Properties for Sale in Costa Rica

• Costa Rica
  
  Realtors’ and lawyers’ fees in Costa Rica and other property purchase costs
  
  Transaction Costs
  Fee/ % / Who Pays?
  Real Estate Transfer Tax (Impuesto de Traspaso) / 0.75%-0.75% / buyer-seller
  Documentary Stamp Taxes / 0.1625%-0.1625% / buyer-seller
  Notary Fees 0.625%-0.625% / buyer-seller
  National Property Register Stamp / 0.25%-0.25% / buyer-seller
  Real Estate Agent fee 2.50% to 5.00% / buyer / 2.50% to 5.00% / seller
  
  Costs paid by buyer: 4.29% - 6.79%
  Costs paid by seller: 4.29% - 6.79%
  
  Roundtrip transaction Costs: 8.58% - 13.58%
  
  Property purchase process in Costa Rica
  The Maritime Zone, 200 m. along the shoreline, is state-owned. The Public Zone, 50 m. from the shore, is protected from any development. Private persons can acquire property in the Restricted Zone by applying to the Municipality, but in the Restricted Zone, leases cannot be granted to foreigners with less than 5 years of residency in Costa Rica. A company whose shares are less than 50% held by foreigners can be granted a concession.
  The general custom is for the buyer and seller to share equally all closing costs.
  The above costs only apply to titled property, not to untitled or beachfront property. The legal fees are based on the property’s sales price and not on the property’s declared value. It is usual in Costa Rica to register a property at a figure far less than its actual sale price.
  The Documentary Stamp Taxes of 0.325% consist of the following: 0.2% Municipal Stamp (Timbre Municipal); 0.025% Costa Rican Bar Association Stamp (Timbre del Colegio de Abogados); and, 0.1% Agricultural Stamp (Timbre Agrario). Additional fees are CRC 20 National Archives Stamp (Timbre del Archivo Nacional) and CRC 625 Fiscal Stamp (Especie Fiscal).
  The property is transferred from seller to buyer by executing a transfer deed (escritura) before a Notary Public, who drafts the transfer deed and register the sale in the Public Registry (Registro Nacional). Registro Nacional can be accessed online.
  
  Having a clear title to the property
  Costa Rican law requires that all documents relating to real property be registered in the property section of the Public Registry (Article 460 of the Civil Code). Most properties have a title registration number known as the folio real, and the records database can be searched with this number or by name index. Information available includes the name of the title holder, boundary lines, tax appraisal, liens, mortgages, recorded easements, and other recorded instruments that would affect title.
  Since Costa Rica follows the doctrine of first in time, first in right, recorded instruments presented to the Public Registry are given priority according to the date and time in which they are recorded. Obviously, every situation differs and in some cases a review of the Public Registry record will not be enough to uncover all encumbrances. That is why it is important that the buyer have her or his own attorney conduct an independent title search and investigation rather than rely on the seller's attorney.
  
  The importance of selecting the notary public
  The local custom is that the buyer may select his or her notary/attorney to draft the transfer deed if paying cash for the property.
  If the purchase price is financed, there are generally three alternatives for selecting the notary/attorney.
  1. If a large percentage of the purchase price is being financed by the seller and a mortgage needs to be drafted to guarantee payment, then the seller may request that her or his notary/attorney will draft the transfer deed.
  2. If a property is purchased 50 percent cash and 50 percent financed, it is common for the buyer's attorney and seller's attorney to jointly draft the transfer deed and mortgage in a single document. This is known as co-notariado.
  3. Finally, the buyer may insist that his or her notary/attorney draft the transfer deed and let the seller's notary/attorney draft a separate mortgage instrument. In this case, because the mortgage is being drafted separately, it carries a higher registration fee. The registration fees are discussed below in the section on closing costs. Drafting of the mortgage requires additional notary fees of around 0.5% - 1.25% of the amount of the mortgage.
  The certification from the Registro Nacional must be acquired by the seller to present information about the titled property. After making sure that the property is cleared of taxes and charges, a Lawyer/Notary verifies the information on the property. When all taxes and fees are paid, the Lawyer/Notary files a “testimonio” (public deed) to Registro Nacional for reviewing. With no further corrections and problems, the “testimonio” is recorded and the buyer becomes the official owner of the property.
  
  The need to evict squatters and tenants
  It is advisable to have all tenants evicted before purchasing a property. If not, one may find oneself in court for a long time, without being able to use the purchased property other than leasing it to the tenant already there.
  If you are an absentee owner, it is best to have someone oversee your property to prevent problems with squatters.
  Basically, the law allows peaceful occupation of "untitled and unattended land" unless there is opposition by the existing owner. If your land is unattended and someone moves onto the land, they begin to establish certain rights after three months.
  
• Action for removal is required before the end of the third month but the process is less complicated than if they occupy the land for a longer period.
  
• If squatters have occupied the land for more than three months but less than a year, the process of eviction called “desalojar” or “desalojo”, becomes more involved, but you are not yet required to reimburse the occupants for their “improvements” to the property.
  
• If the land is occupied for more than a year but less than ten years, you may still be able to recover the property, but the legal process may take years and you will be required to make a settlement for the “improvements” made by the occupants. “Improvements” can range from the construction of shacks, planting of crops and even cutting of trees to clear the property. Improvements and compensation are established by the court. In most cases, it is best to negotiate an out of court settlement. If someone is living on a property you are interested in buying, be it the owner, a relative, a worker, etc., you must be sure this is addressed and settled as a condition of the transaction. “Precario” rights can affect both titled and untitled land but the process of eviction for titled property is in theory, faster and less complicated.
  The Agrarian Development Institute (IDA), established in 1961, acts as a sort of a public defense body for peasant landowners unable to defend themselves against larger landowners trying to “expand” their territory. However, there are many cases today where the system is abused and people fall victim to “de-facto tenants”. That is why it is important to know the history of possession and above all, follow the rules. If ownership is legitimate, it must be demonstrated within the guidelines outlined in the law. It is important to remember that the “precario” law and the recognition of possession rights is considered the first step in the titling process and is the basis of how many lands were originally settled and eventually titled in Costa Rica… in a legal manner.
  The whole process of registering a property can take around 21 days to complete.
  
  Inheritance
  Inheritance and gifts are not specifically taxed in Costa Rica. However, gratuitous transfer of properties and property rights are subject to a substitute tax system. The transfer of properties is taxed at progressive rates depending on the property value.
  
  Transfer Tax
  Net taxable value, CRC (US$) / Marginal Tax Rate
  Up to 700,000 (US$1,317) / 1%
  700,000 – 1,000,000 (US$1,882) / 1.5%
  Over 1,000,000 (US$1,882) / 2%
  
  Costa Rica's inheritance law follows the territorial principle: i.e., the applicable law depends on the location of the property.
  The pertinent regulations are Civil Code Title XI. General rules on Inheritance: sections 520 to 570. Title XII. Inheritance proceedings in the absence of a will: sections 571 to 576. Title XIII. The Will: sections 577 to 62. Law N° 3284. Commercial Code. Trust: sections 633 to 662. Law N° 5476. Family Code. Title I. Marriage. Wealth of the Family: sections 37 to 47. Title V. Guardianship: sections 175 to 229.
  These regulations generally apply to everyone who owns property in Costa Rica. According to its constitutional principles, Costa Rica does not discriminate against or provide different legal treatments to members of different religions, nationalities, or any other groups; they are all treated as Costa Rican citizens.
  In the case of real estate, the territorial principle applies; in the case of other kinds of assets, a different regime may apply. The competent court with jurisdiction over property matters is that where the property is located in Costa Rica. The courts with jurisdiction over inheritance matters are the Civil Courts, or where there are appeals the Superior Tribunal, and in the last instance the “Corte de Casación”. A court’s jurisdiction is divided according to the subject matter. All judicial procedures are processed in the Civil Court.
  The judicial process in inheritance cases usually takes from 1 to 4 years, depending on its complexity. But Costa Rican law also has an easier and faster procedure before a public notary, which can be applied when all heirs are of legal age, and are willing to reach agreement regarding the distribution of the property.
  If one spouse belongs to one nationality, or religion, and the other spouse to another, this is unlikely to raise any legal problem under Costa Rican law, since the legal system applies the territorial principle, regardless of the nationalities of husband and wife.
  A specific reserved portion is not established in Costa Rican Law, but if the probate hearing is initiated before a Costa Rican court, the judge will reserve a portion for economic dependents of the deceased
  Everyone is free to draft a Will, which expresses their testamentary intention, and may include all their properties and assets. They have no obligation to reserve a portion to anyone specific.
  However, if the probate hearing is initiated before a Costa Rican Court, the judge will reserve a portion of the estate for those who depend economically on the deceased. This portion is to maintain the person(s) appointed by the judge, until the final ruling of the of the probate proceedings. It is usually granted to the spouse and children of the deceased.
  
  With the right legal advice, formalizing a Will is simple
  For Costa Ricans it is not usual to make a Will, although the legal framework allows everyone to draft a Will.
  A foreigner in Costa Rica has two options: S/he may have a Will made by a local public notary regarding his/her assets in Costa Rica. This is fully valid in Costa Rica and the assets must be distributed according to his/her instructions. The other option is to validate a foreign Will with the Costa Rican authorities; in this case, after a foreign court decision, an exequatur must be sent to Costa Rica for approval, and duly recorded in the Public Registry.
  It is advisable for a foreigner to make a Will because the proceedings for executing a local will are easier and faster. If the Will is made abroad, the execution requires some special proceedings, with embassies or consulates, and the exequatur. These proceedings require time and usually are more expensive.
  The Civil Code recognizes two types of Wills: the nuncupative or Open Will and the sealed or Closed Will.
  A notarized Open Will is written in the presence of a Notary Public and three witnesses. If the testator hand writes the Will, then two witnesses and a Notary Public are required. An attested Open Will can be written without a Notary Public if witnessed by the testator and four witnesses. If it is not hand written by the testator, then six witnesses must attest to it.
  The writing of a Closed Will must follow certain formal requirements. Once the Will is signed by the testator it must be placed in an envelope and sealed. The envelope containing the will is then taken to a Notary Public who must draft a notarized writing on the envelope itself. The notarized statement must attest that a sealed envelope containing a Will was handed to the Notary Public by the testator and that the testator has informed him/her as to the number of pages contained in the will. It must also indicate that the Will was written and signed by the testator and whether it contains any annotations or smudges. The Notary Public must take a record of this proceeding in his/her protocol book and it must be signed by the testator and three witnesses.
  In the absence or invalidity of a Will, inheritance follows intestate succession.
  The distribution of property and assets in the absence of a will depends on each case, but usually, if the deceased was married, the spouse inherits the major portion of the estate. From the total wealth of the deceased, the judge allocates the amount corresponding to conjugal property rights, and the balance is then distributed between the legitimate heirs appointed by the judge. The Civil Code defines legitimate heirs as follows:
  
• First Degree: The spouse, children and parents of the deceased. If the deceased has no spouse, children or parents, the judge summons other relatives arranged in the following degrees:
  
• Second Degree: The grandparents and other legitimate ascendants.
  
• Third Degree: The natural brothers and sisters on the mother’s side.
  
• Fourth Degree: The nephews of the deceased.
  
• Fifth Degree: The uncles of the deceased.
  
• Sixth Degree: The State. If the estate does not pass to the preceding five degrees, then the Civil Code specifically directs that the property must pass directly to the Board of Education in the district where the property of the deceased was located.
  
  Property in Costa Rica can be given freely during the life-time of the owner
  A gift can be executed by one of three legal procedures: a donation, a free transfer of share certificates or a trust.
  A beneficiary must specifically accept a donation, and the acceptance must be notified to the donor. A free transfer of share certificates may occur if the property is owned by a legal entity. The law demands the signatures on the share certificates, and a record in the company’s shareholder registry. Costa Rican Commercial Code also allows the establishment of a trust, with any kind of clauses, according to the needs of the trustee.
  In general terms these procedures are simple, but require the assistance of a Public Notary, in order to record the name of the new owner at the Costa Rican Public Registry.
  Different legal restrictions affect the transfer of property, such as:
  If the transfer of the property is made by donation, the donor is allowed to establish limitations for the beneficiary, with a lapse of ten years.
  A family home cannot be transferred or mortgaged without the consent of the married couple. For this limitation to be legally valid, the property must be recorded in the Public Registry as a family home, and fulfill the requirements for such purpose e.g. it can be no larger than 10763.9 square feet in an urban zone or 107639 square feet in a rural zone.
  Other limitations apply, related to the development plan of the county where the property is located. This plan establishes the distribution of commercial, industrial and residential areas. Moreover, the property situation has to be analyzed on a case by case basis.
  If a donation is properly made according to legal procedures established in the Civil Code, the gift is not open to challenge after death; however, to avoid such a challenge, and avoid subsequent nullification, the donation must be made in a public deed. Moreover, the property or assets must be clearly described by registration in the Public Registry.
  Marital status may restrict inheritance, irrespective of where the marriage took place, or where is the current residency. If the purchase of the property was made as a single person, it is not subject to conjugal property rights, but if it was purchased as a married person, the property is subject to the conjugal property regime. This does not mean that the property becomes common ownership per se. The division of assets has to be legally established by a court.
  If there is a divorce procedure abroad, the Costa Rican courts may order the Public Registry to withhold the property until the final judicial decision is made. Once finished, the divorce ruling needs to be recognized by an exequatur. If the divorce is filed in Costa Rica, the conjugal property rights are equivalent to fifty percent of the net price of all the properties and goods bought during the marriage. To file this, the marriage certificate, and the titles of the properties and goods involved are required.
  
  Minors may inherit property
  If the property (or part of it) goes to a minor or minors (a child, or children not of legal age, or to others not legally adult) the property can be registered under the name of the minor in the Public Registry; however the minor is not able to administrate the property. In this case, a guardian has the faculty to act on behalf of the minor. A guardian can be appointed in the Will, but if it is not, the court can appoint one according to the law. For example the priority order established at the Costa Rican Family Code is as follows: The grandparents have priority; in their absence, one of the brothers or sisters of legal age, and as a third option, the aunts and uncles. If none of these relatives is willing to accept the guardianship, the court can appoint an independent guardian.
  To avoid inheritance problems, it is advisable for an owner of property in Costa Rica to:
  
• Confirm that the property deed has been registered in the Public Registry as soon as possible. S/he must ask the Notary Public for a document confirming the situation. Sometimes foreigners purchase a property and then leave the country without the property deed duly recorded; this situation may cause problems.
  
• Be clear about the legal condition of the property, since there are different kinds of ownership in Costa Rica.
  
• Appoint a manager or person to take care of the property whilst s/he is not in Costa Rica. This is important because of the maintenance of the property; besides avoiding any disturbance or illegal use.
  

Costa Rica, make your dream investment come true.