by Alejandro
January 3, 2017

This article should serve only as a guide to understanding the general process of buying property for sale in Costa Rica.

Buying Real Estate in Costa Rica.

Buying real estate, whether in Costa Rica or anywhere else, is possibly the biggest investment most will make in their lifetime. It can also be one of the most stressful.  When buying properties in any foreign countries including Costa Rica, the normal stresses of buying property is compounded with other risk factors, such as language barriers and unfamiliarity with Costa Rica property laws and the general real estate buying procedures.

That said, foreigners can and do legally and successfully purchase property in Costa Rica everyday. In fact, Costa Rica offers potential property buyers and real estate investors many options when buying Costa Rican real estate and properties, covering everything including houses, condominiums, time-shares, farms, finished lots and beachfront property. Costa Rica happens to provides foreign investors and property buyers with the same protection under its laws as it does if you were a Costa Rican citizen.

We work with 2 reputable, large real estate law firms in Costa Rica that have the experience, expertise and solid reputation to advise you on how to buy Costa Rican properties or real estate in Costa Rica legally, effectively, and most importantly, safely.  We will be happy to put you in touch with them once it becomes clear this is what you would like to do.
If you are ready to move forward with buying properties or real estate in Costa Rica, and feel you are planning to make a serious offer on a property once you are in Costa Rica, the first thing you need to do is talk to your banker ahead of time so you will be able to make a wire for the earnest money by phone.  Costa Rica has many state run banks, the 2 biggest being Banco de Costa Rica and Banco National de Costa Rica.
The following guide is designed to help potential buyers of Costa Rican real estate and properties navigate their way through the real estate buying process for all types of purchases. It is meant only as a general guideline.

This guide is divided into three main sections:

1. Property Ownership in Costa Rica and other common forms of possession of Real Estate and other Properties in Costa Rica.

2. Basic Terminology. Understanding the buying process can start with understanding the definitions and names of the documents used to record real estate transactions in Costa Rica.

3. Methodologies. As in many countries, Costa Rica offers real estate and property investors and buyers options in ownership.

1.   Property Ownership and other common forms of possession

Just like in the US, Canada , and Europe, there are different types of property available to buyers. Understanding the various types that are available for purchase is critical in the evaluation process. This section highlights the property types that can be purchased in Costa Rica and the implications of each type of ownership for the buyer.
A. Fee Simple:
The most comprehensive form of property ownership in Costa Rica is fee simple ownership. Fortunately for foreigners, the conditions for this type of ownership are the same for Costa Rican nationals as they are for foreigners. The concept of fee simple ownership is the same in Costa Rica as in the US . Basically, fee simple ownership gives the owner of the property the absolute right to materially own the property, use it, enjoy it (i.e. usufruct), sell it, lease it, improve it (i.e. transformation), etc., subject only to conditions outlined in the Costa Rican Laws. Fee simple also means that if the owner is obstructed from enjoying any of his/her rights to the property, he/she has the right to be made whole, in other words, have the property restored in its original condition. Buyers who purchase fee simple title have the most rights under to law to enjoy and use the property as they see fit.
B. Concessions in the Maritime Zone:
Concession property is more commonly known as beachfront property. In Costa Rica , 95% of beachfront property is considered concession property and is governed by the Maritime Zone Law and other specific regulations including but not limited to special dispositions stated by municipalities and the ICT (Costa Rican Institute of Tourism). These legal dispositions set forth the conditions under which foreigners and local residents can own concession property. A concession in Costa Rica is defined as the right to use and enjoy a specific property located on the maritime zone for a pre-determined period of time. The state, through its respective municipality, grants this right. Note that the first 200 meters measured horizontally from the high tide line defines the boundary of the maritime zone. This zone also includes islands, pinnacles of rock, mangroves, estuaries, small islands and any small natural formation that overcome the level of the ocean. This 200 meter zone is divided into two areas:
I. Public Area:
The first 50 meters measured horizontally from the high tide line. This zone is not available for ownership of any kind. No kind of development is allowed except for constructions approved by governmental entities. Further, this area is deemed a public area and any individual wishing to utilize this area for enjoyment has the right to do so. In other words, there are no truly private beaches in the Maritime Zone.
II. Restricted/Concession Area:
The next 150 meters. This area is available for Concessions to be granted. A concession is in essence a “lease” on the property granted to the lessee for a specific period of time. Normally the concession period is granted for 20 years. An owner of a concession may build on that concession, subdivide the concession and perform other acts to the property. However, appropriate permits from the local municipality must be obtained.

2. Basic Terminology

Feeling comfortable with the purchase process starts with understanding the most common terminology. While the purchase process may seem very simple, there are some keys ideas with which a buyer should be familiar. The following defines the most common vocabulary used in real estate transactions in Costa Rica .
A. Folio Real:
This is the “social security” number of properties. It is the unique number assigned to each property to identify it and distinguish it from other properties. This number is comprised of three parts: the first number indicates the province, the second group of six numbers is the number of the property itself and the last group of numbers indicates how many co-owners the property has. All titled properties MUST have this number in order for clear title to be obtained.
B. Transfer or Conveyance Deed (escritura de traspaso):
This document contains all the stipulations regarding the transfer of real estate including basic information about the buyer, seller, the property, and any special terms of sale, such as easements or mortgages. An attorney who is also a Public Notary must prepare this document and the deed must be recorded in his/her Notary Book as well as at the Public Registry of Property.  Once the deed has been prepared and signed at the close, it is the attorney’s responsibility to record the deed immediately at the Public Registry. The recording process consists of two phases. In the first phase, the notary presents the deed to the public registry for its annotation; from this moment the property is protected against any third party interest. After the registry verifies the deed is structurally correct, the second phase of registration begins and the property is recorded in the name of the new owner. Because Costa Rica operates on a “first in time, first in right” system, registering the deed immediately is critical to ensuring that the new buyer’s rights to the property are ahead of any other claims by third parties.
C. Public Notary:
Attorney licensed by law to perform legal acts with Public Faith. All transactions performed by a Notary are recorded in his/her Notary Book. A public notary is necessary in order to purchase a property. Most attorneys in Costa Rica are also Public Notaries.
D.  Power of Attorney: (Poder)
This document authorizes a person to act on behalf of another to perform specific actions such as the purchase of a property. This tool is especially useful for clients that wish to close on their property without returning to Costa Rica . It is best to sign the power of attorney before leaving the country because the law requires that the power of attorney be signed in the presence of a Costa Rican notary. Thus, a visit to a Costa Rican consulate in the US is necessary. One exception to this rule, however, is if the property is being purchased through a corporation. In this case, a signed proxy letter will suffice and there is no need to visit a consulate.
Powers of Attorney come in two form: general and special.
I. General power of attorney
Allows a representative to sign on behalf of an individual for multiple transactions and must be recorded at the Public Registry.
II. specific or special power of attorney
Allows the representative to sign ONLY for the item specified in the power of attorney contract and under the conditions specified there. It is highly recommended that only a specific power of attorney be granted for property purchases to limit the rights of the representative to sign only for the property in question and nothing else. Additionally, The specific power of attorney does not have to be recorded at the Public Registry, however it should be granted before a Notary Public.
E. Survey Plan (Cadastral Department):
In addition to the Public Registry of Properties, which holds all property deeds, Costa Rica also has a Cadastral Office that holds all of the property surveys. In order to transfer, mortgage or acquire a property, a survey must be recorded at the Public Registry. When dealing with property segregations, a municipality authorization is also required to be inserted on the survey. The official drawing of the property is validated through an approval process by the Public Registry of Properties as well as by the municipality in which the property is located. Because the Public Registry and Cadastral Office are separate entities, it is not uncommon for old property surveys to be on file at the Cadastral Office. If this is the case, it is recommended that a new survey plan be registered with the Cadastral Office so that there can be no dispute over boundary lines.

3. Purchasing Methodologies

A. Acquiring Properties through direct transfer:
A purchase process whereby one or more physical individuals acquire a property in their personal name.
B. Acquiring Properties through corporations:
A common practice in Costa Rica is to acquire properties through a new corporation or through an existing corporation that currently owns the property of interest. The process of setting up a corporation is not complicated, but does require a knowledgeable attorney who understands the exact protocols and procedures necessary to properly set up the corporation.
The advantage of this system is that it allows a buyer to protect their asset anonymously. Further, if a purchaser acquires a property through an existing corporation that already owns the property, there are no government transfer taxes and stamps to pay. The reason is that transfer taxes and stamps must be paid anytime that there is a change in the ownership of the property.
If a buyer acquires the shares of an existing corporation, technically there is no change in the recorded owner of the property (i.e. the corporation still owns the property). However, if a property is acquired through forming a new corporation to buy the property, the transfer taxes and stamps must be paid because the name of the property owner has changed.
The risk for the buyer in acquiring an existing corporation is that the corporation might have other liabilities and there is no way to verify 100% that the corporation is clean. When buying a Costa Rican corporation, it is important to keep in mind that there are other obligations and responsibilities that must be addressed. Examples include yearly tax declarations (even if the corporation is inactive), payment of income taxes if any, and keeping the legal books of the corporation up to date and in order.
Step-by-Step through the purchase process (please note that all of these steps can and perhaps should be done through a reputable lawyer) :
Once a buyer has seen a property of interest, the next step is to understand what the process of acquiring the property may entail. The following are the basic steps that a purchaser follows when buying a property.
Step 1: Sign an Option to Purchase/Sale with seller.
Step 2: Deposit funds into escrow (if available)
Step 3: Title research performed by the Notary Public / Lawyer (review to endure the property is free and clear of defects)
Step 4: Closing – Execution of Transfer Deed, Endorsement of Shares and/or Mortgage Deed and disburse funds
Step 5: Register new owner with Public Registry