Buy Land in Costa Rica: Your Legal Guide

Buying Land in Costa Rica: Safe and Smart Investment for owning property.

If you want to buy land in Costa Rica, you’ve chosen an exciting market with unique opportunities. As lawyers specializing in real estate transactions, AG Legal is here to guide you through the entire process, helping you avoid pitfalls and ensure a secure investment in Costa Rica Property.

Can Foreigners Buy Property in Costa Rica?

In Costa Rica, foreigners have equal property rights, meaning they can legally buy property outright, whether residential, commercial, or agricultural land. The only notable restriction is with maritime zones (properties located within 200 meters of the high-tide line on beaches), which are considered public land with a particular concession.

Recommendation: If you’re interested in beachfront property, consult an attorney who can advise on concession property laws and the titled land and help you navigate these specific ownership limitations.

What is the Costa Rican Property Market Like?

The Costa Rican real estate market is diverse and can vary greatly depending on the property type and location. Areas like Guanacaste and the Central Valley are popular with locals and foreign investors, often resulting in higher demand and prices. Costa Rica’s market has grown in specific areas this year, with notable increases in beachfront property and urban developments.

For those looking to buy land in Costa Rica, it’s essential to understand that prices vary widely depending on the area. A knowledgeable real estate agent or realtor can guide you through the entire process and help you find a property that suits your needs and budget. A good agent will also show more properties, make a fairly transparent process, and write up a formal purchase option contract that is easy to understand and precisely what you need.

How Does the Property Purchase Process Work?

The property purchase process in Costa Rica is straightforward but does involve several key steps:

  1. Select Your Property – Choose the type of property you want to buy and work with a reputable real estate agent to find precisely what you need.
  2. Work with an Attorney: Legal professionals in Costa Rica are invaluable for guiding foreign investors through the local market, helping with due diligence, and ensuring a clear title.
  3. Verify Property Through the National Registry: Ensure that any property in Costa Rica is officially titled and has no outstanding legal claims. This step minimizes risks and confirms the property’s legal status.
  4. Sign a Sales Agreement—This preliminary agreement establishes the sale price and basic terms between the buyer and seller.
  5. Understand Closing Costs and Taxes: Anticipate all expenses, including closing costs, property tax, and fees associated with property transfer.
  6. Use Escrow for Security: Escrow is widely used in Costa Rica to hold funds securely until the property transfer is finalized.
  7. Notary Oversight – In Costa Rica, notaries transfer property titles and submit them to the National Registry for registration.

Following these steps with the help of a legal professional ensures that the entire process remains smooth, safe, and compliant with Costa Rican law.

What is the National Registry, and Why is it Important?

The National Registry in Costa Rica documents all property transactions and is essential in verifying property ownership.

Any property in Costa Rica must be registered with the registry to confirm ownership and validate transactions. Before completing a property transfer, an attorney will perform a title search through the public registry to verify that the property is titled in the seller’s name and free of issues.

This registry provides transparency and allows buyers to confirm the legitimacy of the property purchase. Failing to conduct a thorough registry check can result in unexpected issues, such as purchasing the wrong property or discovering undisclosed liens.

Why Due Diligence Matters for Buy Land

Due diligence is an essential part of any property purchase in Costa Rica. This step confirms that the property is titled and checks for any lien or legal restriction. Additionally, it involves verifying with the municipality that property tax payments are current and confirming that there are no zoning or land-use restrictions.

Our due diligence process at AG Legal ensures that the property you want to buy is legally transferable, saving you from future complications. Working with an experienced real estate attorney to conduct these checks protects your investment by ensuring no legal surprises down the line.

What Should You Know About Property Transfer Requirements?

In Costa Rica, the property transfer process must be conducted by a licensed notary who is also an attorney. The notary will draft the transfer deed, verify documentation, and submit the transaction to the National Registry. Once the property transfer is recorded, you are legally recognized as the owner.

Please have all necessary documents ready to proceed with this process. This includes the purchase price agreement, escrow funds, and proper identification. Additional documentation will be required if you plan to buy a property through a corporation.

How Do Property Taxes Work for Buy Land in Costa Rica?

Property tax in Costa Rica is relatively low, set at 0.25% of the property’s registered value. Taxes are paid to the municipality where the property is located. This tax is straightforward and is essential for owning property in compliance with local laws.

Additionally, closing costs often include the property transfer fee, notary fees, and registration costs. In Costa Rica, closing costs are generally split between the buyer and seller, though this arrangement can be negotiated.

How to Verify Title and Ensure Clear Ownership

A clear title is critical to a secure property purchase. A title search is essential to confirm that the property has no existing lien or legal encumbrance. A real estate attorney will conduct this check within the National Registry and confirm that the property is titled correctly and accessible for sale.

In Costa Rica, a title search ensures you purchase precisely what is promised, providing peace of mind that you’ll be the rightful owner without future claims from third parties.

The Role of a Foreigner-Friendly Attorney in the Buying Process

Hiring a Costa Rica real estate attorney is one of the most critical steps in the buying process. An attorney ensures compliance with Costa Rican law, manages the due diligence and title search, and drafts the necessary legal documents. At AG Legal, we are well-equipped to simplify the purchase process for our clients, protect their interests, and ensure a reasonably transparent process.

A real estate attorney also assists with setting up a corporation if you prefer to own the property under a corporate entity. This can provide tax and liability advantages, especially for foreign investors.

What Closing Costs to Expect to Buy Land in Costa Rica

Closing costs are an essential part of buying property in Costa Rica. These include notary fees, registration costs, escrow fees, and any additional taxes related to the transaction. Typically, closing costs are shared between the buyer and seller, although they may be negotiated in the sale agreement.

Understanding and preparing for these costs in advance ensures no surprises when the purchase is finalized. Working with a legal team, such as AG Legal, can help you navigate these fees and understand all the financial aspects of purchasing property.

Considering Corporate Ownership for Asset Protection

Many foreigners buy property in Costa Rica through a local corporation for liability and tax benefits. This approach can also simplify the ownership transfer process if multiple parties are involved or the property is part of a more extensive investment portfolio.

Recommendation: Consult with an attorney about buying property through a corporation. Setting up a corporation can offer additional flexibility, especially if you plan to rent or protect the property as part of an estate plan.

¡Let´s Buy land in Costa Rica!

It is a promising opportunity, and with the proper steps, you can make a secure and informed property purchase. For a smooth transaction, AG Legal’s team of real estate attorneys can provide trusted support throughout the entire process, ensuring that your investment is legally compliant and protected from any potential issues.

Contact us to learn how we can assist with your Costa Rican property purchase: info@aglegal.com

Costa Rica Real Estate

Costa Rica Real Estate Legal path for homes for sale

Are you dreaming of a new life in a tropical paradise to invest in? Welcome to Costa Rica, a beautiful country with a lot to offer expat investors.

Imagine waking up to the sound of waves crashing on the shores of a beautiful beach or enjoying your morning coffee on your ocean-view balcony. Now, wake up! let’s talk about the legal considerations in reality.

Exploring Costa Rica’s Real Estate Options

This market is a tapestry of possibilities, offering real estate listings of homes for all tastes, from a warm house for your rest to a luxurious ocean view villa for a 5-star vacation, but “not all that glitters is gold”; you should seek advice from a recognized and solid firm as AG Legal, do not rely only on a Real Estate agency that could be composed of foreigners or Costa Ricans without a license, explore the featured properties for owning a dream home in Costa Rica, but take precautions to avoid turning your dream into a nightmare.

Real Estate Investment Prospects:

Tamarindo, Liberia, Jaco, Uvita, Dominical, Matapalo, Samara, Santa Teresa, Flamingo, Arenal, and Nosara.

The Costa Rican real estate market is booming, and prices are steadily increasing. However, there are still several affordable properties available, especially in rural areas. The most popular and expensive areas for expats include San José, the capital, and the beach towns of Guanacaste, Puntarenas, and Alajuela like Tamarindo, Liberia, Jaco, Matapalo, Uvita, Dominical, Manuel Antonio, Samara, Santa Teresa, Flamingo, Arenal, and Nosara.

Doing business in Costa Rica is very possible and open to US, Canadian and European citizens; very tolerable if you have a legal team dedicated to your needs and deadlines to complete your investment project or move to Costa Rica.

Steps to buy safely and correctly.

The first mistake you should not make is to be rushed; try not to let the real estate agents put too much pressure on you to close a sale; as a foreigner, they can see you as a sales commission. Understanding the legal landscape of property in Costa Rica is essential; there are many properties for sale and investment opportunities, with conditions that must be previously reviewed, such as the complexities of the land, construction, institutional permits, complete review of property taxes, title transfers, safe ways to transfer purchase money, neighborhood where it is located, construction plans, swimming pool permits and legality of the person signing the transfer.

Some of the real estate agents in Costa Rica are unaware of everything, and they generate work for us Lawyers later.

Learn about the process from a legal practice perspective:

  1. Request your visa to enter the country; if you are a US or Canadian citizen, you do not need a visa. if you are from another country, have a look at our publication in this regard CLICK HERE
  2. Meet with your lawyer to start collecting the requirements to apply for a residence in the country. there are several types, but if you are determined to buy a property, the residence that best fits your profile is the investor residence, the government of Costa Rica has implemented a new law with benefits to attract foreigners to the country, and the ideal is that while deciding to buy your property, you also collect the official documents required to upload the residency application.
  3. Visit the property with a legal team; the experience of attorneys goes beyond the normal vision of a person who is enthusiastic about a beautiful property; therefore, due diligence is started to verify that this property is optimal and not a fraud, in Costa Rica there are many good people, but there are also those who seek to take advantage of foreigners. Your lawyer will check if the property is subject to a lease. This may be a problem, depending on the legal term the tenant has left.
  4. Make a purchase option contract drawn up by your lawyer; this is a contract of commitment to sell the property in exchange, usually for an advance of money. This contract protects the purchase against impossibilities that arise along the way to the property purchase.
  5. If, in the said period, you need to leave Costa Rica, you can grant a power of attorney to your lawyer or anybody else to take care of the purchase process; likewise, it is recommended that the money destined for the purchase be managed by a “trust” or “escrow” and once everything has been reviewed and you have the approval of your legal representative, authorize your payment to the seller, so your money will be safe. AG Legal, due to its experience, has a “Trust” company registered with the Costa Rican Regulatory Authority for these procedures, a client facility.
  6. Once the property is purchased, your residency application will be completed, and you can begin your new life in Costa Rica with peace of mind.

Costa Rica Tax Implications:

There are taxes involved in purchasing real estate which you need to know about:

Property transfer tax: This is 1.5% of the value of the transaction.

Legal fees: These are usually between 1-2% of the property’s sale value.

Government Fees: They are mandatory for the effective registration as a new owner in the National Registry of Costa Rica, it provides legal security as an owner, and these are paid at the same time as the property transfer tax, normally.

Capital gains tax: This tax is equal to 15% of the gain on the sale of the property. The first time the property is sold, you can choose between paying 2.25% of the property’s value transaction or 15% on the gain. All subsequent sales will pay 15% of the gain. This tax does not apply if you sell your primary residence.

Taxes on rentals: 13% VAT applies to rentals for more than 1.5 monthly basic salary (approx. 680,000 colones). Applies to the total amount paid monthly.

Commercial rentals: 13% VAT applies to the entire rental amount, with no exceptions. Small and medium-sized companies can have a different VAT treatment if they are registered before the MEIC.

Property transfer tax: This is 1.5% of the value of the transaction or the value registered, whatever is the higher.

Legal fees: These are usually between 1-2% of the property’s sale value.

Never miss the tax of a luxury home!

The Costa Rican government has created a tax law on luxury homes; for the year 2023, the owners of properties with a value greater than one hundred and forty-eight million colones (¢148,000,000.00) will be obliged to make the payment of this solidarity tax, which is described below:

RATE STEP  TO APPLY

Up to ¢371,000,000.00 0.25%

On the excess of ¢371,000,000.00 and up to ¢744,000,000.00 0.30%

On the excess of ¢744,000,000.00 and up to ¢1,116,000,000.00 0.35%

On the excess of ¢1,116,000,000.00 and up to ¢1,490,000,000.00 0.40%

On the excess of ¢1,490,000,000.00 and up to ¢1,859,000,000.00 0.45%

On the excess of ¢1,859,000,000.00 and up to ¢2,333,000,000.00 0.50%

On the excess of ¢2,233,000,000.00 0.55%

Almost all dream homes in Costa Rica with pools and luxury structures, especially in the capital and Guanacaste province, must pay this solidarity luxury tax.

Buying Property in Costa Rica – Customs:

The buyer of the property can choose the notary of his choice for the purchase. However, he pays 100% of the notary fees.

Even though the rule is upon agreement by both parties, usually, the buyer pays all expenses and transfers taxes.

The seller must help in the due diligence to obtain the correct information, the identification number of the property, the cadastre plan, proof of being up to date with the payment of public services, being up to date with municipal taxes, building permits in order and last information in case the property is mortgaged before a financial entity in Costa Rica. The seller assumes payment to real estate agents (realtors) in Costa Rica.

The term for the eviction of the property is agreed between the parties. ¡Be careful if there are tenants!

Questions about Costa Rica real estate

How much does it cost to get a real estate license in Costa Rica?

In Costa Rica, there is a Costa Rican Chamber of Real Estate Brokers, which offers official courses to approve your incorporation as an Associate. The Government of Costa Rica passed a law that requires all real estate agents and property managers to be registered with SUGEF. SUGEF authority oversees all banking, investment, and monetary transactions. For example, escrow agents and trust companies are registered with SUGEF. So, the cost is not that high, but it requires time and formalities before the authorities.

How much do real estate agents cost in Costa Rica?

Most listing brokers in Costa Rica charge a commission of 5% to 8% on successful sales transactions; they also charge a residential rental commission equivalent to 1 month + VAT, a commercial/industrial rental commission of 5% of the total value + VAT, vacation rental of 15-25% of the value + VAT.

Can a US citizen buy a property in Costa Rica?

Yes, a US citizen can buy property in Costa Rica. The Costa Rican constitution grants the same property rights to foreigners as it does to Costa Rican citizens; as long as you pay attention to the step-by-step that we gave you previously, any foreigner can buy properties in Costa Rica.

Is it worth buying property in Costa Rica?

Yes, it is worth the risk to invest in Costa Rica if you do it with legal advice; this is the only way to enjoy tax incentives linked to the laws applicable to foreigners, and you will not be subject to fraud or overvalued sale, if you try to buy property as a foreigner without help you are likely to acquire a problem.

For example, residency investors may qualify for credits and benefits such as reduced rental income taxes, capped capital gains taxes, and estate and transfer tax exemptions.

Where is the cheapest place to live in Costa Rica?

The cheapest places to live in Costa Rica are in the provinces of Cartago and Limón, where you will find less touristy towns and where real estate is much cheaper than in other places where foreigners usually choose to retire. Other cheap places to live and buy land are San Ramon, Grecia, Nicoya peninsula, San Isidro, and Atenas.

What is the average price of a house in Costa Rica?

The price can vary depending on the location, house size, and amenities. For example, a three-bedroom house at Hermosa in the Central Pacific region might be $190,000, a house in Cartago in the Central Valley might be $150,000, and your next beach home in Playa Flamingo might be $350,000. Though these prices are just an idea, you need to be advised by a good realtor, who can lead you to what you are looking for. you can find wonderful properties that are for sale in Costa Rica.

What is a residency for investors in Costa Rica?

You may qualify for temporary residency as an investor in Costa Rica if you or your spouse are willing to invest USD 150,000 in a business or real estate properties in Costa Rica, or USD 100,000 in a forestry project.

Under this category, the principal applicant may receive residency for a spouse and children as dependents and is valid for 2 years.

It can be renewed for another 2 years if you keep the project you invested in (business, property, etc).

After 3 years of holding temporary residency, you will become eligible for permanent residency.

Amenities and features that Costa Rica offers

Without a doubt, you can generate a great business in the world of real estate; you can sell and buy in this tropical paradise, from luxurious beachfront villas to cozy condos tucked away in gated communities throughout Costa Rica, offers a diverse range of properties that cater to every taste, you can find a from luxurious beachfront villas to cozy condos tucked away in gated communities, vacation home, apartments for sale, single family homes for sale, luxurious houses or find commercial real estate properties.

Navigating this market is made easier with Costa Rica’s diverse listings, and we at AG Legal can help you find your dream property in the best of Costa Rica.

Your Real Estate and Immigration Allies

With our assistance, you’ll unlock the full potential of Costa Rican real estate and business prospects; visit our offices located in the best part of downtown San José, Barrio Escalante. You’ll love talking about listing in Costa Rica and having lunch in one of the delicious restaurants surrounding our office.

Your Costa Rican dream starts here.

Contact us at:

info@aglegal.com