How to Buy Real Estate in Costa Rica: A guide to the Process

It is always important to have a trustworthy lawyer and real estate agent working with you when buying real estate in Costa Rica, but it is also wise to familiarize yourself with the process of purchasing property in Costa Rica so that you can understand what is going on and better manage the transaction to ensure your real estate investment is secure.

It is important to address the significance of property rights, to understand why it is so crucial that the transfer process be completed properly. Real estate generates wealth in an economy because it can be owned, bought or sold, and that ownership can be enforced, guaranteeing security of purchase. Costa Rica has the stability, and legal structure to be able to guarantee that ownership, although disputes can arise on occasion due to poor documentation, or undocumented changes in the past. For this reason it is imperative that the registration process be followed to the letter to ensure that the legal system will stand behind you in case of a dispute.

There is still some property which is not yet titled in Costa Rica, though it may be tempting if you’re offered a good deal, it is extremely risky to purchase un-titled real estate. The problem arises because all property must be legally registered and if it is not, it does not exist under the law, and therefore the legal system will not grant ownership.

Registration of the property is the number one most important thing in Costa Rica, more important than the actual deed to the property. All property is registered at the Registro Publico, so you will begin your title search there, and obtain the escritura, a written title document that details the property and how it is registered in the Registro Pubilco. The escritura defines the property, including whether it is commercial or residential, the location, land size, etc.  It also states the current owner.  But most importantly it outlines all liens, mortgages, or other encumbrances against the property. If issues arise during this initial background check they must be addressed before proceeding further. These are the sorts of things which could cause disputes regarding the ownership of the property at a later time.

Next you will need to find the catastro, the plan, or graphic drawings of the land. The catastro is filed separately from the escritura and note that while it is legally required that the escritura be updated when there is any change, it is not required to update the cadastro. Because of this the catastro and escritura may not be 100% in agreement due to transactions which took place but were not properly recorded. One of the most important things to watch for when buying real estate in Costa Rica, is consistency between the escritura and catastro, the 2 documents which officially define the property. It is important to verify both of these documents by doing a topographical study of the property and defining the property boundaries clearly. Any inconsistencies between these two documents must be resolved before proceeding with the purchase of a property.

Once you have verified the title, and checked for any problems, the seller will provide the buyer with two tax documents. The first is a copy of the tax receipt, or impuesto territorial, showing that all taxes and registration fees have been up to date, and the second is a tax clearance certificate issued by the Municipality where the property is located called a constancia municipal.

Now you are ready to have a notary draw up the sale agreement as a testimonio, or public deed. In Costa Rica all notaries are lawyers. The notary should work for both the buyer and seller and should not be biased. If you are financing your purchase with a bank or other lending institution, the institution may reserve the right to designate the notary as a condition of the financing agreement. The notary responsible for the closing will draft the purchase contract, and be present at the closing.

On the day of the closing you are required to present proof of payment to cover several taxes and duties involved in the purchase transaction. Here are the most common:

• Transfer Tax: 1.5% of property price • National Property Register Stamp: 0.5% of the property value• Municipal Stamp: 0.2% of property value• Fiscal Stamp Tax: CRC 625• Agrarian Stamp: 0.1% of property value• Costa Rican Bar Association: 3000 CRC for deeds over 10 million CRC• National Archive: CRC 20

The taxes and duties are calculated based on the highest stated purchase price and the property value appearing on the Registry. The notary will certify an affidavit that the payment was made and it will be included in the documentation.

The purchase contract will then be incorporated into the notary's register, under a specific deed number. Once it is signed, it the notary is responsibility for registering the purchase as soon as possible.

When the papers have been filed, the affidavit of the transfer deed will be reviewed by the Registry and if all is well, it is recorded and the buyer is declared the formal owner. Should there be any problems, the document will be returned to the notary for correction and re-filing.

Once your deed is registered, you can request an original copy of the deed, or testimonio, or a copy of the closing document with the seals showing the registration for your own verification and records. In addition, your property will have a folio real number showing you as the owner, which can be verified at the Registry.