Buying Costa Rica Real Estate
Here are the hoops that you have to jump through to buy Real Estate in Costa Rica.. Our suggestion might be to rent when you first arrive in Costa Rica while you get settled into the new terrain, find a location that is suitable, pick out an honest attorney and so on. That is why it is important to meet others that have made the trek to Costa Rica and have already experienced the in's and out's of relocating. Here are some necessary steps you should take when thinking about buying real estate in Costa Rica. Buyer beware.
Locate a Reliable Attorney:
Ask someone you
trust to recommend an attorney who is reliable and trustworthy. Your country's
embassy or one of your consulates might have some suggestions to offer. The
Costa Rican-American Chamber of Commerce is worth checking out.
Contact them at
www.amcham.co.cr/
Research the Property Information:
Request your
attorney to conduct a title search at the Registro Publico (Public Registry) for
the property you want to buy.
By law all properties must be registered in Registro Publico. Most properties
have a title registration number called the "Folio Real." Once you have this
number you can search the database. The Registro Publico's Report, called the "Informe
Registral," contains information such as the name of the title holder, boundary
lines, tax appraisal, liens, mortgages, recorded easements, and other records
that could affect the title.
Costa Rica follows "first in time, first in right" rule. Additions to a property
title are prioritized according to the date they were recorded. So make sure
your attorney searches your title back to the beginning title entry to esnure
that you can hold clear title.
Write a Transfer Deed:
This is the
document that transfers ownership of the property. The transfer is made with the
buyer and seller signing the transfer deed (called an "escritura") in the
presence of an attorney. The attorney then drafts the transfer deed and
registers the sale at the Registro Publico.
Custom dictates that if the buyer pays in cash, he selects the attorney to draft
the transfer deed. If the purchase is financed, then the transfer can be made in
various other ways.
A. If a large percentage of the purchase price is financed by the seller and a
mortgage needs to be drafted to guarantee payment, the seller's attorney may
draft the transfer deed upon seller's request.
B. If a property is purchased 50% cash and 50% financed, the buyer's attorney
and seller's attorneys can draft the transfer deed and mortgage in a single
document. This process is called a co-notariado.
C. Buyer may have his attorney write the transfer deed and let the seller's
attorney draft a separate mortgage instrument. Since the mortgage agreement is
being drafted separately, registration fees are higher.
Closing Costs:
By custom, buyer
and seller split the closing costs, but the split may be negotiated as part of
the purchase contract.
What they want are:
Taxes
You must buy
Documentary Stamps – Agrarian, Hospital, Municipal, Bar Association, National
Archive and Fiscal – totaling 0.55% of sale price. You must pay a Real Estate
Transfer Tax at 3% of the sale price and a Registration Fee of 0.5 % of sale
price
Plus
Notary Fees
1.5 % of the first $5,000 (million colones) and 1.25 % of the balance
And
Mortgage Registration Fees
Usually, the person getting the financing pays for the costs of drafting and
registering the mortgage instrument. A mortgage may be issued at the time of the
sale by adding a mortgage clause to the transfer deed. A mortgage within a deed
costs 0.25% in registration fees and approximately 0.53% in documentary stamps.
For drafting the document, the notary receives between 0.5% and 1.25% of the
amount of the mortgage.
The good news...
It is customary in Costa Rica to register a property at a figure far less than
its actual sale price. All transfer taxes and fees discussed above are figured
as a percentage of the reduced sale price -- with the exception of the notary.
He or she drafted the documents. He or she knows exactly how much money changed
hands. He or she collects the full .5 to 1.25% of the mortgage.
Consult your attorney about further consequences of these practices.
Register The Transfer Deed:
To register
your transfer deed, you or your attorney must bring to the Registro Publico
(Public Registry) the following documents:
A. Proof of payment of all taxes and registrations fees
B. Certifications issued by: a) Finance Ministry, confirming that all seller's
property taxes were paid; and, b) the local Municipality, stating that buyer and
seller areup to date on municipal taxes.
C. Proof that all prior mortgages, liens and judgments (if any) have been
resolved
Once all fees are paid, make sure that the attorney who drafted the transfer
deed registered it in the Property Section of Registro Publico. It should be
registered by the Registro Publico 45 to 60 business day after presentation.
Check with the notary to make sure the deed has been properly filed.
Hint: Before you buy the house check conditions of the house during dry and
rainy season; talk to the neighbors and ask them if they know of any problems in
the house.
