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Properties Laws and Investment in Costa Rica 2017-05-06T14:11:24+00:00

Costa Rica Property Laws


Property Laws & Investment in Costa Rica

  1. Costa Rica, a place to invest

Foreigner Friendly Property Laws

  • Foreigners have the same rightswhen purchasing land in Costa Rica as locals do. You can own property outright in your own name or in the name of a corporation. You do not need a local partner, except in cases of beachfront concession property, where special rules apply.

There is absolutely nothing to prevent you from purchasing Costa Rica property in your own name, but the majority of buyers form a corporation with the help of a reputable lawyer and then purchase property through that corporation (a typical limited liability company, called “Sociedad Anonima” or S.A. for short).

The reason for this is threefold:

One – it may be more beneficial to have your income (from rentals) or gains (from sale of the property) taxed within a Costa Rican company rather than having it taxed as personal income. Mind you, this will depend on the tax laws of the country from which you originate.

Two – it allows for simplified estate planning, whereby you can give or will shares of the corporation that owns the property to members of your family.

Three – if you ever decide to sell your property, you can avoid paying property transfer taxes a second time by simply transferring the shares of the corporation to the new owner.

Another plus for property purchases in Costa Rica is its Public Registry, which allows your lawyer to confirm that there is clear title to the property in question as well as to discern if there are any restrictions on the property before the deal goes through.

  • Very attractive low Municipal Property Taxes.
  1. The Purchase Process in Costa Rica

Once you have found a property of interest to you, the next step is to understand what the process of acquiring it might entail.

  • Sign an option to purchase with the seller. Once buyer and seller have come to an agreement and have signed the contract, a deposit (usually 10%) is expected. The normal time period for receipt of deposit is two weeks, but this time period may be negotiated according to the buyer’s circumstances. All funds should be held in a SUGEF or government registered escrow account.  It is common for buyers and sellers to use third party companies such as Stewart Title for escrow purposes.
  • The Due Diligence Period is the time between signing of the purchase option by both parties and the time of “the closing” which is normally 30 days but can be shorter or longer, dependent on the complexity of the property. This is the time for Title search (review if property is free and clear of debts and/or defects), confirmation of availability of water (very important in case of raw land acquired for construction purposes, since no building permit will be issued without a letter of availability of water), electricity, and other public services.
  • The closing

    – the Execution of the Transfer Deed, Endorsement of Shares and/or Mortgage Deed, and the disbursement of fund.

  • The final step: Register the new owner (you or your corporation) with the Public Registry.
  1. Protecting your Real Estate Investment in Costa Rica

One of the greatest concerns of buying in a foreign country is to ensure that the transactions will be executed legally and that the systems provides the protection for a lifetime of enjoyment.

Costa Rica’s legal system offers ample protection to the investor, provided the transactions are

executed properly.

Things that should be present in a well-executed real estate investment:

  • Professional legal representation – which should not only guarantee correct legal transactions but also legal advice and representation throughout the purchasing process.
  • Escrow service – a financial service to prevent manipulation and/or misuse of funds prior to closing.
  • Title Guaranty – an optional Insurance to protect your investment against hidden ownership claims, and their potential cost, falsified documents, non-registered property easements, and a number of fraud attempts by previous owners heirs.
  1. Building and Builders in Costa Rica

Before making your decision about which Costa Rica construction company to use, take some time to do your research:

Find permitted  Costa Rican Construction Companies: Costa Rican Chamber of Construction

  • Ask how many homes the company has built in the area where you plan to build your home.  This is very important since building costs vary throughout the country, mostly due to shipping and transportation costs.  Generally, a home at the coast will cost more to construct per square foot than will a home in the Central Valley, since materials may need to be shipped from San Jose and crews may need to be housed onsite.
  • Find out the builder’s credentials.  Does he and/or his company have professional training or certification?
  • Don’t forget to ask about peripheral costs such as pools, fountains, terraces, exterior walls, gates, and landscaping.
  • If a builder’s quote is significantly lower per square foot than his competitors, proceed with caution. Reputable builders will give you the straight story when it comes to price. Quoting low to get the job, then hitting the client up for more funds later is not uncommon, so remember the old adage:  If it seems too good to be true, it probably is.
  • Ask to see the company’s portfolio.  If possible, tour homes that the builder has constructed and speak with the owners.  Recommendations from happy home owners are the best credentials a builder can provide.

Many real estate clients have navigated the home building process and ended up with properties that they absolutely love.  The secret is to do your homework.  By choosing a reputable Costa Rica construction company and builder, you can successfully create your dream home here in paradise.

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