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Costa Rica is this year’s best destination to retire according to International Living, the country’s many advantages continue to charm foreigners who choose to retire or relocate abroad.
The great weather, the political and economic stability, its beautiful beaches and natural attractions as well as the friendliness of its people are just some of the reasons that make the country an attractive place to live in; the good news is, that even though Costa Rica is not a cheap country, real estate is considerably cheaper than in North America and Europe, when it comes to property in Costa Rica, you will get bang for your buck.
There are, however, some things that need to be considered when buying real estate in Costa Rica, naturally, many questions arise, the first thing you should know is that foreigners and nationals have the same rights in terms of acquiring and owning real estate property with just a couple of restrictions.
Location: Of course the location of your property is the first thing you need to decide on, several factors will influence your decision: the type of property you want, the price range, the weather (Costa Rica has many microclimates). The gold coast of Guanacaste is the preferred location of those looking to retire at the beach or own a vacation home, while for those who want to relocate to Costa Rica with their family city locations such as Santa Ana and Escazu are popular because of their many conveniences and large expat communities. Make sure to run your own research regarding the main problems the area where you plan to buy has, the availability of main services, security, etc.
Types of Property: Individual residence, condominium, gated communities, lots, beachfront property, commercial property, etc. Many foreigners come to Costa Rica looking to buy beachfront property, in this case you will likely hear the terms Maritime Zone and Concession Property, this is what you need to know :
- Maritime land zones:
these properties on locations facing maritime coasts, and it includes islands, mangroves, estuaries, and natural rock formations that overcome the level of the ocean the maritime land zone is the first 200 meters from the ordinary high tide and heading inland; this area is owned by the government, and has a public and a restricted area. The land located in public areas, which comprises the first 50-meter-wide belt between the ordinary high tide and the areas exposed during low tide are NOT available for ownership of any kind.
The other 150 meters of maritime land zones may be subject to concession rights for a limited, although extendable, period of time. The municipalities are the entities in charge of granting concessions, which are subject to royalty payment to the municipality and the Costa Rica Tourism Board.
This is where one of the restrictions mentioned before come into place regarding foreigners investing in real estate property. A concession cannot be granted to a foreigner that has not resided in the country for a period of at least five years. Deloitte Company explains it in detail in its Investor’s Guide 2017: “…only physical individuals and companies that are qualified to hold concession rights may participate in tourism developments on the maritime-land zone or in locations with access thereto. Similarly, foreign entities may participate therein provided they are tourism companies whose capital investment toward the development is owned by Costa Ricans in a proportion of over 50%”.
In other words, foreigners with more than 5-years residing in the country can own only up to 49% of a concession.
Concession land is very valuable, and therefore it usually pays higher taxes and are subject to a series of restrictions which makes this land difficult to develop and heavily regulated.
- Titled Property:
This is the most common form of real estate investing in Costa Rica, all information for the property should be available and provided by the seller and verified at the public registry and corresponding municipality.
- Untitled Property:
This means a property is not recorded in the Public Registry; although this is not very common, it is possible and you want to avoid buying untitled property if you don’t want future problems regarding ownership, delimitations of the property, etc.
- Properties in condominium and gated communities:
When buying property in a gated community, we may be talking about individual residences or townhouses, apartments in vertical buildings, or condos; this has become a very popular option in Costa Rica particularly because it offers advantages such as private security, common areas (pool, green areas, etc.) and the sense of community that is very important for many. Ownership of property of this sort is of fee simple ownership, but it is important to consider that they usually are managed under a “Condominium Law”, a set of by-laws that contain all the restrictions, limitations and privileges that can be enjoyed by owners of this property; this means there can be architectural guidelines and land use restrictions as well as rules that all owners should abide by, for instance, some don’t allow pets, there may be a restriction regarding social activities, etc. If you are buying a property in a gated community as an investment with the idea or renting it out or placing it in platforms such as AirBnB, make sure to check the restrictions the project lists in their bylaws, since many do not allow the use of property as “vacation rentals” or AirBnB type of rental.
Purpose of the Property: As we just mentioned in the paragraph above, you must be very clear on what the purpose of the property is before you purchase it; if you are relocating to the country permanently then there is usually no problems, but if you interest in buying real estate in Costa Rica is to make an investment then you need to be more careful and take into account other aspects; for instance, if you want to buy property to use it as a vacation rental make sure the property can be used for this purpose, in the case of condos and gated communities in the city some have restrictions in this sense, consider maintenance and if you are not going to be in the country to oversee things, then a property management service is a good option; if you buy land for development do not leave it unattended, squatters may take advantage of this.
Terminology: Some of the terms you will hear when you are going through a real estate purchase property in Costa Rica are:
Registro de la Propiedad: Public Property Registry, basically the government institution where all records are kept for properties.
Plano Catastro: Survey Plan. The survey plan for a property is recorded at the Public Registry. The official drawing of the property is validated through an approval process by the Public Registry of Properties as well as by the municipality in which the property is located.
Folio real: This is a unique number, sort of an identification number for each property. The first part of the number indicates the province the property is located int, the second group of numbers is the ID itself and the last digits indicated the number of co-owners the property has.
Escritura de Traspaso: The legal document that contains all the details regarding the conditions and transfer of the property; this document is done by an attorney/public notary and has to be recorded at the Public Registry which needs to verify the information on the document is correct and then proceeds to register the property with the new owner’s information.
Real Estate Purchase Fees: The costs associated with buying property in Costa Rica will depend on how you buy the property (directly in your personal name or through a corporation); it also fluctuates depending on the attorney you work with since some will be flexible and charge you a fixed fee while others will go with the percentage established by the Colegio de Abogados de Costa Rica (Bar Association) which is established depending on the value of the property (between 1%-2%). Public Registry stamp can mean an additional 1% and the transfer tax runs 1.5%.
Taxes: Don’t just take an impulsive decision when you are buying property in Costa Rica, the best thing to do is consult with a real estate attorney or tax expert regarding the exact amount your will have to pay on property taxes annually, generally, taxes on properties in Costa Rica are a lot more reasonable than what you’d pay in North America. Property taxes are calculated as a 0.25% of the value the property has in the public registry. Taxes are collected by the corresponding Municipality so a visit to the Municipality will also clarify this information for you. Also consider that houses with a total value of ¢129 million colones (approximately $229,600.00 USD) (value in 2018) or higher, are subject to paying the “Impuesto Solidario” or Solidarity Tax also known as luxury home tax. The amount to be paid for this tax goes from a minimum of 0.25% for properties of up to ¢323 million (approximately $574,940.00 USD) and in increments of 0.05% with a max of 0.55% for properties which value exceeds an approximate $3,458,540.00 USD (¢1,943,000,000.00).
Is it safe? For the most part it is safe to buy real estate in Costa Rica, the country’s political and economic stability makes it a very attractive country to invest in. However, just as it happens in every country there’s always the possibility that someone may want to take advantage of the buyer, it happens to locals and it happens to foreigners, so, even if it involves an extra expense, get a reputable real estate agent, we recommend Expathousingcr.com; and a real estate attorney that can help you get everything in order.
Other things you should consider: It is very often that we hear foreigners complain about problems with their recently purchased homes, mainly construction problems or issues with the electrical system or drainage, etc. So don’t just focus on the esthetics or the look of the house. If it’s a gated community or a brand new project getting details on the construction of the house should be easy, get details on the developers and construction company and past projects; if it’s an individual residence get as many details as possible from the seller, blueprints, etc. and have the house inspected by an engineer and architect if you have that opportunity. Try to visit the house when it is raining, turn on all the lights, open and close the doors including the garage, the faucets, and pay attention to all details.
How to protect your investment: Once you have finalized your deal and you are a property owner in Costa Rica, make sure to follow up with your lawyer on the process of registering the property under your name or corporation, confirm everything is showing properly in the Public Registry; make sure to get a copy of all legal documents and keep them in a safe place. Hold onto your corporations yourself and do not leave them with an attorney. If you bought land, take steps towards protecting it from squatters. If necessary, get a property manager. Inquire about insurance to ensure you are protected in the event of a natural disaster, earthquakes, fires, floods, volcanic activity.