Costa Rica Real Estate Laws

Land Ownership
Costa Rican laws and the constitution guarantees private ownership of land. By law, foreigners have the same property rights as citizens. For foreigners, there are almost no restrictions to ownership of private land. However, there are government programs that sell or give land to Costa Rican citizens. After a time period, these lands can be freely traded or acquired by foreigners. You do not need to be a citizenship, residence, or live in the country to own property.

Clear Title Registration and Information
Costa Rican law requires that all property documents with clear title must be registered in the property section of the Public Registry (Article 460 of the Civil Code). All property must contain a titled registration number, the Folio Real. The national database can be searched with this number or by name index. All clear property can be verified for clear title at the web site for the National Registry at www.registronacional.go.cr

This report, the informe registral, will provide all detailed information about the property. The information including the name of the titleholder, all boundary lines, tax appraisal, any liens, unpaid mortgages, recorded easements, and all other recorded instruments that would affect clear title for the property. To protect the buyer, Costa Rica follows the doctrine of first in time, first in right, all recorded instruments regarding land for sale presented to the Public Registry are given priority according to the date and time in which they are recorded. For the buyer, this means that any mortgages or liens, which are not recorded by the national registry at title transfer, are not valid. Since the certificate of title issued by the Public Registry is conclusive evidence for clear title on the date issued, any lean or instrument not recorded at the time the certificate is issued is invalid by Costa Rican law. This means that there is no need for title insurance, because any instrument not in the report is deemed invalid.

Obviously, every situation differs and in some cases a review of the Public Registry record will not be enough to uncover all encumbrances. We suggest that the buyer have there won attorney conduct an independent title search. Never rely on the seller's attorney to conduct the search. If you feel more comfortable purchasing title insurance, then the title company can guarantee clear title and be responsible for the search.

The title transfer process of land for sale
In Costa Rica, the seller transfers land to the buyer by executing a transfer deed (escritura) before a lawyer or notary public. Unlike common law countries, in Costa Rica the notary public has extensive powers. All notary publics must be attorneys and may draft and interpret legal documents, as well as authenticate or certify the authenticity of documents concerning clear title.

In order to close on the property, the buyer and seller must select a notary/attorney who will draft the transfer deed and register the sale in the Public Registry (Registro Nacional). We suggest using the buyer's attorney who will draft the transfer deed when paying cash for the property. Interest rates are much higher in Costa Rica and not tax deductible in the USA. We suggest taking a second loan out on property owned in the USA to finance property in Costa Rica.

However, if the purchase price is financed, there are 3 options for selecting the notary/attorney:

Registration of the transfer deed
Once all the fees have been paid, it is the obligation of your lawyer to ensure that the deed is presented (anotado) and registered (inscrito) in the Property Section of the Public Registry. Check the web site to guarantee that you have been properly registered. Even though the presentation guarantees your priority (i.e., first in time, first in right), it may not guarantee registration. The Public Registry will not allow a transfer deed unless all taxes and registration fees are included. Get a certified copy from the Finance Ministry, Ministerio de Hacienda.   This provides that a certified copy of the seller's property tax (impuesto territorial) payments is up to date. A municipal certification is provided from the local municipality certifying the seller is current on municipal tax payments. Likewise, any prior instruments that encumber the property like mortgages, liens, judgments, etc. must be satisfied before your land transaction will be registered.

After the transfer deed is accepted for registration, the Public Registry will return the original document with all the documentary stamps affixed to it to your lawyer. Assuming no problems exist, it will be registered by the Public Registry within 60 days after presentation.

Closing Costs
Closing costs for a sale include a transfer land tax, a stamp tax, and legal fees. Closing costs typically run 4 to 6% of sales price. These cost are normally split 50/50 between buyer and seller. Now, the transfer and land taxes are assessed based on the declared value, while legal fees are charged based on the actually sales price. This law is being discussed in the congress now.