Costa Rica is a beautiful country located in Central America, known for its lush rainforests, beautiful beaches, and diverse wildlife. It is a popular destination for eco-tourism and outdoor activities and strongly focuses on sustainable living. All these aspects, combined with its affordable cost of living, make it an attractive option for those looking to buy a property. This blog pretends to guide purchasing a property in Costa Rica. Here you can find advice regarding how to get the right property, the right attorney, the guide to buying, and other essential tips that will help you, so if you are looking to buy land or a house in Costa Rica, this a blog you must read.

Can a Foreigner Buy a Property in Costa Rica?

There is no problem for a foreigner to buy a property in Costa Rica; the key question is to know if it is correct or not to register the property under your personal name or a company name and if the property purchase has been conducted correctly. These aspects will be treated in this blog, where you can find all the answers to your questions.

As follows, you will find the tips you have been looking to move to Costa Rica and

Researching the Right Property

As a first piece of advice, it is essential to research the location and zoning of the property. Some areas may restrict development or building, while others may be prone to natural hazards such as landslides or flooding. Hence, it is essential to consult with a local real estate agent and a good attorney to ensure that the property is titled correctly and that all necessary legal paperwork is in order.

When it comes to buying real estate in Costa Rica, research is critical. The market in Costa Rica can be complex and ever-changing, and it’s essential to have a good understanding of the current conditions before making a purchase. Here are a few key factors to consider when researching the Costa Rica real estate market.

Location, Location, Location.

The old adage holds true regarding real estate, and it’s essential in Costa Rica. Different areas of the country offer different lifestyles, climates, and views. For example, the Central Valley offers a more temperate climate, while the coast offers beautiful beaches and a more tropical environment. It’s important to consider what lifestyle you want and research the different areas that provide that.

Price.

Costa Rica offers a wide range of prices for real estate, depending on the property’s location, size, and condition. Having a clear budget and research properties that fit within that budget is essential. Keep in mind that prices in Costa Rica tend to be higher in more developed areas and closer to the coast, especially beachfront, while they can be more affordable in rural or mountainous areas. Remember to keep in mind that usually, the sale price is negotiable.

Availability of Utilities and Services.

This is an essential factor to consider when researching properties in Costa Rica. Some areas may not have access to certain utilities or services, such as electricity, water, or internet. It’s essential to find out what services are available in the area where you’re interested in buying property, as it can affect the value of the property and your ability to use it.

It’s also important to consider the legal aspects of buying property in Costa Rica. Always hire a reputable lawyer to assist you with the legal process. This will give you an idea of the current property laws and regulations and help you avoid potential legal issues.

The Real Estate Agent

Working with a local real estate agent can be a valuable asset. Here are a few reasons why it’s beneficial to work with a professional familiar with the Costa Rican market.

Expertise and knowledge of the market. A local broker has a wealth of knowledge about the Costa Rican real estate market and is well-versed in the current conditions and trends. They can provide valuable insight into the different areas of the country, including the pros and cons of each location, and help you find the right piece of land for your needs. They can also provide information on local zoning laws, building regulations, and other important factors impacting your purchase.

Access to a wide range of properties. Local realtors have access to many properties that may not be listed on public websites or in other publications. They can also provide information on upcoming listings and pre-market properties, giving you an edge over other buyers.

Negotiating skills. Buying real estate can be complex, and it can be not easy to navigate the negotiations on your own. A local real estate agent has the experience and knowledge to negotiate the best deal for you, considering your current market conditions and specific needs.

Usually, the real estate agent’s fees oscillate between 5% – 10%, depending on your negotiation with them.

What is the Process of Buying Property in Costa Rica?

Here you will find the main steps of the buying process. These steps are based on the most common elements based on costa rican law.

The Main Financing Options

Once you have found the right property among all the properties for sale, you can negotiate the financing terms in case you need it.

Mortgages: Like in other countries, mortgages are a popular financing option for buying land in Costa Rica. In case you are a foreigner, banks in Costa Rica usually don’t offer mortgages for purchasing property, so usually, this must be done by a private finance source. However, if you are lucky and a Costa Rican Bank is willing to give you a loan, it’s important to note that the mortgage process can be more complex and time-consuming than in other countries. It’s also important to remember that the interest rates in Costa Rica are typically higher than in other countries.

Trusts: Another popular financing option in Costa Rica is buying property through a trust. This is a legal arrangement where a trustee holds the property on behalf of the buyer. Trusts can be helpful for those who want to buy property in Costa Rica but cannot obtain a mortgage or for those who want to keep their ownership of the property private.

Cash payments: Some buyers choose to pay for their property in cash. This can be a good option for those who have readily available funds and want to avoid the complexity and costs of obtaining a mortgage or setting up a trust.

Financing through a developer or builder:

Seller Financing: Some developers and builders in Costa Rica offer financing options for their properties. This can be a good option for those looking to buy a new property still under construction. It’s important to note that financing through a developer or builder can come with certain restrictions or conditions, so it’s important to carefully review the terms and conditions before signing any agreements.

It’s important to consider the various financing options available and choose the one that best suits your needs. It’s also essential to consult with a financial advisor or a lawyer to help you understand the process and to ensure that you’re making a sound financial decision.

Legal Considerations When Buying a Property in Costa Rica

A real estate attorney can guide you on the legal aspects of buying property in Costa Rica, such as property taxes and registration. They can also help you find a reputable lawyer to assist you with the legal process and ensure that all the necessary paperwork is in order. This is a crucial aspect since, depending on the attorney’s skills and expertise, just avoiding one of the main aspects to review on the property title can make the difference between getting involved in a legal fight and living in peace in Costa Rica.

Who must conduct the due diligence? The buyer’s attorney must make this important task because this going to be a guarantee that you will have a professional in law who can stand for your rights during the process.

The Due Diligence

Due diligence is an essential step in buying property in Costa Rica. It involves investigating and evaluating a property before purchasing, ensuring it meets the buyer’s needs and expectations and identifying potential issues or risks.

One of the most important aspects of due diligence is checking the property’s title and legal documentation. This includes reviewing the property’s title to ensure that it is free and clear of any liens or encumbrances and that the seller has the legal right to sell the property. It also includes reviewing building permits, zoning regulations, and other legal documents to ensure that the property complies with local laws and regulations.

The due diligence process shall include the following steps:

  • Reviewing the property’s title and legal documentation,
  • Check the owner’s background. This is very important because sometimes the person who seems to be the owner is not the person who is selling the property to you. This means that you should be 100% sure of how the person who is shown in the public registry as the owner acquired the property. Do not forget to ask your attorney to double-check the seller’s identity.
  • Inspecting the property for any physical or structural issues.
  • Evaluating the property’s zoning and building regulations and researching the surrounding area to determine if it meets the buyer’s needs.

Due diligence is also crucial for identifying any potential risks or issues. This can include researching the property’s history, checking for natural hazards, or evaluating the local market conditions. This step can help the buyer determine whether the property is a good investment.

The Zoning Certificate

A zoning certificate is an important document that provides information about the property’s allowed uses and regulations. This certificate, also known as a “Certificado de Uso de Suelo” in Spanish, is issued by the local government (Municipalidad) and confirms that the property complies with the local zoning laws.

The zoning certificate is important because it provides information about the property’s allowed uses, such as whether it can be used for residential, commercial, or industrial purposes. It also provides information about the property’s building regulations, such as how many stories the building can be, how much of the property can be built on, and whether there are any restrictions on the use of the property.

The zoning certificate is also important because it helps to ensure that the property complies with local laws and regulations. This is particularly important in Costa Rica, where zoning laws can vary greatly between municipalities. By reviewing the zoning certificate, the buyer can ensure that the property is suitable for their intended use and complies with local laws.

In addition, the zoning certificate can also be useful in the future if the buyer decides to make any changes to the property. For example, if the buyer wants to build an addition or make any other changes to the property, they will need to ensure that these changes comply with the zoning laws. The zoning certificate can help the buyer understand what changes are allowed and are not.

Property Titles

Property title is one of the most important legal considerations when buying land in Costa Rica. It’s crucial to ensure that the property is appropriately titled and that the seller is the rightful owner. A property title search should be conducted to verify that the property is free of any liens or encumbrances and that there are no outstanding debts or taxes. It is essential to conduct a historical study of the property title since there are many stories of terror where the buyer ends up involved in a legal dispute since problems in the title are not shown at the first review of the attorney in the property title.

Taxes

Another important legal consideration when buying land in Costa Rica is taxes. Property taxes in Costa Rica are relatively low compared to other countries, but they must be paid annually. It’s essential to consult with a local tax advisor or attorney to understand the tax implications of buying property in Costa Rica.

Permits

Certain permits may be required depending on the location and intended use of the property. This aspect becomes highly important when you’re buying; for example, if the property is located in a protected area or if you plan to build on the property, you may need to obtain special permits from the government. It’s important to research the permitting requirements for the area where you’re interested in buying property and ensure that all necessary permits are obtained before making a purchase.

The Option Agreement

Once the property review has passed the steps mentioned above, you can proceed with the drafting o the option agreement. This is a very important document when buying property in Costa Rica as it allows the buyer to secure the property for a certain period of time while they complete their due diligence and arrange to finance. This agreement gives the buyer the exclusive right to purchase the property at a specified price and within a specific timeframe, usually 30 to 90 days.

The option agreement also protects the buyer if the seller decides to sell the property to someone else during the option period. It also allows the buyer to cancel the option and get their deposit back if any issues are found during the due diligence process. Additionally, it serves as a legal document that can be used in court to enforce the purchase agreement.

It is important to note that the option agreement could be written in any language and notarized by a Costa Rican Notary Public; it can even be noted at the property title to leverage its value for legal purposes.

The Deposit in an Option Agreement

Depending on the real estate transaction, the seller and buyer could agree on an early deposit when you negotiate an option agreement. A deposit is an important part of the option agreement; this document allows the buyer to secure the property for a certain period while they complete their due diligence and arrange to finance the purchase. No percentage is established by law, but it usually is about 5% of the purchase price.

The deposit serves several important functions in the option agreement. Firstly, it shows the seller that the buyer is serious about purchasing the property and is willing to put money on the line to secure the option. This can be important, especially in a competitive market, where the seller may receive offers from multiple buyers.

Secondly, the deposit also serves as security for the buyer. If the seller decides to sell the property to someone else during the option period, the deposit will typically be returned to the buyer. This protects the buyer if the seller changes their mind about the sale.

Thirdly, the deposit can compensate the seller if the buyer returns from the sale. In this case, the seller or a third person typically retains the deposit as compensation for expenses incurred during the option period.

Finally, the deposit also serves as a way to lock in the purchase price for the buyer. The option agreement typically specifies the purchase price that the buyer will pay for the property. By paying the deposit, the buyer agrees to purchase the property at that price if they decide to proceed with the sale

The Importance of a Surveyor

When buying a big property or empty land, it is important to hire a surveyor to complete a property survey. A survey is a detailed map that shows the boundaries, measurements, and other important information about the property, and it is an essential step in buying property.

The surveyor’s role is to physically mark the boundaries of the property, taking into account the legal description of the property as it appears in the Public Registry. A surveyor will also verify if there are any encroachments or disputes in the boundaries of the property, which is crucial to ensure that the property is free and clear of any liens or encumbrances.

A survey is also important because it helps to ensure that the property complies with local laws and regulations. For example, a surveyor will verify if the property complies with the local zoning laws and if any building restrictions might affect the property’s use. This is particularly important in Costa Rica, where zoning laws can vary greatly between municipalities.

A surveyor can also provide important information about the property’s topography, such as the slope, drainage, and soil type, which can be critical for assessing the property’s suitability for certain uses and the cost of future construction.

Ways of Transferring the Property

Basically, from the process of buying, there are two main ways how to buy a property in Costa Rica:

Buying a corporation: This is a very common way of how to transfer the property title; this means that by acquiring the shares of a corporation that owns the property title, you can also acquire the property title. This type of transaction demands a lot of analysis since you don’t need to analyze the property title and the corporations that own the property.

Transferring the property title before a notary public: First, you may take under consideration that in Costa Rica, to be Notary Public, you need to be an attorney, so when you want the property title to be transferred to you or a corporation of you, the notary public will need to conduct the due diligence on the property, usually on the basics aspects, so, please talk to an attorney of your confidence to go beyond the simple analysis that a Notary Public will do. Once the due diligence is concluded, the notary public shall prepare a public deed that the seller and buyer must sign in the books of records, called “protocol.”

Transferring the title in summary, buying property in Costa Rica has several legal considerations, such as property titles, taxes, and permits. It’s important to ensure that the property is properly titled, that taxes are paid, and that the property meets the necessary permits for the area and intended use. It’s also important to consult with a local lawyer who is well-versed in the laws and regulations of buying property in Costa Rica.

Also, remember that since you will move to Costa Rica to live for short periods of time or permanently, you may apply as a legal resident; for more information, please click here.

Summarizing, buying a property in Costa Rica could be a very complex process that usually shall be conducted not only by the buyer but also by a group of professionals that will guarantee a positive outcome of this experience. If you have any questions regarding any other aspect or want to amply more on one of the topics of this blog, do not hesitate to contact the AG LEGAL team.