Costa Rica Primary: Everything You Need to Know About Property Laws
You may have noticed that a lot of our recent articles and eBooks laud Costa Rica as a great place to invest or buy a home. Our biggest reasons for that include the country’s incredible natural surroundings, unsurpassed beauty, and unmatched quality of life.
However, there’s another, more practical reason we recommend it as a place you should consider for buying or investing in property.
Costa Rica has the most favorable property ownership laws in all of Central America. It also ranks 6th (behind the likes of Chile, Uruguay, and Brazil) out of Central and South America combined.
Buying and owning property overseas, as a foreigner, can certainly present its own set of challenges. However, in Costa Rica those hurdles are pleasantly lower. Here’s the lowdown on what you need to know before you buy Costa Rica real estate.
All Costa Rica Real Estate Falls into One of Six Categories
To help narrow your focus when considering Costa Rica real estate, it’s important to know that every piece of property falls into one of these six categories, some much more common than others. Understanding the pros and cons of each type can help simplify your decision-making process when the time comes.
1. Fee Simple Property
This type of property ownership is the one that North Americans are most familiar with, as it mimics what happens when you buy a piece of property in the U.S. With fee simple ownership, the buyer owns the property and has every right to use, sell, lease, improve, and enjoy the property, subject only to Costa Rican law.
Buyers who purchase fee simple property have the most rights, according to the law, to enjoy their property and use it however they see fit. And foreigners have exactly the same rights as Costa Rican nationals.
2. Concession Property
These classifications, set forth by the Maritime Zone Law, apply specifically to beachfront property in Costa Rica or, more specifically, the first 200 meters measured horizontally from the high tide line. Foreigners cannot purchase concession property as easily as fee simple.
In fact, they’re only permitted to hold a 49% share in a corporation with a native Costa Rican. That is, unless they’ve lived in Costa Rica for five years, in which case they are permitted to be a majority owner. Here’s how that 200 meters breaks down.
- Public Area – The first 50 meters is considered a public area and, consequently, cannot be owned by anyone, including locals. Development is permitted only by approval. However, anything that’s built can be accessed by any individual who wishes to use it for enjoyment.
- Restricted/Concession Area – The next 150 meters, after the public area, is available for concession (which essentially works like a lease). Both foreigners and locals can purchase Maritime Zone property through a concession, which allows them to use it for a specified length of time (usually 20 years). They can build or alter the property, but only after obtaining a permit.
3. Property in Condominium
No, this doesn’t mean a townhome-like residence or a single unit in a high-rise development. It just means a property has been developed according to “Condominium Law.”
These laws allow developers to regulate certain aspects of the development, according to a set of by-laws that spells out all the restrictions and limitations. It’s technically the same as fee simple ownership. However, the by-laws may restrict certain aspects in order to preserve the intended look and feel of the development.
4. Untitled Property
Properties in Costa Rica are required to be registered in the Folio Real at the offices of the Public Registry in San Jose. This registry contains information on the ownership, boundary lines, liens, etc.
That being said, there are some properties in Costa Rica that have never been registered. They may have been passed down through family generations, claimed by squatters, or maybe even never occupied by anyone. This type of property is not recommended for purchase due to the difficulty in proving where the boundaries are or that the “owner” even has a right to sell it.
5. Time Share
While not common in Costa Rica, time share properties do exist. Similar to condominium properties, these offer owners the option to use a particular property for a specified amount of the year.
6. Frontier and Border Land
This category represents the only land in Costa Rica that can’t be owned, either by foreigners or locals. It’s essentially any land within two kilometers of any national frontiers or borders shared with other countries.
There Are Two Types of Purchasing Methodologies
You can purchase and own Costa Rica real estate in one of two ways. Here’s an explanation of each method.
Direct Transfer
This method is exactly what it sounds like. The buyer buys a property and takes ownership, registering it in their own personal name.
Corporations
Buying a property through a corporation is a common practice in Costa Rica. It’s a relatively simple process, with the help of a knowledgeable attorney, and allows the buyer to remain anonymous by registering the property in the name of the corporation.
Another variation of this method is for a buyer to acquire a property by buying shares in an existing corporation that already owns a property, in which case transfer taxes can be avoided since there’s technically no change in ownership of the property if the same corporation still owns it.
There are definite benefits to this method. However, there are also some risks. Namely that a buyer cannot be completely sure that the corporation they’re buying into has no other liabilities that might undermine its solvency.
Now You’re Armed With All the Knowledge You Need
So, that’s it. That’s the basics. Consider yourself ready to navigate the laws governing Costa Rica real estate. All that’s left to do is find the property of your dreams!
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