Property Ownership in Costa Rica

Property Ownership in Costa Rica
Ownership of Land
Costa Rican laws and constitution protect private ownership of land and foreigners enjoy the same rights as citizens. They do not require any special conditions to purchase property within Costa Rica. That is why Costa Rica ranks in fourth place at the world level as an ideal environment for foreign investment.

Furthermore, one of the great things about Costa RIca is that it is 100% tax free regarding Capital Gains!

Neither citizenship, residence, nor even presence in the country is required for land ownership.

One exception is the - "Terrestrial Maritime Zone" (see below).

Registration

Costa Rica boasts of a safe form of title registration to protect buyers from hidden claims. It is centered in the "Registro Nacional" (National registry), where both title documents and survey plotted for every property are recorded. Any change in the status of a title or any claim that might affect it must also be noted on the title registry page, thus making it easy to verify.

Those who want to buy land in Costa Rica should work with a professional reputable Real Estate company that will refer them to a good, reliable lawyer. The lawyer will do a search of the title in the registry, so as to confirm that there are no liens on it, and to establish its proper ownership. Once the deal is completed, you should also secure documents from the lawyer to prove that the sale was registered. This is for your own safety and to present to somebody else if necessary.

Stewart Title

Stewart title opened its doors in Costa Rica 2 years ago offering title insurance. It is the biggest title company in North America. Stewart Title is commonly used by many buyers to secure and insure clean title on all types of purchases in Costa Rica.

Financing

With some properties, owner finance is available at between 10-12% per year. Financing is starting with the bank of Nova Scotia in Costa Rica with interest rates as low as 7.5%, but the requirements for foreigners are still tight. At this time, it is more profitable for our clients to acquire a U.S. mortgage loan for the lowest interest rate.

Zoning

Knowledgeable lawyers agree that zoning regulations in Costa Rica are reasonable and logical, although far less stringent then in other countries such as the United States. A registered local engineer must sign all building and subdivision plans, and they also require approval by the local municipality, the Ministry of Health, and the Government Housing Department.

Taxes

The taxes paid on properties in Costa Rica are very low. Yearly property taxes vary from 0.5% to 1.5% of the declared value of the property. This declared value is a common law practice; in that a property's value according to the government is very low, almost always lower than the sale price.

Closing Costs

Closing cost for a sale include a transfer land tax, a stamp tax, and legal fees. Closing costs are approximately 4% of the sale price. The transfer and land taxes are assessed based on the declared value, while legal fees are charged based on sales price of the property. It is a common practice with many lawyers here to lower the actual amount paid on a sale to a much lower sum on paper to reduce the land transfer tax. This is acceptable if you are willing to take the risk, but be aware should there be any legal disputes at a later time, that you will only be compensated for the amount registered at the National Registry.

Corporation

We advise all our foreign owners who purchase any property or vehicles to register them in Costa Rican companies for tax reasons as well as resale or inheritance. The cost of a company will be around $500+/- depending on the lawyer you use.

Regulations for Beachfront Property ("Terrestrial Maritime Zone")

When buying beachfront properties, one must be aware of the Costa Rican regulation that the coastline is all public. By law, the first 50 meters above the mean high tide line are inalienable public, defined by what is known as the 50-meters line. No one can restrict access or have a totally private beach. There are some exceptions, but they include port areas, old land grants, and some title prior to 1973.

On 80-85% of the coast, the next 150 meters are government-owned lease, and also known as the maritime-terrestrial zone (or just maritime zone). Restrictions on maritime zone land for foreigners are that one must establish five years residency to own more than 50% of the rights to a lease. A loophole includes holding the lease with a corporation that is 50% held by a Costa Rican (or a five year resident) in name only. Development of the maritime zone does not discriminate against foreigners. A regulation plan must exist for areas where the land is, or just for the parcel itself.

The other 15-20% of the coast is land that has title to the 50 meters line. That is to say that no maritime zone exists and the landowner may develop without inconvenience of filing a regulation plan.

Building

Building costs generally range from $50 to $80 a square foot. Average time for building permits generally range from 2 to 3 months time, but can take longer. Building materials and techniques are similar to that of the U.S.