Guidelines for buying real estate

Public Record Office System: With few exceptions, land ownership must be registered at the Property Department of the Public Record Office. Liens, encumbrances and easements imposed on a recorded property should also be duly registered to have any effect on third parties. To ensure the buyer that he is acquiring land from its legal owner, and that the property is free of mortgages and other kinds of encumbrances, a thorough title search of the public records must be performed as a previous and necessary step for buying real estate.

Legal Procedures in the Deeding and Transfer of Land:

Depending on the legal regulations applicable to a specific piece of land, there are various kinds of property ownership.

1. Recorded Land: Property duly registered at the Public Record Office.

2. Non-Recorded Land: Property subject to be registered at the Public Record Office which has not been duly recorded.

3. Non-Registerable Land: Property which is not subject to be recorded at the Public Registry by law.

Recorded Land:

Recorded land transfers must be granted through a public deed. To this effect, the parties must appear before a Costa Rican Notary Public (to be chosen by the purchaser) who will insert the title transfer in his Protocol. A Notary Public is a licensed Attorney at Law who is endowed with "public trust, " and the right to validate and legalize all contracts and deeds. To protect his/her investment, the buyer is entitled to appoint his or her attorney to perform as the Notary Public in the transaction.

Prior to the signing of the deed, the buyer or his/her attorney are expected to investigate ownership status and encumbrances at the Public Records Office to make sure the seller's title is clear and lien free. The purchase deed, as well as any related liens granted by the purchaser, must be presented by the Notary to be duly registered in the public records. It is also the Notary's duty to complete all recording procedures necessary to provide the title transfer with full efficacy.

Registration taxes and legal fees will range from 2.5% to 3% of the total amount of the transaction. These costs will be shared by the parties on a 50%-50% basis if they have not agreed otherwise. All registration taxes will be calculated based on the official or declared value of the property, which is usually much lower than the market value. The legal fees will be charged based on the real purchase price.

Non-Recorded Land:

Real estate that fulfills all the requirement the law establishes for legitimate ownership but has never been recorded, may be transferred through a public deed, or even a private contract. It is advisable that the purchase of non-recorded land be performed with the advise and participation of an Attorney at Law.

The transfer of non-recorded land cannot be registered at the Record Office. A judicial procedure is required to obtain authorization to inscribe real estate ownership for the first time in the public records.

Even though the ownership of non-recorded land is valid and has most of the legal effects of a registered title, it lacks the securities that are granted by the Record Office.

Non-Registerable Land:

Because of special regulations, some areas are not subject to private ownership. This is the case of most of the beach front property, which is regulated by Law No. 6043 of 2 March 1977 and will be explained in detail later on. Sometimes non-recordable land may be subject to be legally used or possessed by individuals or private companies, either through a concession granted by the Government, or the transfer of legitimate possession by the former possessor.

Requirements for Land Ownership:

Apart from the restrictions established for non-registerable land and other special cases determined by the law, any individual, national or foreign, may legally own land sheltered by our Record Office system. Nonetheless, for legal and economical reasons, it is advisable that the acquisition of real estate is performed through a Costa Rican company.

Recording and Deeding of Beach Front Property

Public Law No. 6043 of 2 March 1977 establishes a restricted coastal zone called the "Zone Maritimo/Terrestre." It comprises a 200 meters long strip of land along both the Pacific and Atlantic coasts of Costa Rica, measured from the high tide line toward the inland. This "Maritime/terrestrial" restricted zone is given a differentiated treatment since it is owned by the national government and administered by local governments (municipalities). It is divided into two sections:

a) The Public Zone (Zone Publica): 50 meters wide strip of land between the high tide line and the outer line of the "Restricted Zone" (Zone Restringida).

b) The Restricted Zone (Zone Restringida): 150 meters wide strip of land from the inner limit of the Public Zone toward the inland.

No private individual or corporation is allowed to build on or use for private purposes any portion whatsoever of the Public Zone. However, they may obtain a lease concession on the Restricted Zone for private or business use.

Leases on the Restricted Zone are authorized by the Instituto Costarricense de Turismo (ICT) and granted by the relevant municipality. Beneficiaries of lease concessions are granted the use, occupation, and possession of the land, including the right to build.

No lease concessions are granted to non-Costa Ricans who have resided in the country less than 5 years, nor to foreign companies, nor to national companies of which 50% or more of its stock is owned by non-Costa Ricans. Lease concessions may be transferred with the previous approval of the municipality and the ICT. They are generally granted for periods of time that range from 5 to 20 years. The lease granting municipality is entitled to charge a small leasing fee. The lessee can apply for an extension of the lease concession at the Municipality. Extensions are normally granted with the previous approval of the ICT.

There are very few exceptions to Law No. 6043 of 2 March 1977. Beach front land that is not regulated by this Law can be found, but it is extremely unusual to have property titles in areas within the restricted 200 meters.

A foreign investor wishing to acquire a lease concession must do it through a Costa Rican corporation. Land not included in the Public or the Restricted Zones can be purchased individually and with no special restriction or limitation .

Before acquiring a lease concession, the buyer would ask his or her attorney to examine the Municipality Records and the Concession Registry, to verify the seller's concessionary status, as well as general tax and leasing dues. A similar procedure applies to the purchase of non-restricted land described above.

Purchase of Land through Costa Rican Companies

In any of the above mentioned cases, both Costa Ricans and foreigners are always advised to buy land through a company. Among the advantages of forming companies for this specific reason, the reduction of personal liabilities and taxes are the most outstanding.

Ownership of recordable assets, such as real estate and cars, has become the main purpose of most of the registered companies in the country. Hence this method of "indirect" possession, is the most highly recommended means of managing recordable assets.

Once formed, a corporation may be fully controlled by a sole shareholder. This allows the concentration of corporate powers which allows a single individual, or a small group of people, to operate the company in a relatively simple and inexpensive manner. Your attorney will be able to help you find the best ways to ensure control of the company and the overall handling of corporate power.