Costa Rica Legal System
Costa Rica’s legal system is based on the Roman-Continental Law. Practical Implications: Written law, very strict and specific formalities for contracts, agreements etc., procedures and regulations are more detailed. There are many rules and regulations for certain transactions that are compulsory. Conflicts among parties must always be settled or solved through Court and in some cases in Arbitration Centers.
Foreigners & Costa Rica Real Estate
In regards to rights of ownership, Costa Rica makes no differentiation between citizens and foreigners.
Foreigners must have a valid passport or proof of residency card. Costa Ricans must provide ID. Corporations must be duly registered in Costa Rica and the legal representative must provide the corporate card and a certificate of incorporation in good standing. A Municipal Certificate from the local Municipality must reflect that taxes are paid and that the seller has no debts within that municipality. A Cadastral Survey, duly recorded in the National Register, is necessary for each Costa Rica real estate property transaction. Real Estate Property Registry Report showing that the property is free of liens, mortgages, annotations and encumbrances. A power of attorney may be used if one of the parties will not be present at the time of signing the sales documents.
Legal Documents and Transactions
- Agree on a deal.
- Buyer must, through the Attorney/Notary Public, make the legal search for clear and clean title, absence of encumbrances, unwanted easements, judicial annotations and garnishments, foreclosures, etc.
- Confirm that the property complies with the recorded survey map (i.e. boundaries, dimensions, location).
- If need be, sign a Preliminary Agreement (Purchase Option, Promise to Buy-Sell, First Refusal, and others.)
- Attorney/Notary Public must make the purchase agreement in the Protocol Book, signed by the parties, and an Escritura will be filed with the Public Registry.
- Legal Fees and Transfer Taxes must be paid upon signing to the Attorney/Notary Public in order to present the document to the Registry. (Transfer Taxes: 2.3% of the value of the purchase. Legal Fees: Fixed rate that varies according to the value of the transaction.)
- Purchase undergoes internal procedure in the Registry and the transfer is recorded.
- Registry emits a Certification of Ownership guaranteeing the Title.
Types of Property
According to Costa Rica law all properties must be registered with the National Registry.
Non Registered Property
As all properties must be registered, it is highly suggested not to purchase an unregistered property as the possession rights could be contested. Consult with an attorney if considering an Non Registered Property.
Some land may be owned by Costa Rican Government, National Parks and other state institutions. The properties will remain public and are governed by special regulations.
Maritime Terrestial Zone aka Zona Maritimo Terrestre (ZMT)
In Costa Rica, one of the most important factors in buying beachfront property is to ensure the property’s status in the national registry. The majority of beachfront property falls into a category commonly referred to as concession property because it is located within the maritime zone (Zona Maritima Terrestre). The ZMT includes all coastal areas of 200 meters from the mean high tide line. Special laws apply to the use of this area.
Public Area: Extends up to 50 meters from the mean high tide line. This area is strictly public and cannot be owned. Only ports and marina can be built here.
Restricted Area aka Concession Area: Extends from the public area to 150 extra meters. This area also cannot be owned but the Government can allow this area to be built upon for use and enjoyment for a specific term. The term is usually lasts 20 years and can be renewed. If is it not renewed the land and everything on it reverts back to the Government. To apply for a concession an application must be submitted to the Costa Rica government. This type of land has limitations for foreign investors, the concessionaire must include a Costa Rican or Costa Rican company or it can be granted to a foreigner who has permanent legal resident status for 5 years or more.
Similar to condos in the US, condos in Costa Rica usually have regulations governing maintenance, security, moral code etc. The cost of amenities is typically added to the purchase price.
Like time shares in other countries, this type of purchase does not come with an ownership right but is a right of use of the property for a specific time frame.
While Costa Rican law does recognize rights of possession proving possession of a property that was not purchased legally is very difficult. The process to claim possession is challenging and is strictly regulated. To claim possession the person must be living on the land for at least one year on productive land and three years for any other type of land. The person claiming possession must be able to prove they are acting in “good faith” and displaying “acts of ownership”. These conditions make it very difficult for a person to claim possession if the property has been acquired legally by the purchaser. Costa Rica law gives you the right to evict squatters if you initiate eviction within three months of their appearance on your property. If eviction is not initiated in that timeframe there are other legal procedures that can be done to maintain your ownership rights.
Power of Attorney
If a person owns property in Costa Rica but is not residing in Costa Rica it is recommended to grant a person of trust Power of Attorney.
Full Power of Attorney: Allows the agent assigned to accept mortgages, signing checks, buying and selling of goods and can appear before authority on behalf of the owner and act in their name.
General Power of Attorney: Administrative or business use allows the power of attorney to manage a business on your behalf including signing invoices, hiring etc.
Special Power of Attorney: Allows the power of attorney to perform only specific acts each described in the agreement.
NOTE: Buyers unfamiliar with Costa Rican Real Estate law should seek legal advice from a reputable Costa Rican law firm.