Rents and leases in Costa Rica. ☎️ Legal Recommendations.
For many expats and investors, Costa Rica presents an exciting opportunity to own property, whether as a personal residence, a vacation home, or an investment. However, renting property in Costa Rica is not as simple as finding a tenant or signing a lease. To ensure a successful and legally compliant rental experience, it’s crucial to understand the local rental laws, obligations, and best practices.
A well-prepared lease agreement can prevent misunderstandings between landlords and tenants. Legal situations can be prevented by choosing the right tenant. This article will cover several essential aspects of renting and leasing in Costa Rica.
Procure a written rental agreement:
Key Clauses for your Rental Agreement:
Key clauses that should be included in any Costa Rican lease agreement are:
- Identification of the Parties: Clearly state the names of the lessor (landlord) and lessee (tenant). Verifying that the landlord has legal authority to lease the property is important.
- Property Identification: Include the Public Registry’s registration number, a general description of the property, its survey, and its precise location.
- Permitted Use of the Property: Specify whether the property is intended for residential, commercial, or agricultural use, along with any restrictions or prohibitions. It it´s going to be a home for the tenant, do specify it.
- Rent Amount and Payment Terms: Outline the monthly rental amount, currency, payment schedule, and other costs, such as utilities or condominium fees.
Sub leasing prohibition: Unless it´s clearly forbidden, the tenant can sublease the property. Make sure you forbid this in the rent contract unless you wish to allow it.
- Term of the Agreement: Specify the lease duration, which generally cannot be less than three years, except in short-term rental situations regulated by specific laws.
- Security Deposit: It is equivalent to one month of rent to cover damages, unpaid bills, or, in some cases, unpaid rent.
- Notices and Communications: Provide contact details for both parties for official notifications or communications.
- Property Condition at Move-In: Document the property’s condition, including any included fixtures or appliances.
- Inspection Rights: Describe the landlord’s property inspection rights, including notice requirements.
Rental Payments: Currencty, Timing and Regulations:
Costa Rican law allows landlords and tenants to freely negotiate the rental amount, currency, and payment frequency, with monthly payments being the most common. However, specific rules apply:
• Payment Deadline and Grace Period: Rent is typically due monthly, but tenants have a legal grace period of seven days after the due date to make payment. Any delay beyond this grace period can lead to eviction proceedings.
• Advance Payment Restrictions: Landlords may not request more than one month’s rent in advance for residential leases.
• Payments in Foreign Currency: Many leases are denominated in U.S. dollars, although the tenant can legally pay in Costa Rican colones at the official exchange rate on the due date. The landlord must accept this option, and it does not constitute a breach of contract.
• Utility Payments as Part of Rent Obligations: Utilities are often included in the rent payment structure. If tenants do not pay these utilities, it constitutes a breach of contract, and landlords can initiate eviction. By default, tenants are responsible for utilities except the basic water rate, which falls to the landlord unless otherwise agreed.
Security Deposit: Purpose and Return Conditions:
A security deposit, usually equivalent to one month’s rent, covers any damages caused by the tenant, unpaid utilities, or outstanding rent. For commercial properties, there is no limit on the deposit amount, allowing landlords greater flexibility in setting the deposit. It’s crucial to clearly outline deposit return terms to avoid disputes at the end of the lease. Typically, the deposit is returned once any deductions for damages or unpaid bills are settled.
Late Payments and Eviction Process (Tolerance):
If a tenant consistently pays rent late, the landlord’s acceptance of these payments may be considered tolerance and could affect the enforceability of the payment date. To avoid this issue, landlords should provide written notice that late payments will not be tolerated before filing any eviction process.
Short term rentals such as Airbnb:
Costa Rica’s recent “Framework Law for Non-Traditional Lodging” regulates short-term rentals, defined as rentals lasting between 24 hours and one year. Property owners offering short-term rentals through platforms like Airbnb and VRBO must register with the Costa Rican Institute of Tourism (ICT) and comply with specific requirements, including sanitary standards, electronic invoicing, and tax obligations.
This law allows short-term rentals to operate in residential zones without a commercial license, although local zoning regulations may still apply. Non-compliance with the Framework Law can result in fines or legal action from local authorities, underscoring the importance of registration.
Tenant Rights and Obligations:
Tenants in Costa Rica have various rights under the “Ley General de Arrendamientos Urbanos y Suburbanos” (Law No. 7527), which include:
- Protection Against Arbitrary Eviction: Tenants who comply with their lease terms are generally protected from eviction for the lease’s entire duration. Even if the property is sold, tenants maintain their right to stay until the lease ends.
- Maintenance and Repair Standards: Tenants are responsible for keeping the property in good condition and covering any damage beyond normal wear and tear. The landlord is responsible for essential maintenance and improvements to ensure a safe and functional space.
- Possibility of Lease Assignment: Tenants cannot sublet the property or assign the lease without the landlord’s consent. For businesses, a transfer may be allowed under specific commercial regulations.
- Automatic Lease Agreement Renewal: Before the rental agreement due date comes to term, the landlord must clarify his position: will he terminate the agreement? If so, he must announce this to the tenant, with at least two months before the end of the contractual term. If not, the rent agreement will renew itself automatically for another full term.
Conclusion
The rental and leasing landscape in Costa Rica involves understanding various laws and best practices, from drafting clear lease agreements to complying with tax and registration requirements. Whether renting a home, commercial space, or a short-term rental, a well-structured lease agreement is essential. Landlords and tenants can ensure a smooth and mutually beneficial rental experience by following these guidelines and seeking professional legal advice.
For assistance with drafting lease agreements or legal advice on rental laws in Costa Rica, please contact CPG Legal. Our team of experienced attorneys is here to provide the support and expertise needed to make your investment in Costa Rica’s property market successful.
Dr. Christopher Pirie Gil – CPG LEGAL.
