Do I Really Need To Use A Realtor Or Broker In Costa Rica?

The answer is an emphatic yes!   Costa Rica is not the 51st state, but a fiercely proud foreign country with their own system of laws and ways of doing things. Just because you remember some high school spanish and have the courage to drive in a foreign country, should not give you the confidence that you can  find "deals" on your own.  The services of a professional real estate company can be invaluable when you are buying property in Costa Rica, before, during and after the purchase. Every area has its particular customs, and this is why its important to use a local agency like CR Beach Investment Real Estate for the Jaco and surrounding areas. 

A common fallacy is that supposedly locals offering properties for sale are ALWAYS cheaper than foreign sellers' prices.  The reality is that the local (sometimes) will actually set his price way above market, knowing that with extreme patience (and si dios quiere), his price will eventually be met.  Many times the better deal is from the foreign seller that needs that cash, now!  We know exactly what you should be paying, and we will fight for the lowest price possible. Many a seller has left our office shaking their head after hearing Jeff's famous, "that price is not even close to reality."  We know that you worked hard for your money, and we want to see you make a wise investment with us, as well as your friends and relatives, too!!!

 We love this country and really want your buying, selling, living, and  investing experience to be as positive as we know it can be.   We will help you select the perfect property, attorney and other experts, assist with financing, and provide you with realistic price comparables and "no bull" market analysis. We can enlighten you to the realities of Costa Rican bureacracy, assist in the discoveries of the hidden treasures found amongst us, but most importantly we will protect your investment--this is why you use a local realtor--especially CR Beach. Let our 70 plus years experience in Costa Rica provide you with the comfort and security you need and deserve.

 Can A Foreigner Buy And Sell Property In Costa Rica?

Ownership of real estate in Costa Rica by foreigners is fully guaranteed by the constitution. In addition, foreigners enjoy the same ownership rights as Costa Rican citizens, regardless of whether the property is placed in the name of a corporation or in the name of an individual. The only exception to this is in regards to concession lands, which will be discussed later.

What Legal Documents Can I See Prior To Making A Deposit?

First, we will need to see an official Costa Rican Registry report, (informe registral) which will provide detailed information on the property, including the name of the title holder, boundary lines, tax appraisal, liens, mortgages, recorded easements, and other recorded instruments that would affect title. Since Costa Rica follows the doctrine of first in time, first in right, ALL recorded instruments regarding property for sale presented to the Public Registry are given priority according to the date and time in which they are recorded.  Since the certificate of title issued by the Public Registry is prima facie evidence of the condition of title on the date issued, any instrument not recorded at the time the certificate is issued is invalid. This eliminates the need for title insurance MOST OF THE TIME.   

The second document, the "catastro" or "cadastral" will show all boundaries and markers, neighboring properties with owner's/corporation names,  and whether there are any local or national ordinances affecting that particular piece.  Your attorney will advise you on the legality of the presented documents, and may request that any deposit be held by him or title company until all paper work is satisfactory.  In addition, all  obligations (water, electricity, road access, all taxes on the property paid up to date, etc) promised by the owner need to be clearly stated  in the written agreement. If the promised time for completion of these obligations is considerable,  again request that an amount of the purchase funds to be withheld by the attorney until the obligations have been met. 

All properties have a titled registration number known as the Folio Real, and the records database can be searched with this number or by name index.  Anyone may do research through the official web site of the National Registry  www.registronacional.go.cr

Step By Step Through The Purchase Process:

 These are the basics that a purchaser follows when buying a property in Costa Rica.

• Sign an Option to Purchase with Seller.
• Deposit 5-10% of the purchase price with Escrow Company,or approved attorney's escrow account, or in some 100% safe cases directly with the Seller. Please remember that wir e transfers from the states typically take 2-5 business days.
• Title research performed by an approved Notary Public-Lawyer and/or title company attorneys.  In Costa Rica, all notaries must be attorneys, and are registered with the Bar Association, (Colegio de Abogados).
• Closing with final transfer of funds, execution of transfer deed, endorsement of shares and/or mortgage deed.
• Register new owner with Public Registry (Registro Nacional). In about 6 weeks, receive official title and guaranty (if purchased).
• CR Beach will ensure that you are protected, every step of the way. 

How Is Title Transferred?

When buying property in Costa Rica, property is transferred from seller to buyer by executing a transfer deed ( escritura ) before a public notary. Unlike common law countries, such as the United States and Canada, where the role of the notary is limited to authenticating signatures, in Costa Rica the public notary has extensive power to act on behalf of the state. The public notary must be an attorney and draft and interpret legal documents, as well as authenticate and certify the authenticity of documents.

Once a transfer deed is accepted for registration, the Public Registry will return the original document with all the documentary stamps affixed to it and properly sealed. Assuming no defects in the transfer deed, it should be registered by the Public Registry within 45 to 60 days after presentation. 

Can I Get Financing In Costa Rica?

Finally this year, 2007, financing is not the ridiculous extortion option of years past.  Many local banks such as Banco Banex, Cuscatlan, and ScotiaBank will now loan to foreigners, and have courted them with lower  interest rates.  Now around 9-10% with origination fees up to 3% max., compared to last year's rates--as high as 14% with origination fees up to 6%,  this is a tremendous improvement.  Some other private lending companies are now touting their services as well, check for details.  

BRAND NEW TO JACO IS OWNER FINANCING!   TWO OF OUR FAVORITE BEACHFRONT CONDO PROJECTS ARE OFFERING  9%  FIXED RATES.  CONTACT US NOW FOR MORE INFO!!!

Of course, Costa Rican banks will never compete with the lowest rates offered in the States or Canada, so our general line of advice is to use the equity you have in your home country and save yourself some money, some time, some headaches .......

LATEST NEWS!

Costa Rican Home Loan Market Heats Up With Lower Interest Rates
Banks are looking to increase their loans portfolios and are looking to the
middle class with easy and accessible home loans. (vivienda).

The banks are using low interest rates and in some cases a fixed rate for
the first years and a variety of terms as a hook to get customers through
their doors.

Competition between the banks - state and private - is fierce and has
prompted bankers to sharpen their pencils and find creative ways to attract
customers.

For instance, home loan interest rates at private banks have gone from
18.95% on June 5, 2006 to 11.09% on June 5 of this year. On June 5, 2005,
the interest rate on home loans was 21.43%.

At the state banks, the rate on home loans was 18.56% on June 5, 2006 and
11.18% on June 5 2007 and 20.56% on June 5, 2005.. according to figures by
the Banco Central de Costa Rica (BCCR).

Some 25 different home loan products geared specifically to the middle
class, are now available on the market, on loans in colones and dollars.

The Superintendencia General de Entidades Financieras (SUGEF) - the banking
regulator - stipulates that not more that 40% of net income can be used to
pay a home loan.

The private banks are also active in the market, offering all types of terms
and bonuses to get their share of the home loan market.

For those in the market for a home loan, the best is to shop around and
compare the offers made by the different banks, both private and state.

REMEMBER: THE BEST RATES ARE USING YOUR EQUITY IN THE STATES!

The general custom is for the buyer and seller to share equally in the closing costs, unless the owner is offering the property in an easy to prove “clean” corporation, or the seller has clearly stated that the final price is so low that to pay anything towards closing costs will prevent his children from getting "leche" (milk). 

Closing costs containing the notary fees are based on the real sales price, and now, as declared by the Colegio de Abogados, 1.5%. This fee sometimes is negotiable, depending upon the relationship that CR Beach Investment Real Estate has with that particular attorney.  Further added on is the transfer land tax, legal fees, and miscellaneous fees which are about 2.6% of the declared value of the property. For the purpose of lowering the property transfer land tax, it is a common practice to lower the gross amount paid by declaring a much lower sum than the actual sales price, although be aware that acting in this manner could cause problems in the future. We at CR Beach will help you choose a highly competent, extremely intelligent, honest attorney before buying property in Costa Rica.

How Much Are The Yearly Property Taxes?

Property taxes (Municipal Taxes) are only ¼ of 1% of the declared value. Thus for every $100,000, the property tax is only $250 ANNUALLY. Coincidentally this percentage is about the same to purchase home-owners insurance.

The municipal tax is administered at the municipal level and varies throughout the country. Paid quarterly, the type of property, location and other factors contribute to the calculation of this tax and MUST be  shown to be fully paid immediately prior to transferring title.  Again, this tax is so low, people can afford to buy new shocks for their cars yearly.

What About Capital Gains Taxes?

A nice incentive for foreign investment is that there is no capital gain tax. The Costa Rican government will not tax you on the profit from the future sale of your property as long as this is not undertaken as a means of business. You would be obligated to pay taxes on any "declared" earnings being brought back to your country of citizenship,   You can claim an exemption from U.S. Income tax of up to $85,700 for 2007  (and lesser amounts for earlier years) in earnings from employment or self employment  while residing outside of the U.S. for a full calendar year, or  for any fiscal 12 month period providing you are not in the U.S. for more than 35 days during that fiscal year. Both you and your working spouse can each separately claim this exemption for up to $164,800 in U.S. tax free income for 2006. Please contact a tax advisor with experience for foreign filing!

Who Pays The Sales Commission?

The most common way is that the seller pays the commission to the realtor or broker at closing. The buyer or purchaser does not have to pay any commission when buying property in Costa Rica, unless they specifically agreed to do so. Tips are always gladly accepted, however.

Can I Have The Title Of Property In My Own Name?

The decision to have the property that you are buying in Costa Rica in your own personal name or in the name of a corporation is strictly up to the investor. To put it in the name of a corporation is very common; it can offer benefits of asset protection, anonymity for the actual owner, and makes title transfer easier and cheaper . A valid passport for four representatives (president, vice president, secretary, and treasurer-all can be foreigners) is the only requirement for a foreigner to form a corporation in Costa Rica; the cost ranges from $300-$600 in most cases. More corporation info will be found on this website.

How Can I Ensure That I Have Clear Title To The Property?

It is important that you or your attorney take the necessary steps in order to properly register the property, and more importantly, be assured that the property in question is free of all liens and encumbrances before buying property in Costa Rica.

Of particular interest to North Americans is t he additional security offered by Chicago Title, Stewart Title and First American Title.  These relatively new concepts to Costa Rican real estate transactions can further ensure that your purchase could be more fully secured, although EVERY COSTA RICAN ATTORNEY RELIES ON THE IDENTICAL INFORMATION PROVIDED BY THE NATIONAL REGISTRY.  Thus most of our transactions are handled without a Title Guaranty, particularly in new condo projects, or lots within a gated community, (however we will strongly recommend Title Guarantees in the case of purchasing farms or probate properties).  

READ THE FINE PRINT ON ANY CONTRACT

The Registro Nacional (Property Registry) is located in San Jose - Zapote, where all property documents are recorded, thus a title search at the Registry would confirm good title and proper ownership.

In the event that adjustments were made to any given title, these alterations must be recorded at the Registry. The Public Registry report (informe registral) provides detailed information on the property, including the name of the title holder, boundary lines, tax appraisal, liens, mortgages, recorded easements, and other recorded instruments that would affect title.

Do I Need To Have Residency To Purchase  Property?

No, it is not necessary to have residency to buy property in Costa Rica. You can buy with your tourist status. Living here is another matter, as a foreigner and tourist you have to leave the country for 72 hours once every 3 months in order to renew your legal status in Costa Rica. Some of the foreigners without residency enjoy traveling and visiting Nicaragua or Panama for a couple of days, or go back home for a short trip,  or discover more of Central America in order to renew their visa.

There are many forms of residency available, we can help you to contact an attorney who can assist you in determining what residency status would work for you. If you plan on living here year round, you will find it easier if you have legal residency.

How Can I Get Residency In Costa Rica?   

There are several ways to get a residency here, with different types, such as Pensionado, Rentista or Inversionista. It depends on your individual situation; we recommend consulting a lawyer regarding residency. There are websites that  explain the process, such as:  www.residencyincostarica.com  or   www.arcr.net .

What Are The Regulations  Regarding "Concession"  Beach Front Properties?

When buying property located on or very close to Costa Rica's beaches, you should be aware of the following:

In ALL OF COSTA RICA, the first 50 meters from the mean tide mark CANNOT LEGALLY be built on by anybody, anywhere in the country, as it is considered public beach.

An estimated 95% of Costa Rican beaches falls under a category known as the Maritime Zone Law, which affects the 150 meters adjoining the first 50 meters of land measured from the median tide line. This 150 meters is subject to the Maritime Zone Law (Concession), (unless the property was registered prior to 1973, in which case it has full title and can be transferred as such and called "titled to the 50 meter line").   Concession property operates as a leasehold agreement with the Costa Rican ICT, and local Municipality and  and we strongly urge caution when purchasing this type of property.  Many people say that concession properties have never been confiscated, but we advise to seek other property if given an alternative.

Here Are Some Official Regulations Regarding Concessions:   (Thanks to CCCBR)

            Concessions for maritime zone beach property cannot be granted to:

• Foreigners who have not been residents for five years
• Companies with bearer shares
• Foreign companies based abroad
• A company set up in Costa Rica exclusively for foreigners.
• A company with more than fifty percent foreign capital (ZM Art. 47)

Concessions on maritime zone beach property can be forfeited for the following reasons:

• Failure to apply for an extension of a concession in a timely manner
• The forfeiture of rights by the interested parties
• The death or legal absence of the concession holder with no heir
• Not abiding by the established obligations of Article 51
• Cancellation of the concession (ZM Art. 52)

The ICT can cancel a concession on maritime zone beach property for:

• Non payment of the yearly canon or royalty
• Breach of contract (e.g. use of the land for purposes other than those expressly stated by ICT)
• Violation of the ordinances of the law that grants the concession
• Impediment of the use of the public right of way
• Other causes that this law establishes (ZM Art. 53)

All in all, an investment in shoreline property regulated by the Maritime Zoning Law requires extra caution and thorough investigation. The reality is that ambiguities exist within the written law, so that as regulations are created and amended, rights to property may also change. There are no guarantees and there is no foolproof way around the law. Even if you get a concession, there are no guarantees that the concessions will be renewed or that the price of the concession or the yearly canon will be within reason. The fact remains that you are not purchasing property, you are leasing it and you must be willing to accept that risk.  ONE LAST THING:  MOST OF THE MAJOR HOTEL-CONDO PROJECTS ALL READY BUILT OR CURRENTLY IN CONSTRUCTION ARE ON CONCESSION PROPERTIES!!!

Costa Rican Corporate Structures For Business Interests

Types Of Legal Business Organizations

The Costa Rican Commerce Code has the following forms of corporate organization:

• Anonymous corporation (sociedad anonima), so called because the Registry of Shareholders           is not  easily discovered by the general public; your lawyer can better explain.

• Limited liability company (Sociedad de Responsabilidad Limitada)

• Liability companies (Sociedad en Comandita y Sociedad Limitada).

The Sociedad Anónima is the most common form of Stock Corporation in Costa Rica, given its structural flexibility. The typical rates charged range from $350-$600, costs include official government stamps, taxes and legal fees.  There may be additional costs involved when a change in the board of directors of an off-the-shelf corporation is desired. If the company is to be recorded as a tax contributor, there may be additional expenses. Some law firms have established a cost of approximately $500-$600 for an off the shelf corporation, including viaticals, registration fees, the issuing of stock certificates, changes in the board of directors, and approval of corporate books. In the case of existing corporations, ask your attorney whether the corporation he is selling you has had any commercial activity, and whether he can certify that the company has no debts or non-disclosed liabilities, because when you acquire the shares of an existing company, you are getting its assets as well as any liabilities or obligations.  Foreign nationals may be shareholders and/or serve as board members or officers, but if the company is to be registered as a tax contributor, the foreigner needs to provide a physical address in Costa Rica.

A resident agent must be appointed for purposes of receiving notices, when the legal representative is not found. Under Costa Rican civil, commercial and administrative laws, corporations are separate legal entities, with a distinct personality, that is, their assets are considered separate from the assets of its shareholders or officers. The so-called ¨corporate veil¨ is usually respected, except in cases involving child support (pensiones aimentarias), alimony, and sometimes marital assets, when the spouse shows that he/she was a founding shareholder in the company. Responsibility or liabilities of a company do not reach its shareholders, parent company or other related entities.  The Commerce Code states that the obligations of the shareholders are limited to payment of the capital stock.

There are no restrictions on capitalization. However, whenever capitalization causes an increment in value of the stock of a company, the corporate resolution to increase the social capital must be elevated to a public deed, that is, authorized by a Notary Public, published in the official gazette and submitted to the Public Registry.

Purchase Of Land Through Costa Rican Corporations

Many people prefer to set up a corporation, and register the title to real estate property to that corporation’s name. This is a way of protecting their assets, and it may also facilitate future transfers, as the stock of the company can be transferred tax-free, thus avoiding property transfer taxes and registration stamps. Also, if a title guarantee has been obtained in the name of the corporation, the guarantee will remain in place even if there is a change of stock ownership or in the board of directors. Costa Rican corporations can also be beneficiaries of leaseholds or concessions in the Maritime Zone, and foreigners can own shares in Costa Rican corporations, so the hurdle of having to reside legally in the country for at least 5 years may be overcome when necessary, as long as 50% of the social capital of the Costa Rican corporation is owned by a Costa Rican. This structure where a Costa Rican owns at least 50% of the shares is only necessary when there are hurdles such as the limitations contained in Maritime Zone Law that require that the capital of a company that applies for a concession be owned in this proportion; otherwise, a foreigner has no specific limitation on the percentage of shares he/she can own in a corporation. However, one must keep in mind that in order to form a new corporation, at least two founding shareholders are necessary. Once the company is recorded, the shares may be transferred by endorsement or by an assignment contract. Ownership of recordable assets, such as real estate and cars, has become the main purpose of most of the registered companies (especially S.A.’s) in the country. This is because corporations provide asset protection in many cases.   LATELY THERE HAVE DISCUSSIONS OF USING "TRUSTS", PLEASE CONSULT YOUR LAWYER ABOUT THIS ALTERNATIVE.

We have known people to pay as low as $38 per square foot and as high as $150 a square foot.

Building Versus Buying An Existing Home? What's The Process To Build?

ATTENTION DEVELOPERS:  BUY NOW AND SUBMIT YOUR PLANS PRIOR TO THE COMING MUNICIPAL REGULATION PLAN!!!

There is a licensing body for architects and engineers, Colegio de Ingenieros y Arquitectos, which sets standards for fees should you decide to build. These prices however are not chiseled in concrete! Of course it is much easier to buy property already established, but if you must build, it is strongly advised that you have prior building experience, speak some Spanish, or have a solid recommendation for either the construction company or an architect.   Costa Rica offers a wide  availability of good quality construction materials, reputable contractors and construction companies. Most construction meets or exceeds California's seismic codes, due to the low price of concrete. Hardwoods  and imported tile are cheaper than the U.S. and laborers are plentiful from Nicaragua.  There are many builders we can recommend, with proven track records.

T he following is from www.costaricalaw.com who we endorse as reputable:

All architects and engineers in Costa Rica must be licensed by the Costa Rican Association of Engineers and Architects (olegio Federado de Ingenieros y Ingenieros y Arquitectos-CFIA). This governing body establishes the fee schedule that can be charged by its members. Most fees are based upon a percentage of the value of the construction project. According to the regulations of the CFIA (Reglamento para la Contratación de Servicios de Consultoría en Ingeniería y Arquitectura), the involvement of a licensed architect/engineer in a construction project is separated into two phases. Phase 1 is construction plans and permits and Phase 2 is control and execution.

Before you purchase a lot with the intent of building on it, you should conduct some preliminary studies on the property to ensure that there won't be a problem obtaining a building permit. First, determine if the lot has basic services such as water, electricity, telephone, and drainage. Second, make sure there are no restrictions placed on the lot that could result in the denial of a construction permit. It will not be enough to check the Public Registry. You should also check the Ministry of Public Works (Ministerio de Obras Públicas y Transporte) for future road construction projects; the Ministry of Health (Ministerio de Salud); the National Institute of Housing and Urban Development (Instituto Nacional de Vivienda y Urbanismo) and the municipality where the property is located (municipalidad). And finally, be aware of any environmental regulation that may effect your construction project, such as national wildlife refuges and areas deemed protected by the forestry Law. (see MINAE and SETENA below).

Requests for construction permits are filed with the Permit Reception Office (Oficina Receptora de Permisos de Construcción), which is a centralized office that houses government representatives from MOPT (Ministerio de Obras Públicas y Transportes-roads), INVU (Instituto Nacional de Vivienda y Urbanismo- housing), ICE (Instituto Costarricense de Electricidad-telephone), AYA (Instituto Costarricense de Acueductos y Alcantarillados-water), SNE (Servicio Nacional de Electricidad-electricity), CFIA (Colegio Federado de Ingenieros y Arquitectos), and the Ministry of Health (Ministerio de Salud).

For a single family home that measures more than 70 m2 (735.2 ft.2), the applicant must provide the following documentation: four copies of the construction plans, four copies of the property cadastre plot plan (Plano catastrado), four copies of the permit checklist (hoja de comisión), two copies of your property deed (escritura), one copy of the consulting contract with your architect/engineer (contrato de consultoria), an approval from the water company (AYA) regarding availability of water, and one copy of your electrical design plan approved by SNE. Condominium projects, commercial construction, and urbanization projects all carry additional requirements for obtaining construction permits.

In addition to these requirements, you will need to request a building permit from the municipality in which the property is located. By law it is the municipality that is delegated the responsibility to ensure that all constructions comply with building regulations (Article 1, Construction Law). You can, therefore, expect periodic visits to your construction site by the municipal building inspector, who must certify that the construction is proceeding according to code.

We don't mean to scare you with the above information, but to be w ell informed will eliminate future problems. We are experiencing a building boom currently, so its not impossible to follow procedures and get things done right.

CR Beach will recommend builders and arquitects that we trust.

WHO ARE MINAE and SETENA?

Minae is the Ministry of Energy and the Environment which governs and enforces the environmental laws in effect here in Costa Rica. Minae is entrusted with protecting ecosystems and species and can be called upon to file denuncias or legal charges in cases of environmental damage by Costa Ricans and foreigners alike. Indeed, in Costa Rica, Article 50 of the Constitution gives all HUMANS the right to enjoy a healthy and balanced natural environment and provides that the STATE or government will guarantee and preserve this right for all.  

All permits for cutting trees and general aspects of land use are delimited by MINAE in accordance with these environmental laws. Therefore, if your property contains primary or secondary jungle, rivers, streams or springs, your use is strictly limited and should be investigated with authorities in your area to avoid serious civil and criminal penalties. Moreover, if any of these trees are rivers or springs are situated on steep mountain slopes, the laws governing construction are different.

MINAE works in conjunction with local Municipalites as well as with SETENA, the Technical Environmental Secretary charged with evaluating environmental impact incurred with all development projects. You need a Technical Study or Estudio Technico to move forward with any kind of development or construction activity, and there are private companies that can assist you with these studies, check www.deppat.com.

Many properties are part of a Municipal Zoning Plan or Plan Reguladora. IN this case, your local Municipal government can tell you if a plan exists for your area, OR IS IN THE WORKS, and give you any regulations set forth therein. Any activities carried out on your property must be permitted by the zoning plan. Moreover, if your property is in a coastal zone or Zona Maritima, you must request special permits from the Municipal government as well from the Tourism Institute (ICT) to carry out any kind of construction or tourism activity.  

Ministry of Environment and Energy (MINAE)Information Office Headquarters Telephone: (506) 283- 8094        www.minae.go.cr/       http://www.minae.go.cr/setena/                         SETENA PHONE NUMBERS: 234-3367,234-3368,234-3369  EMAIL: setena@minae.go.cr 

Can I Use IRS 1031 Exchanges or IRAs For Costa Rica Real Estate? 

 Yes, for those U.S. citizens who are sophisticated investors looking for unique real estate investment avenues, we recommend that you consult with your tax professional for the best strategies tailored to your specific needs.