A Look at Costa Rican Real Estate Law

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he Costa Rican legal system is based on a so-called civil law system, which is derived from the Spanish Civil Code which is based on the Napoleonic Code. It is key to have professional legal advice during the course of any real estate transaction in Costa Rica. Foreigners have the same right as citizens to own real estate property in Costa Rica.

 

The legal framework can be described as a pyramidal body of laws, regulations, decrees and ordinances, some of which date back to the 18th century, that are spread across specialized institutions and government agencies. This framework contains the principles and norms that regulate the ownership of real estate in Costa Rica. A full and comprehensive analysis of this branch of law is really complicated because of the extensive amount of information involved. This is just a brief glance at it.

 

Section two of the Civil Code deals with assets and the extension and modification of ownership. Ten subsections regulate real property: I. Assets and their classification, II. Ownership, III. Rights of property use, IV. Easements, V. Encumbrances and limitations upon property, VI. Mortgage and lien of property, VII. The Public Registry (also named the National Registry), VIII. Means of acquisition of ownership, IX. Occupancy, and X. Accession; and the remaining three subsections regulate will and succession law: XI. Succession, XII. Legitimate succession, and XIII. Testamentary succession (the will).

All titled property in Costa Rica is registered through the National Registry. If a property is not registered, it is untitled and should be strictly avoided. It is important to check with the National Registry before making any purchase transactions. Almost all legal liens and encumbrances will also be on file in the Registry.

 

Once you purchase a property, especially a large rural tract, it is advisable to "contract" a caretaker to guard against squatters. This is not that expensive, especially if the caretaker's contract allows him to partially farm the property. It is important to have a written contract with the caretaker in order to prevent him from ever asserting squatters rights himself.

 

You want to be sure that the property you see is the property you are getting. If there is a question at all, you should have a survey done. Likewise, you may want to have an engineer check buildings for structural defects.

 

Taxes and fees are paid both to the municipality and the Costa Rican Government. The amounts vary from place to place, but they are normally considerably less than one would pay in the U.S.A.

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rban Code: This is a collection of several laws, regulations and a declaration regulating land subdivision, urbanization, development and related zoning and housing issues, which are conventionally classified as:

I Planning and Zoning;

II. Housing and Public Sector;

III. Construction and Urbanization;

IV. Public ways;

V. Urban Property.

Briefly the most important ones are:

 

1. Urban Planning Law: or Law N°4240 of 1968, revolves around a major concept called “National Plan for Urban Development”, and assigns several functions to the National Housing and Urban Institute (INVU), the Municipalities and other government agencies particularly related with the subject.

 

1. Regulation for the National Control of Land Subdivisions and Urbanizations: This is an INVU Ordinance from 1982, it has two important definitions that trigger the whole chapter: "Land Subdivision: the subdivision of any field with the purpose to sell, transfer, negotiate, deliver, exploit or use in a separate manner, the resulting parcels; inclusive of judicial or non-judicial awards subdivisions, localization of undivided rights and simple subdivisions by owner…" and "Urbanization: The subdivision and preparation of a field for urban purposes through the opening of streets and the provision of services." It sets a body of technical standards and requirements that said land developments must comply with.

 

Law of Constructions and its Regulations: This is Decree N°833 of 1949 with amendments and modifications. It recognizes the necessity of cities and other populated areas to have minimum security, health, comfort and esthetic levels in the public ways and constructions, and delegates such regulation to the respective Municipality where the land is located without prejudice to the authority of other agencies.

 

Regulation of Condominium Ownership Law: or Law N°7933 of 1999, this is the equivalent of the Condominium Act in the US or Canada although much simpler and generic. It defines the Condominium Property Regime, its standards, requirements and procedures for submission. It also establishes the rights and duties of the owners and other due diligence issues.

There are many condominiums throughout the Central Valley and certain beach areas. In addition to new units being built, conversions of older existing buildings from rental apartments to condominiums are taking place. Condominiums are very practical for someone who plans to spend only part of the year in Costa Rica or for someone looking to be an absentee owner of an income producing property. Condos in Costa Rica are treated as real property and can be mortgaged.

Maritime Terrestrial Zone Law and its Regulations: Law N°6043 of 1977, defines the Maritime Terrestrial Zone as part of the national patrimony, belonging to the state of Costa Rica. It is subdivided in Public Zone: a 50 meter strip of land counted from the ordinary high tide and surface land during low tide (conventionally known as the beach); and Restricted Zone: constitutes the remaining 150 meters land strip or the remaining surface in the islands. The Restricted Zone is under the administration of the nearest Municipality with the supervision of the Costa Rican Tourism Board (I.C.T.).

Concession: The Restricted Zone can be granted in concession by the Municipality in terms not less than five years and not greater than 20 years, renewable indefinitely upon request by the concessionaire, in accordance to this Law except the exceptions thereto established.

Concession Title: The land where concession is given is patrimony of the Costa Rican State, the Municipality does not own title to concessions, as Administrator they are responsible for the enforcement of the Maritime Terrestrial Zone Law, the development and use of the maritime terrestrial zone, and they are custodians to zones where a concession has not been granted.

 

Under article 47 there is a prohibition to grant concessions to:

• foreigners who have less than five (5) years of legal residency in Costa Rica.

• corporations with bearer shares.

• foreign entities (corporations or companies).

• domestic entities established by foreigners.

• entities which more than 50% of the shares or stock is owned by foreign owners

 

Establishing Residency
It is necessary to qualify for and establish legal residency if one plans to live in Costa Rica for an extended period of time. The Government offers several alternatives for legal residency such as: pensionado (pensioner), rentista (a foreigner with a guaranteed income), investor, relative of a resident, or one with a foreign government assignment or an international mission .

The pensionados and rentistas program has historically been the easiest method of establishing residency.