FAQs About Developing Property in Costa Rica
You are interested in learning more about developing real estate and property in Costa Rica and you’ve found our website. We are experts in Costa Rica development properties, land for sale, resorts and hotel real estate, as well as commercial properties and we are here to guide you through the many questions about developing property in Costa Rica. Our FAQs provide the basic information you need to know before investing in Costa Rica real estate. For more detailed information and information on specific properties, contact our team of professional real estate advisors today.
What are the main environmental regulations we need to keep in mind when developing land, or before developing property in Costa Rica?
Costa Rica has been long recognized worldwide as a country committed to the preservation of its wildlife and natural resources. Therefore, Costa Rica has a complex legal and regulatory framework with regards to environmental protection, including an environmental assessment before developing any property. The Environmental Secretariat, (SETENA), the governmental agency in charge of performing the assessment and it addresses the impact of the project on the land, and also the impact on the surrounding community and its residents. Due to the potential effects of environmental matters on future development of the land, it’s customary to perform an environmental due diligence before acquiring the property.
Are there building, land use and zoning codes?
The Urban Planning Law does contain the general provisions applicable to zoning plans and land subdivisions for a potential development. It also establishes the authority of each Municipality to implement specific zoning plans in each county. Costa Rica has 81 counties Cantons, all have adopted zoning plans in accordance with the Urban Planning Law. It is very important to verify which zoning plan is applicable to a particular project, and to review and comply with the zoning plan. In the absence of a Municipal Zoning Plan, a development is subject to approval by the National Housing Institute (INVU), with national jurisdiction.
What are the laws in Costa Rica pertaining to subdividing a property into condominiums?
The Costa Rica Condominium rules are a recognized form of real property ownership under Development Costa Rican Law No. 7933, (the Condominium Law). Like other condominium laws in other countries, Costa Rica condominium ownership in is a property right, which combines various forms of ownership. The condominium unit owner is the sole owner of the “unit”, but also one of many mutual owners of certain “common elements” which service all units, and which the unit owner may use and enjoy along with other unit owners, like as elevators, parking lots and/or swimming pools etc. Each unit owner has an undivided interest in the common elements, which all unit owners own as tenants in common. The flexibility of the condominium structure lends itself to many different development types. In addition to residential and resort condominiums, the condominium structure is commonly used in connection with the development of hotel, “condo-hotel”, office, industrial and retail projects.
The Condominium Law also permits master condominiums, phased condominium developments, land condominiums, and vertical condominiums. The Condominium Law allows ownership of condominium units within projects located in the Maritime Zone. In this instance, the ownership interests are in the concession, rather than the fee simple property interest, and are subject to the existence and validity of the concession rights, including the 50 per cent Costa Rican national ownership requirement. The condominium is created, by modifying the property title, by means of a public deed recorded at the Public Registry with a copy of the approved drawings for the Condominium. The deed includes detailed descriptions of the individual units and common areas, establishes rules and bylaws for both the operation of the condominium owners association and for compliance with building codes, covenants, and references all mandatory governmental permits and approvals. Other mechanisms to create multiple ownership and freeholds existing on one plot of land including fractional ownership programs as well.
What are the standard legal fees for a real estate transaction and what are they based on?
The Notary Public fees are established by law, which defines the amounts based on the type of transaction or act performed by the notary. For example, notary fees are 1% of the purchase price.
Regarding legal fees for due diligence work, drafting and negotiation of contracts related with the real estate transactions there are no standard schedules of fees. Customarily, attorneys charge their fees based on hourly rates applicable to their time devoted to perform these tasks.
Are their restrictions on what foreigners or foreign entities can own, in terms of real estate in Costa Rica?
For the most part, no. Real property in Costa Rica may be owned and transferred by anyone, or corporation through fee simple title, except for property located in the Maritime Zone, discussed in more detail below, which can only be used and occupied pursuant to a concession agreement with the government. There are no express or implied limitations on foreign individuals or corporations acquiring fee simple title to property, but there are restrictions on foreign ownership of concessions in the Maritime Zone. Specifically, properties subject to the Maritime Zone regime may not be held by: foreigners that have resided in Costa Rica for a period of less than five years; companies domiciled outside of the country; Costa Rican companies organized exclusively for foreign stockholders; companies with bearer shares; or Costa Rican companies with more than 50 per cent of their equity belonging to foreigners.
What are the various ways to own property in Costa Rica?
In all of Costa Rica real estate is capable of being owned as fee simple or freehold as we know it in the United States.
The exception is untitled properties located within the Maritime Zone (known as concession properties). The Maritime Zone is a 200 meters (656 foot) wide strip of land running parallel to the coastline, beginning at the mean high-tide mark as set by the government. Costa Rica properties in this zone, with a few exceptions, cannot be privately owned or transferred fee simple. However, there is a legal procedure to acquire concession rights granted for a set time, but subject to the terms and conditions of Law No.6043 (the Maritime Zone Law). The Maritime Zone is divided into:
- Public areas, a 50 metre (164 foot) strip of land closest to the shore which is public land and cannot be owned or possessed as private property; and
- Restricted area composed of the remaining 150 meters or 492 feet inland, where a party can possess or “lease” the land as the holder of a concession granted by the local Municipality for a set period of time between five and 20 years, so long as the holder meets all applicable legal requirements for that local Municipality.
- Restricted areas composed of the remaining 150 metres (492 feet) further inland, where a party can possess or “lease” the land as the holder of a concession granted by the local municipality (the Municipality) on behalf of the government, for a set period of time between five and 20 years, so long as the holder meets all applicable legal requirements and laws.
- Natural resources (beaches, mangroves, rivers, forests, lakes, etc.) also known as Natural State Patrimony, belonging to the state.
A few other forms of real property ownership include traditional: fee simple title, condominium property, untitled property, usufruct and bare ownership – legal title without over a property without the right of use and enjoyment and co-ownership rights of the owners.
Are there rights that can be overridden by the State within my private property?
The beaches are public domain therefore it is mandatory to maintain any pre-existing public accesses. Furthermore, forests located within private property have limitations for logging and deforestation, hence the state has the right to supervise the conservation of these forests and can also declare them as public reserve. The state owns mineral and riparian rights. It has absolute, inalienable and imprescriptible domain over all mineral resources that exist in the national territory and its patrimonial sea, without restriction regarding its origin, physical condition or nature of the substances they contain. Nevertheless, the state may grant concessions to private parties for the exploration, exploitation and processing of these resources.
Is title insurance customary when purchasing a property or with a mortgage?
During the past 15 years several of the largest US title companies have established operations in Costa Rica that offer “title insurance” products protecting the buyers against defects, liens and encumbrances affecting title to real property in a manner similar to the ALTA policies of title insurance common in United States real estate transactions. In addition to owner’s coverage, lender’s title guaranty products are available that insure the priority and validity of the mortgage instrument securing the debt. Purchasers of real estate in Costa Rica historically have relied on Costa Rica’s public registration process and closing customs, in which a notary public prepares the deed, examines title, and informs the buyer of recorded encumbrances that affect the use and/or ownership of the property, rather than title insurance to assure acquisition of valid title to the property. Although the present system and common practices are reliable as a general matter, there may be little recourse available to an individual purchaser that finds itself a victim of fraud or mistake.
What are the various fees and costs associated with a real estate purchase?
The basic real property transfer tax rate is 1.5 per cent of the greater of the total declared value of the property or the fiscal value indicated in the public records. Other expenses related to the transfer of properties include notary fees 1% of the purchase price for conveyance deeds and legal stamps .85 percent. Other fees may apply based on Municipality.