Interested in buying property in Costa Rica? Investing in a second home, or a vacation rental property is a big step, and I bet you have a lot of questions. Can foreigners purchase property? This article will provide you with links and information. I am an attorney in San José, Costa Rica, and I will gladly help you purchase any property. It begins with due diligence, escrow coordination, and ends with obtaining a secure title from the Public Registry. You should never rush to buy or sell property, if due diligence is not done first. It first involves ensuring the asset has a secure title free of encumbrances. This research includes checking other relevant information to ascertain that the property for sale has no problems for the purchase.
No. The physical title you get from the Public Registry, is for informative purposes only. Most real estate assets in Costa Rica are privately owned, meaning they have a clear title on who the owner is. Property transfers in Costa Rica, are not done through title endorsement, such as you would do with a check, or company shares.
Under our laws, to buy a house in Costa Rica, or even to sell property, the actual transfer takes place in front of a Notary Public, through mere consent. The seller agrees to sell property, to the buyer, for a price. Both seller and buyer sign the notarized agreement. The notary public, then registers a copy of the notarized document, in the Public Registry. Once the registration is performed, the Public Registry will show you as the new owner, and you can even get a certification that this is so.
As stated previously, most real estate in Costa Rica is privately owned. There are exceptions such as beach front properties under maritime property concessions. Concessions are granted by the State of Costa Rica, for the use and enjoyment of a state owned property, such as beach front properties. Special attention must be taken, if you wish to buy a home in Costa Rica, that is located in the maritime area.
The Public Registry is crucial for land title security. All privately owned land in Costa Rica, has a number. This is called the “Folio Real.” the first number of the folio real, corresponds to the province in Costa Rica, where the real estate asset is located: 1 is for San José, 2 is for Alajuela, 3 is for Cartago, 4 for Heredia, 5 for Guanacaste, 6 for Puntarenas, and 7 for Limón. After the province number, the folio real is followed by several other identification numbers. Finally a sequence with three numbers, which are generally three zeroes, indicate if the property is completely owned by a person, or if its divided in rights, in a tenancy in common.
With the property number, I can ascertain all types of information. The Registry will show us, who the owner of the property is, and the type of ownership. (Is the property owned in 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 actually 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.
Once the due diligence is finalized, your attorney will give the go ahead with the purchase agreement. The purchase agreement is done and signed by the notary public, in his public protocol. Escrow is always a good idea to close. If you are the seller, you can even receive your money in the United States, through escrow.
The same goes for buying property in Costa Rica. If your have your money overseas, then an Escrow Agreement is highly recommended to do the closing. As an attorney, I have bee involved in countless real estate closings. I have a few distinguished escrow companies I recommend, since I have worked with them in the past, to provide my clients with a secure transaction. Purchase moneys, are held in Escrow, by the escrow agent, until the notarized purchase agreement is signed. At that moment, the money will be released to the seller. By these guidelines, the property transfer will be done smoothly, whether you are the seller or the buyer.
The goal is to get the property for sale registered, through a secure title, in your name! Once you have agreed to buy a property in Costa Rica for a determined price, the sale is perfected by mere consent. But that is not enough! The purchase agreement must be drafted and signed. This must be done in a notarized document called “escritura de traspaso.” This is a notarized document, that can only be done by a Notary Public of Costa Rica. It is in this document, that the actual sale takes place.
As notaries, we have a particular book called the protocol. The notary public´s protocol is given to us by the State, and all public scriptures are done in it. So if you are buying property in Costa Rica, or if you wish to sell property in Costa Rica, both buyer and seller end up signing the purchase agreement in the notary ´s protocol. Let me be clear: the property transfer is never done in a “private agreement”, it must always be done with the aid of a notary public, in a public purchase agreement, done in his protocole.
It´s a Costa Rican custom that the buyer is the one that hires the notary public and pays for his fees and the transfer costs. So if you wish to buy property in Costa Rica, you will end up paying for this. There is a reason for this. As the buyer of the property for sale, it´s in your best interest to control the registration process. This is the reason why the buyer selects the notary public. Once the property transfer has been done and signed in the notary´s protocol, his job is still not finished. After both of you closed the deal with the signature, the property transfer must also take place in the Public Registry of Costa Rica.
The notary public does this by filing a certified copy of the notarized purchase agreement, in the Public Registry. There are transfer taxes that must be paid and legal stamps (timbres).
Yes of course! You don´t need to have a migratory condition to buy a house in Costa Rica. You can even open a corporation to own the land, and sign all types of contracts. As a foreigner, you have every right a Costa Rican person has. The few exceptions are the right to vote.
You should be aware of your property rights as an owner. 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 link that follows, to learn how to prevent property fraud, and what to do if this should happen to you.
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.
When the public scripture (escritura de traspaso) is signed as the purchase, you will have to pay for several things. Firstly, the notary public fees. But to get the real estate asset registered in your name, you must pay the corresponding property transfer tax 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 the buyer always chooses the notary public.
This is a question that I get asked constantly. The short answer is yes. Americans can buy property in Costa Rica, without any hassle. In fact, any foreigner has the same rights as any Costa Rican national, with exceptions such as work permits, and voting rights. Even though Americans can buy property in Costa Rica, it’s imperative to understand how to do it. You may want to do it through a corporation, or in your personal names.
By hiring us. The property transaction is a process that entrails due diligence, escrow coordination, correct notarization, and registration. If you hire an incompetent professional, you risk that the transaction won´t be appropriately registered. The Notary Public you choose is essential to acquire that property for sale that you wish, with a secure title. Even though Americans can buy property in Costa Rica, special care must be taken into consideration, in order to avoid scams and unlawful behaviour.
When you buy a house in Costa Rica, the notary public files the property purchase agreement in the Public Registry. He will get a receipt from the Public Registry. This receipt has information to track the registration process. Once the property is registered to your name, you can access the public registry and, with the corresponding asset number, corroborate that you have a secure title. We always show this to our clients once everything is done.
An option to purchase agreement is what we call a “pre-contract.” It´s a contract to prepare another one: the future property sale agreement. If you are still negotiating the property sale, and still need time, then an option to purchase agreement is a good idea. This is a way to “tie” the asset to the future sale. A good faith deposit is customary, but not necessary. Earnest money is give to the seller, per the option to purchase agreement. The idea is to demonstrate your seriousness about buying the real estate property. If the sale doesn´t happen, then the seller must return the earnest money deposit to you, unless otherwise stated in the contract.
Never judge a book by it´s cover, goes the saying. The same can be said about contracts. Many people believe, that just because the contract says “option to purchase”, then that must be, because it says so. However, the content of the contract is what matters. You should remember, that in Costa Rica, a sale is perfected, by mere consent, if these two things are involved: the sellers consent to sell an asset for a price, and the buyer´s consent to buy a house for that price. If these two things are present, in an “option to purchase agreement”, in reality what has happened is a property sale, not an option to buy property. These things are important to know, to avoid headaches and even litigation.
Dr. Christopher Pirie.