Costa Rica real estate buyers tips, info and legal advice from
CR Beach Investment Real Estate,
the experienced ones in Costa Rica!
UPDATE June, 2019
1.Yes you can buy Costa Rica real estate with the exact same rights as a Costa Rican, (except for the "Zona Maritima or concession zone" properties which we don't like, and will warn you about further down the page).
2.Costa Rica has a very modern, digital online computerized system for registering properties, called the Registro Nacional, and everybody has the right to research all registered propertie-
it's kind of complicated, but google has videos that can explain it really well..
3. Despite a few bad apples here, we do have great attorneys, and trustworthy realtors and who will help you get the best deal possible, while your money is being protected with Escrow services regulated by the Costa Rican Central Bank system (SUJEF). There is an office in Jaco that provides this service, STLA.
REMEMBER, Money does not leave Escrow without your authorization. And my Intent to Purchase Agreements even contain a BUYER'S remorse clause....
4. Almost all properties (homes-land-businesses-vehicles) are put into a corporation for your protection, and later on, it makes selling the property easier in the future.
5. Realtors don't have to be licensed yet, but soon they will be, by either of the two existing Realtor associations, the CCCBR and the CRGAR --we affiliate with them, as well as the National Association of Realtors USA. (Mine is International Realtor ® Certificate of Membership #061212737 National Association of REALTORS®)
6. All the scary stuff of buying property in Costa Rica happens when the Buyer doesn't use a real estate professional nor a recommended attorney. After almost 25 years here, we know which professionals you can trust, as our experience has taught us to be very selective.
7. Ever since the beginning of 2017, the purchase process here has become more difficult in following the Escrow agreement procedures, thanks to the process called Apostille. Now the good news is that it's a lot easier to get an Apostille stamp from your nearest Secretary of State's office than it is to find the nearest Costa Rican consulate. The Apostille stamp certifies that the notary public that stamped your other Escrow requested documents is an officially
More info is contained below, but feel free to call OR email us with any of your questions, email@example.com
toll free 888-782-1119 or 4702-0808. We'll be glad to help!
Do I Really Need To Use A Realtor Or Broker In Costa Rica?
Of course, the answer is yes! Costa Rica is not the 51st U.S. state, but a fiercely proud independent 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 land, should not give you the confidence that you can find "deals" on your own.
When you hear about the "gringo price" and the "locals" price, of course thats true if you are trying to find a property on your own, by driving around a neighborhood. Of course, the "local" in every country on this planet will tell you the highest price they can think of in that moment, just to see your reaction.
This is where the services of a professional real estate broker/agent can be invaluable when you are buying property in Costa Rica, before, during and after the purchase. Every area has its own particular quirks, secrets and customs, and this is why its important to use a local agency like CR Beach Investment Real Estate for the Jaco beach and surrounding Central Pacific areas.
Would you call a San Francisco realtor if you wanted property in Los Angeles? It's the same thing here. So remember, the reality is that the local (sometimes) will actually set his price way above market, hoping that with extreme patience (and si dios quiere), his price will eventually be met.
Most of the time, (99.8%) 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 trying to list their property for a "dream price" 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 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.
Can A Foreigner Buy And Sell Property In Costa Rica?
Ownership of real estate in Costa Rica by foreigners is fully guaranteed by the Costa Rican 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.
Step By Step Through The Purchase Process and how CR Beach protects you more than other real estate companies:
Step By Step Through The Purchase Process and how CR Beach protects you more than other real estate companies: These are the basics that a purchaser follows when buying a property in Costa Rica:
1. Sign a Letter of Intent (aka Intent to Purchase Agreement) which contains the basic facts of the property; the price you are offering; a few details about the Buyers; time elements of the deal, and as many specifics to the deal known at the time. Signatures of Buyers and Sellers must be on the last page, initials on the previous pages, which will then be presented to the Escrow company and your Attorney.
2. If you are in Costa Rica, we suggest you make a small deposit via cash or even credit card, usually $500 to show the Seller you are serious and to take it off the market (usually for 5-10 days after you have returned home.) This $500 is given to your Attorney to initiate the Due Diligence process and later this will be a credit in your Closing Costs. Any questions:call tollfree 888-782-1119.
3. Wire Transfers are part of the process established by the “real” Escrow Company (REGULATED by Costa Rica's Central Bank Approved Financial Authority SUJEF currently www.STLA.net ).
ATTENTION: As of 2015: There are many more requirements as established by SUJEF prior to the Escrow company being permitted to send you the wire instructions. a. There has to be a signed Intent to Purchase Agreement by both Seller and Buyer for them to start. b. They require proof of funds and completion of a form called KYC: Know Your Client, and this paperwork must be completed prior to the Escrow company sending you the wiring instructions. Please remember that wire transfers from the U.S. or Canada typically take 2-3 business days AND please include the extra fees that the banks charge here for receiving them $35-$50 per transfer.
*NO FUNDS WILL EVER BE RELEASED FROM ESCROW WITHOUT YOUR SIGNED AUTHORIZATION!
4. We will introduce you to our area's most respected Attorneys, who will speak and write in English, and they will be happy to converse with you regarding any legal matters you may have, from the purchase of property, to the choice of corporation type, to residency requirements. Best online legal info is: www.costaricalaw.com
5. When you are comfortable with the lawyer, and you have correctly filled out all the documents required to open up the Escrow Account, you will be sent wiring instructions as ONLY THEN can your funds be wired into Costa Rica to the authorized Escrow Account opened by the prestigious Scotiabank.
6. Due Diligence will then be initiated and generally takes from 1 week to 10 days, only rarely does it take 2 weeks or longer. The DD will include complete Title and Corporation research, performed by your Lawyer. In Costa Rica, all notaries must be attorneys, and are registered with the Bar Association, (Colegio de Abogados).
7. CR Beach always protects you by giving you up to 36 hours from receiving the Due Diligence report, to decide to if you wish to continue with your purchase. For any reason, if you decide to not continue with the purchase, you will be charged only the $500 (negotiable!) for the Lawyer's legal fees, and be required to provide a banking address for your refund if other funds were submitted. You must send an email stating your intentions!
8. Closing will then occur after you have seen the Closing costs detailed by the Escrow company; proof of the receipt of the final transfer of funds; then the actual Closing where the complete explanation of all documents are explained to you in English or Spanish; the execution of transfer deed, and if the corporation is being transferred to the Buyers there is the endorsement of shares, and the change of officers form.
In the not too common sale where the Seller is financing a portion, there will be a mortgage deed and the complete list of the future required payments.
These days either the Sellers or the Buyers do have the option to not be present in Costa Rica for the closing, but they will have to have appointed a Power of Attorney to someone who will sign on their behalf. These documents authorizing the POA are signed first in front of a Notary Public in the country where the Buyer/Seller resides, then scanned back immediately and later sent by Fedex/UPS to Costa Rica.
9. Your lawyer will submit all paperwork to the Public Registry (Registro Nacional) and then in about 9-12 weeks, you will receive official title.
CR Beach will ensure that you are protected, every step of the way!
How Much Are The Closing Costs?
The old custom was for the Buyer and Seller to share equally in the closing costs, because in many cases, to reduce legal fees, the buyer and seller used the same attorney.
For the years up to 2013, if the Seller was providing a clean, easily transferable corporation, the Buyer was responsible for paying the closing costs, because the Seller had provided his "value" or financial contribution to the transaction, this was always less than 2%. Not any more! This all changed starting in 2013:
The 2012 Costa Rica Property Transfer Tax Law provides that all new real estate transfers will be subject to a 1.5% transfer tax. In addition, when the property is transferred and recorded in the National Registry, additional fees for registration and “stamps” will be added to the closing costs as well, .08%. This means that if you want 100% complete "peace of mind" you can pay $550-$900 for a new corporation, plus the extra .08% of the selling price to the National Registry and place the property in a brand new corporation.
This is the #1 method to protect yourself from any legal liabilities that might be the responsibility of the prior corporation, and i agree!..
Thus, the total cost of a real estate closing transaction will be somewhere around 2.3% of the selling price for the Buyers and about 2% for the Sellers (plus Sellers pay the real estate commission + the 13% tax on that commission-negotiable?), with the Buyer paying extra fees for the cost and registration of the new corporation, and wire transfer fees and escrow.
This can all be negotiated however, as when certain times the Seller stands firm with his selling price, and says, "I will agree to this price but you pay all closing costs, I will pay only the realtor's commission." Some realtors are making the Purchase price offer to include the Buyers paying all the closing fees, and there are some smart negotiating tactics reasons for this.
Also important to note is that if the Seller is financing any portion of the sale, or the Buyer has miraculously secured bank financing (extremely difficult especially for foreign buyers), then the Buyer IS responsible for paying ALL closing costs.
Thus for the Buyers to get the best possible price, we recommend making an
all cash offer, as this can save you from 10-25% off the purchase price!
How Is Title Transferred? What Legal Documents will the Buyer receive?
When buying property in Costa Rica, property is transferred from seller to buyer by executing a transfer deed ( escritura ) before a lawyer-notary, except when merely transferring shares of a corporation, which has become the norm HOWEVER, this all changed in January 2013.
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 must be an attorney! They have extensive power to act on behalf of the state as they draft and interpret legal documents, and 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 25 to 60 days after presentation. Your completed transaction package will be provided to you by your attorney and will contain:
A) Due diligence
B) Transfer deed
c) Corporate books and by-laws
d) Certificate of incorporation
e) Escrow disbursements
f) New title certificate.
Please note, that as required by Costa Rican law, all documents (except the Due Diligence report), will be in Spanish. However you can pay extra and your lawyer can get those documents translated into English (or French, German, Mandarin, or Portugues!)
How Much Are The Yearly Property Taxes?
Property taxes (Municipal Taxes) are supposed to be only ¼ of 1% of the declared value. Thus for every $100,000, the property tax is supposed to be
only $250 ANNUALLY. But it's usually less-except for those in luxury tax zones.
Unfortunately the Costa Rican government is not receiving what they should for property taxes, usually because of pre-registered values and the neighbors pressure to "not rock the boat." Coincidentally this percentage is about the same to purchase home-owners insurance, and yet many choose NOT to have it.
Be aware that a new luxury tax was approved, and levied at about the same one fourth of one percent, yet, this doesn’t seem to be very well enforced. Please see our News Jaco Costa Rica page regarding the luxury tax. This year the law says that its only for the construction of a home worth more than $234,000 after depreciation. If the home has that value, then the land is added to the amount and the tax is figured from there. IN some cases, this would mean an annual property tax of $2000 of homes worth over $800,000. This tax is administered at the municipal level and can be 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.
What About Capital Gains Taxes?
A nice incentive for foreign investment is that there is no personal 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 $102,700 for 2017 (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. PLEASE NOTE: YOU MUST HAVE PRE-REGISTERED WITH THE IRS TO RECEIVE THIS DEDUCTION/EXEMPTION! 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/broker at closing and typically 5-7%. The buyer or purchaser does not have to pay any commission when buying property in Costa Rica, UNLESS you have chosen this method with your Broker, and he acts 100% as a “Buyers Agent” and provides you with a Buyers'-Broker's Agreement. There are advantages to this strategy (with an honest broker) as many times the Seller wants to know exactly how much will go into his pocket, or the Seller thinks because he will never be in Costa Rica again, he will skip out on paying.
BE AWARE, the Seller that skips out may find that the actual sale can be blocked at the Registro Nacional, and thus will lose (or have blocked) 100% of the expected funds, versus only the 3-7% he had previously agreed to pay out. The Seller is responsible also for a 13% tax on the commission that was paid, (since 2013) and this is in lieu of a "capital gains tax" the CR government has been trying for years to impose. Just remember, overall, taxes in Costa Rica are a lot cheaper than the U.S.
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 $500-$900 in most cases. More corporation info will be found on this website.
DO I NEED TITLE INSURANCE? SHORT ANSWER: no
Costa Rica used to have “title insurance providers” (Stewart Title, Chicago Title companies and some others) but these companies were ruled to be unnecessary and illegal about 2011. The success of Costa Rica’s new Registro Nacional with its’ improved and fully digital changeover starting in 1997, meant that all attorneys, could use this modern Costa Rican Registro Nacional system faster and more accurately to confirm that a property had clean title with proper ownership. The main Registro Nacional is located in Zapote, San Jose with many branches throughout Costa Rica. In the event that adjustments are needed for any given title, these alterations must be recorded at any Registro Nacional. The Public Registry report (Informe Registral) that most anybody can now access, 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. Of course for accurate Due Diligence, the corporations that almost always own the property are thoroughly investigated in a different government entity.
Please note: Stewart Title used to offer title insurance in Costa Rica, and stopped around 2011.
We highly applaud and recommend their evolvement into a legitimate excellent Escrow services provider STLA, Secure Title Latin America https://stla.net/offices/secure-title-latin-america-costa-rica-office/.
This is who most intelligent lawyers/realtors are using to protect their Buyers' funds because it's not easy to get an Escrow account to be approved, (proving the funds are from provable legal sources), and NO BUYERS' FUNDS can be released without the Buyers' signed approval of the closing statement. They have been great!
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.
For all residency requirements and updates we highly recommend: such as: www.arcr.net or www.residencyincostarica.com and there are others too.
The easiest? way is to fall in love and marry a Costa Rican. They recently have changed the divorce laws, so now, its no longer 3 years before one can file for the divorce. The government has cracked down a little on obvious "fake" marriages, so if you are serious, we suggest meeting your "soul mate" thru the few reputable and legit Costa Rican "introductory services" .
SUPER IMPORTANT: RESIDENCY NOW REQUIRES YOU JOIN THE "CAJA"
When you apply for CR residency you are required to join CAJA and pay into the government health care system. The fee is determined by your monthly income minus expenses, your age, and how they feel at the time? It is a reasonable price for an medical emergency, but I would not count on it as your primary medical system.
I pay to see private doctors who are fairly inexpensive, as compared to cost in California, U.S., and get good care for our needs. If you have preexisting conditions, fortunately that doesn't even matter to CAJA, just need to pay into the system every month and then wait and wait and wait.
My recommendation is what i did, join Blue Cross-Blue Shield, that they sell here, and my agent
is Freddy Obando. https://www.seguros506.com/english-version.html I also recommend Freddy
for home and auto insurance, thru Mapfre, which saves me 25% annually.....
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 (for linear feet x 3.28=164 feet) 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, (Zona Maritima). So to the first 50 meters or 164 feet add 150 meters or 492 feet. This 150 meters is subject to the Maritime Zone Law and the ICT administers the granting of Concessions. There are some disputed properties whose owners claim that since 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 the local Municipality and and we strongly urge caution when purchasing this type of property. We at CR Beach will sell you "concession land" ONLY after you show us a letter or email from your attorney stating that you have been advised about all the possible risks.
If there is an alternate property to the concession land you are considering purchasing, we advise you to purchase that fully titled property.
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 (new battles!)
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
for "real legal free internet up to date advise" we highly recommend
www.costaricalaw.com and since he is in San Jose, i don't use him.
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. This is the most widely used for placing homes and cars in the corporate name to protect the Owner from potential lawsuits. As of 2017, they are further divided into 2 different classes that pay different fees, one for Active Corporations (most active retail businesses as well as "well publicized" rental income properties. Then there is the popular one everyone hopes they have, and thats "InActive corporations."
Your lawyer will explain all the new laws that took place in 2017.
• 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 legal fees/rates charged range from $500-$800, AND these 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-$800 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.
This is why these days we advise real estate property purchasers to invest in a new corporation-it's not that much and you will sleep better at night.
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. Trusts are not used as often due to their expense, but are still available when the Seller is offering "owner financing." It will protect both parties and is the easiest way to resolve problems
without having to go to Court-and nobody wants to go to Court in Costa Rica!
What Does It Cost To Build In Costa Rica?
We have known people to pay as low as $58 per square foot and as high as $150 a square foot. I say, on average $100 sq.ft, but if you speak spanish, then knock off
10% and if you have building experience then knock off other 5%. (or vice-versa)
Building Versus Buying An Existing Home? Depends on the market. Now it's cheaper to buy
built, in a majority of cases.
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.
The 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.
Preliminary studies (estudios preliminaries): 0.5 percent. These studies may or may not be required, depending on the scope of the project.
Preproject design (anteproyecto): 1.0 to 1.5 percent. Generally, during this stage, the architect/engineer will meet with the client in order to discuss the client's construction requirements. With this information, the architect/engineer will prepare drafts of the proposed construction project for review by the client. These drafts should include site planning and preliminary work drawings. When you contract for this service be sure you agree with your architect/engineer before hand on what he or she is going to provide for you.
Construction plans and technical specifications (planos de construcción y especificaciones técnicas): 4.0 percent. This is one of the most important steps in the overall construction project since execution of the project will depend upon the quality and accuracy of your construction plans. Once you and your architect/engineer have agreed on the layout and design of the project, she or he will begin drafting the plans. In Costa Rica, a complete set of plans should include a site plan, distribution plan, elevation and transversal and longitude perspectives, roof design and drainage, design of footings and support beams, structural plans, electrical design, mechanical and sanitary system design, as well as a plan that details all of the interior finishings of the construction.
Budgeting (presupuesto): 0.5 percent for global budgeting; 1.0 percent for itemized budgeting. Here the architect/engineer prepares a materials list based upon your construction plans and prepares a construction budget for you.
Construction Permits--Another View of the Construction Process:
Phase 1. Construction plans and permits. This phase is further subdivided into several distinct professional services that can be provided to the client by the architect/engineer. The percentages cited below are those that the CFIA has established as minimum chargeable fees.
Supervision (Dirección técnica): 5 percent. This requires more direct involvement by the architect/engineer in the day-to-day operation of the project.
Administration (Administración): 12 percent. Here, the architect/engineer takes complete responsibility for the execution and completion of the project.
The option you choose will depend upon the type of project involved, the reliability of your builder/general contractor, and the amount of time you are willing to dedicate to the construction project. All told, phases 1 and 2 can range from 9 percent to 18 percent of the estimated value of the construction project, depending on the amount of services required.
As such, it is common practice to negotiate fees with the Architect AND engineer.
Most, of course, will be eager for your business and, depending on the scope of the project will be willing to work out an agreement tailored to your particular needs. Otherwise, have your Attorney do the negotiating for you to ensure that you will get the best agreement possible.
Before you sign any contract, be sure that you understand the fee structure and know exactly what is and is not included in the fee and clearly define the responsibilities that your architect/engineer are going to assume. Do the same thing with your general contractor and any subcontractors. ALL FEES ARE NEGOTIABLE!!!
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. Due diligence studies include:
1. Determine if the lot has basic services such as water, electricity, telephone, and drainage.
2. Determine 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).
3. Investigate if there are 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 well informed will eliminate future problems. We are experiencing a building boom currently, so it is possible to follow procedures and get things done right.
Phase 2. Control and execution. This stage involves the actual construction and project supervision. The regulations authorize three kinds of supervisory tasks, each of which requires a larger time investment from the architect/engineer. Inspection (Inspección): 3 percent of total construction value. Here your architect/engineer will visit the construction site at least once a week and will inspect it to ensure that the plan specifications are being followed by the general contractor. They will also verify the quality of the materials being used and review invoices being presented by the general contractor.
We don't mean to scare you with the above information, but to be well informed will eliminate future problems. CR Beach will go the extra step to ensure you have the greatest chance
for success in Costa Rica.
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: firstname.lastname@example.org FOR MORE INFORMATION VISIT: http://www.tramites.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.
NEW LAWS PASSED JULY 30, 2009 Regarding Client providing information to Banks, Escrow and Insurance Companies: still in effect today!
This is in observance of Law No. 8204 “Estupefacientes, Sustancias Psicotrópicas, Drogas de Uso No Autorizado, Actividades Conexas, Legimitación de Capitales y Financiamiento al Terrorismo” (the anti money-laundering law), which requires that financial institutions complete a dossier on clients whose financial movements exceed $10,000.
In July 2008, when laws were changed to allow insurance companies other than INS to operate in Costa Rica, Law No. 8204 was also changed to encompass insurance companies, based on the fact that they are indeed financial institutions.
INS – which is still the only insurance company operating in this country - has integrated a Compliance Office, with a full-time staff to make sure of full compliance, because the consequences are expensive if a financial institution is found to be in non-compliance!
INS is now getting serious. Their first objective is to improve, update and complete a data base of its clients, known as Base Unificada de Clientes, or “BUC”. To do this, it has ruled that as of July 1st, 2009, applications for new insurance or applications to modify existing policies must attach a form “Información del Cliente”, without which INS simply will not process applications. Excepted are the simpler one-shot policies, such as Flight insurance, Students’ insurance, Traveller’s Accident insurance, etc.
The form is detailed, and requires from the client the usual identity and contact information. If the client is a corporation, the information is required of the corporation itself and also of the person representing the corporation (“apoderado”), whose power-of-attorney (“personería”) must be attached.
The form must be signed by the client or the legal representative, if a corporation. Must attach:
- Copies of the client’s and signer’s ID’s.
- Proof of address (light, phone, or water bill)
- Proof of income and sources of income.
- “Personería” of the signer (for corporations.)
Once a client has complied by filling out the “Información del Cliente” form and providing the additional info, there will be no more disclosure requirements from that client for two years – after which the information in the BUC is considered obsolete, and the form, etc. has to be done again. Otherwise, it is said, INS will not renew that client’s insurance policies.
These requirements are fairly stringent, and we assume that, initially, they will have to be fully complied with: “A new broom sweeps clean” and although everyone is used to bureaucracy, disclosure is indeed a new ballgame for INS.
Client Info Forms and Client Info EXAMPLE Forms can be provided.
1- The forms must be sent in with ORIGINAL signatures. No Faxes. No Scanning. No Fotos. Only Snail Mail or similar service.
2- If you need help translating your data from English to Spanish, we're glad to help. Just send a copy of the Client Info Forms BLANK with original signature, and another with your data in English, as explained in the example forms.
UPDATED Sept, 2015 U.S. CITIZENS: PLEASE BE RESPONSIBLE AND TALK TO YOUR ACCOUNTANT OR TAX ATTORNEY REGARDING THE PURCHASE OF PROPERTY HERE IN COSTA RICA. ESPECIALLY REGARDING THE NEW FATCA AND FBAR REQUIREMENTS! IF YOU ARE GOING TO BE LIVING HERE FULL TIME, AND ATTEMPT TO MAKE MONEY, UNDER PRE-REGISTRATION IRS RULES, YOU COULD RECEIVE A U.S. TAX EXEMPTION FOR EARNED INCOME OF $102,000 (changes annually) .