While purchasing real estate in Costa Rica is a similar process to the US, it is important for foreign buyers to understand purchase requirements, property owners rights and the best strategies for avoiding fees and other problems before investing. Making sure a potential property has the proper “folio real” (tracking number), forming a Costa Rican LLC to handle property transactions and registering property deeds promptly are among some of the important steps an investor should take to ensure a successful purchase. See the following article from International Property Journal.
Costa Rica earns its reputation as the easiest country to buy property in Central America. The political stability and volume of expats help keep surprises to a minimum, while there are ample bi-lingual resources.
The actual process is fairly similar to the United States, with a certified escritura (title) and plano (survey) required for most transactions. Title insurance is available. Agents don’t have to be licensed, but the Costa Rica Chamber of Real Estate Brokers and other groups are helping to bring standards and the NAR’s ethical code to the industry.
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It’s fairly common for buyers to form a Costa Rican limited liability corporation, a Sociedad Anónima, to handle property deals. Although not always appropriate, the corporate structure can help smooth the process and avoid fee. Once a deal is done, property taxes are relatively low—usually not more than 1 percent of the property value—and, best of all, there is no capital gains tax.
The only area where transactions get more complex is directly along the waterfront, the “maritime zone,” where construction and ownership is tightly controlled. There are no private beaches in the zone. Property within 150 meters of the waterfront is known as “concession land,” and there are restrictions on foreign ownership. Typically it’s only possible to buy the right to use concession land and any developments requires strict local review.
- Homeowner associations are governed by the Ley de Condominio, which covers condominium properties officially registered as condominiums with the Costa Rica National Registry. Homeowner associations on properties not registered as condominiums don’t have the same legal standing and could easily lead to complexities.
- In most transactions, buyers and sellers split closing cost, but this can also be a topic for negotiation.
- Costa Rica is, arguably, one of the eco-development leaders in Central America. Developments are often subject to complicated environmental reviews.
- There are no hurricanes on the Pacific Coast, but earthquakes are a huge issue. All construction must meet rigid earthquake safety standards.
- Only two people are needed to form a corporation in Costa Rica (plus a board of directors). But once a corporation is formed it’s easy to transfer assets to others members.
- Costa Rica courts recognize a “first in time, first in right” policy, giving legal rights to whoever stakes the first claim. It is essential to register deeds immediately upon transfer of the property.
- There is a 3 percent property transfer tax added to sales. The tax is based on the value of the property registered on the transfer deed.
- Every property is assigned a “folio real,” a tracking number used for all transaction. A missing folio real is a huge red flag.
- Retirees with verifiable pension or investment income can apply for pensionados status, which offers an array of benefits.
This article has been republished from International Property Journal. You can also view this article at International Property Journal, an international property news and information site.