes, fees and Registry costs must be paid through escrow, to the notary public.
- As the designated notary publics, we will register the property in the buyer’s name at the Public Registry.
- Be aware of the yearly real estate taxes in Costa Rica, once you become a property owner.
- Be aware of property theft and your rights as a property owner.
Dr. Christopher Pirie.
Real estate lawyer in Costa Rica.
