The law and constitution of the Republic of Costa Rica protect private ownership of real estates. You don´t need citizenship, residence or even presence in the country for property ownership. This is a very important fact if you are thinking in buying real estate in Costa Rica. This is a real property of the law in Costa Rica.

Foreigners enjoy the same rights as citizens (unless the owner bought the land as part of a government program) In these cases, the land can be traded or sold to foreigners only after the original owner has held it for certain period of time.  

Real estate can be purchased in one person’s name, jointly, or in the name of a corporation. It is very common in Costa Rica for individuals to put property in the name of a corporation in which they own all the shares. Holding title in the name of a registered corporation provides greater flexibility in estate and tax planning, liability and overall management. We suggest you to discuss this your accountant and attorney so that you will be informed of the tax implications in your individual situation.

The buying process

Buyer and seller of a real estate sign a clear, concise purchase agreement drafted by a Costa Rican attorney.  Usually, a deposit on the property, which is typically 10% of the agreed upon price, will be made. This deposit will be held in the lawyers escrow account and subject to the terms and conditions set forth in the purchase agreement.

A survey on the property must be done by your lawyer. He will  have to perform these tasks:

1.    Property Reports.
2.    Extensive Title Search.
3.    Contingency releases.
4.    Closing Statement.
5.    Distribution of Funds through certified bank checks.
6.    Registry of documents.
7.    Verifycation of  size and boundaries of the property.

If the property is owned by a corporation, the attorney will perform a corporate search in the commercial section of the registry to verify that the corporation is in good standing and that the proposed signatory has the capacity to sign on behalf of the corporation.

After that, a meeting will be scheduled between buyer and seller. Representing lawyers will be there too. Once the buyer, seller and notary sign the transfer deed, it will be recorded in the notary's record book and a copy will be presented to the Registro Nacional for annotation and registration.

In Costa Rica, the transfer deed is named “escritura” and is required for transferring a property from seller to buyer. The Public Notary, (who is an attorney), drafts the transfer deed and registers the sale at the Registro Público. By law all properties must be registered there. Property cannot be transferred if the land does not have a registered survey, which must be referenced in the transfer deed.

The Registro gives a title registration number called the "Folio Real." to each property. Once you have this number, you can check the “Informe Registral”. This is the Registro Publico's Report, is their database. Contains information such as the name of the title holder, boundary lines, tax appraisal, liens, mortgages, recorded easements, and other records that could affect the title. The Registro Nacional reviews the deed and then registers the property in the name of the new owner.

To register your transfer deed you or your attorney must bring to the Registro Publico (Public Registry) the following documents:

• A. Proof of payment of all taxes and registrations fees
• B. Certifications issued by:
•      a)    Finance Ministry, confirming that all seller's property taxes were paid; and,
•      b)    the local Municipality, stating that buyer and seller are up to date on municipal taxes.
• C. Proof that all prior mortgages, liens and judgments (if any) have been resolved

Once a transfer deed is accepted for registration, the Registro Público 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 Registro Público with 45 to 60 days after presentation. It is therefore important to follow up with the notary to ensure registration, if your sale is not registrated you will run into problems in the future if you decide to resell the property.

Costa Rica follows the doctrine of “first in time, first in right”. 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. The certificate of title issued by the Registro Público is evidence of the condition of title on the date issued, any instrument not recorded at the time the certificate is issued is invalid.

Obviously, every situation differs and in some cases a review of the Registro Público record will not be enough to uncover all encumbrances. That is why it is important that the buyer`s attorney conduct an independent title search and investigation rather than rely on the seller's attorney. Some buyers feel more comfortable purchasing title insurance, in which case the title guaranty company will take care of the search.

Closing Costs

Closing costs run about 5% or 6% of the sale price, an expense divided evenly between buyer and seller. Transfer land tax and stamp tax assessments are based on the declared value. Legal fees are based on the selling price of the property.

It is customary for the buyer and seller to share equally in the closing costs. This can be negotiated. There are three closing costs:

1.    Government taxes and fees,
2.    Notary fee,
3.    Mortgage costs.

Government taxes.

This includes a real estate transfer tax of 3 percent; a registration fee of 0.5 percent; and documentary stamps (agrarian, hospital, municipal, bar association, national archive and fiscal stamps) totaling approximately 0.55 percent of sale price.

Notary fees.

The notary who drafts the transfer deed is entitled by law to charge 1.50 percent of the first one million colones of the sales price, and 1.25 percent on the balance. However, many attorneys will accept much less since a property with a high value involves the same work as a lower priced property.

Mortgage costs.

Usually, the person getting the financing pays for the costs of drafting and registering the mortgage instrument. A mortgage may be issued at the time of the sale by adding a mortgage clause to the transfer deed. A mortgage within a deed costs 0.25% in registration fees and approximately 0.53% in documentary stamps. For drafting the document, the notary receives between 0.5% and 1.25% of the amount of the mortgage.

You should know that Costa Rican real estate transactions commonly operate on a two-tiered system. Since Costa Rica land has a low property tax appraisal base in relation to market value, it is a customary practice to run property sales through at the registered value, which may be substantially lower than the actual sales price of the property. In such a case, all transfer taxes and fees discussed above would apply to the registered value as opposed to its sales price, with the exception of the notary fee. Consult your attorney about further consequences of these practices.