Costa Rica real estate laws

Costa Rica property laws


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General Laws of Owning Property in Costa Rica

In matters of land and property ownership, foreigners and Costa Rican citizens have equal rights under the law (unless the owner bought the land as part of a government program). In these cases, the land can be traded or sold to foreigners only after the original owner has held it for certain period of time.

Foreigners do not have to live in Costa Rica to own property here.

Registration of a Property

Costa Rican properties are registered at the Registro de la Propiedad (Property Registry) which keeps track of all the title registrations. It is a great resource for verifying the status of a title or claim associated with a property.

If you wish to buy land in Costa Rica it is wise to either hire a lawyer or go yourself to the Registro de la Propiedad to search the title and verify that there are no liens against the property or the property owner(s).

Once you buy a property, you need to make sure the sale is properly registered at the Registro de la Propiedad, proof that you are the new legal owner.

There is no local financing for property purchased by foreigners.

Zoning

Building and subdivision plans must be:

A. Signed by a registered local engineer

B. Approved by the local Ministerio de Salud (Health Department)

C. Approved by the Instituto de Vivienda y Urbanismo (INVU) (Housing and Urban Development Department)

Real Estate Brokers

The Ministerio de Economia (Treasury Department) issues real estates licenses on the recommendation of the Chamber of Real Estate Brokers.


Taxes

Property taxes vary from 0.5% to 1.5% of the declared value of the property. However, Costa Ricans are a calm and resourceful people, so they customarily undervalue their properties by at least 20% when they register it.

The closing costs of a sale include a transfer land tax, a stamp tax, and legal fees. Closing costs run about 5% or 6% of the sale price, an expense divided evenly between buyer and seller. Transfer land tax and stamp tax assessments are based on the declared value. Legal fees are based on the selling price of the property.

Transactions may be conducted in U.S. dollars.

Costa Rican lawmakers have drawn up very strict rules governing the development of ocean front property along both coasts.

First, according Costa Rican law, the beaches belong to everybody and everybody has a right to use them. The first 50 meters (164 ft.) above the mean high tide line are public land. No one can restrict access to a beach or claim a beach is privately owned, exceptions being landholdings in port areas, old land grants or by some agreements made prior to 1973.

Second, along 80% to 85% of the coastline, the 150 meters (492 ft.) after the 50 first meters (164 ft.) are called the Maritime Zone and are controlled by the government. A foreigner must establish five years of residency to own more than 49% of a lease in this zone. Foreigners can evade the law by assigning the lease to a corporation that is wholly foreign owned or by assigning 51% of the ownership of the land (on paper) to a Costa Rican citizen. Take a careful look at the zoning laws before you start development in any of these areas.

If there is no zoning plan for land you want to develop, hold off on the celebration. If nobody has gotten around to making a zoning plan, then it's up to you to create one on your own and submit it to ICT (Tourist Board), the INVU (Housing and Urban Development Department), and the local municipality for approval.

The "zoning of land" plan you submit must address questions regarding – among other things – public use areas, roads, water and electricity.

If your development dream is located on the 15% or 20% of the coast land not in a Maritime Zone, then you may develop the property without filing a regulating plan. However, developments geared to the tourist industry must be approved by ICT (Tourist Board), anything else requires building permits.

Squatters

The greatest potential danger for land ownership in absentia and at times even when the landowner resides on the property is the problem of squatters. Before investing in large expanses of land or even a cottage, or a quinta in the countryside, knowledge of the legal procedures along with due diligence is necessary to maintain one's property rights. Written into the Civil Code (hereafter referred to as 'CC') are numerous passages that deal with the rights of possession that are reminiscent of the earlier days of agricultural reforrn. Such clauses tend to favor the small, poor land-holder by upholding de facto "squatters rights" (CC Titulo II, Capítulo II).

Technically, squatters can only attempt to gain legal rights to a non-maritime property by peacefully occupying non-cultivated, unimproved agranian land over an extended period of time. The difficulty of maintaining one's rights over those of the squatters is due to the nebulous nature of the law and what legally passes as "non-cultivated" or "unimproved" land. It can be equally difficult to establish the duration of the squatter occupation, which is a crucial piece of evidence in the eviction process. It is imperative to understand that, according to the law, in case of doubt, "good faith" is presumed on the side of the squatters (CC Art. 284).

There are legal steps that can be taken to rid one's land of squatters. Procedurally, the eviction process is divided into three phases. The first phase is the eviction of squatters during the first three months of occupation. Such early discovery is key, as during this period one need not go to court. Theoretically, one need only alert the local police, who are then obliged to evict the squatters. The catch is that it can be extremely difficult to get the police to carry out their duty, and if one is not in the country, actual eviction is very difficult to verify. Even though eviction within the first three months is a rather straightforward procedure, at least in principle, early recognition can prove to be difficult if one is not residing on the property.

The second phase is after the initial three months of occupation but before one year. If squatters are "allowed" to squat on property for this duration of time, one must go to the courts and start the process of "administrative eviction" (Harris, 1995). The third phase is continued occupation for more than one year. According to the law, squatters have then achieved a "legal assumption," and the owners must go through an ordinary lawsuit process. Such a process has been described by attomey Robert Wells as "kind of like a root canal" (Harris, 1995). In order for the court to grant the property rights to squatters, they must prove that they have been on the land "uninterrupted," "non-challenged" and "peacefully" for ten years.

Although there are no foolproof, preventive measures for eliminating the problem of squatters on land owned in absentia, there are a few somewhat helpful steps that can be taken. Firstly, the propety should not appear abandoned and signs should be posted with the owner's name. The most important, albeit expensive, precaution is to hire a caretaker for the property. Great pains should be taken to secure a reliable caretaker, as well as another individual who can monitor the caretaker; it is not unconunon for a caretaker to squat on the land that he is paid to protect. The easiest way to avoid such a problem is to register the caretaker as an employee, which entails paying minimum wage and social security. One should also demand signed receipts from the caretaker as proof of payment.

A word of caution regarding squatters: the notion that squatters are simple campesinos is unfortunately not always correct. There have been numerous reports of armed, dangerous and organized squatters -- predominantly in the southern regions of Golfito and Pavones, and one such group killed an American landowner in 1997. There have been other reports of a armed squatters using intimidation and violence with caretakers and landowners in order to gain control of the land. Obviously, extreme caution should be exercised when purchasing land in Costa Rica to avoid areas with known organized squatters. The bottom line with purchasing land for future development or as a summer getaway is that, while it may be less expensive than other developed resort areas, it may not be the bargain it appears, as caretaker and attomey costs may accumulate very quickly.



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