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real estate regulations
 - Costa Rica

Real Estate Regulations

Real Estate Regulations

General Information

In matters of land and property ownership, foreigners and Costa Rican citizens have equal rights under the law (unless the owner bought the land as part of a government program). In these cases, the land can be traded or sold to foreigners only after the original owner has held it for certain period of time. Foreigners do not have to live in Costa Rica to own property here.

Property Registration

Costa Rican properties are registered at the Property Registry, which keeps track of all the title registrations. It is a great resource for verifying the status of a title or claim associated with a property.

If you wish to buy land in Costa Rica, it is wise to go to the Property Registry to search the title and verify that there are no liens against the property or the property owner(s). Once you buy a property, you need to make sure the sale is properly registered as proof that you are the new legal owner.

Financing for Costa Rican real estate is available through local banks, mortgage brokers, and alternative sources like home equity loans and owner financing. 

Zoning

Building and subdivision plans must be:

  • Signed by a registered local engineer
  • Approved by the local Ministerio de Salud (Health Department)
  • Approved by the Instituto de Vivienda y Urbanismo (INVU) Housing and Urban Development Institute
  • Approved by the Costa Rican Tourism Institute

Taxes

Property taxes vary from 0.25% to 1.5% of the declared value of the property. However, Costa Ricans are resourceful people, so they customarily undervalue their properties by at least 20% when they register it.

The closing costs of a sale include a transfer land tax, a stamp tax, and legal fees. Closing costs run about 5% or 6% of the sale price, and are negotiable between the buyer and seller, though the buyer normally assumes these costs. Transfer land tax and stamp tax assessments are based on the declared value. Legal fees are based on the selling price of the property. Transactions may be conducted in U.S. dollars.

Ocean Front Properties

Costa Rican lawmakers have drawn up very strict rules governing the development of ocean front property along both coasts.

According Costa Rican law, the beaches belong to everybody and everyone has a right to use them. The first 164 feet (50 meters) above the mean high tide line, including all islands except Cocos Island, is public land. No one can restrict access to a beach or claim a beach is privately owned, exceptions being landholdings in port areas, old land grants or by some agreements made prior to 1973.

Second, along 80% to 85% of the coastline, the 492 feet (150 meters) after the first 164 feet (50 meters) are called the Maritime Zone and are controlled by the government. In general, construction is restricted inside this area, but there are certain exceptions, including cities located within the Maritime Zone; properties registered with the 1970 Law No 4558; land in Mata de Limon, near the Caldera Port; certain public-use or tourism buildings; and fishing projects, among other exceptions.

A foreigner must establish at minimum five years of residency to obtain a government concession for construction within the Maritime Zone. Foreigners can evade the law by assigning the lease to a corporation that is wholly foreign-owned or by assigning 51% of the ownership of the land (on paper) to a Costa Rican citizen. Take a careful look at the zoning laws before you start development in any of these areas.

If there is no zoning plan for land you want to develop, hold off on the celebration. If nobody has gotten around to making a zoning plan, then it's up to you to create one on your own – with the help of a licensed architect – and submit it to the INVU (Housing and Urban Development Institute), which will in turn submit your plans to the Costa Rica Tourism Institute (ICT) and Ministry of Health. You must also seek approval from the local municipality. The "zoning of land" plan you submit must address questions regarding – among other things – public use areas, roads, water and electricity.

If your development dream is located on the 15% or 20% of the coastland not in a Maritime Zone, then you may develop the property without filing a regulating plan. However, developments geared to the tourist industry must be approved by the ICT, anything else requires building permits.

Coastal Building Regulations

The Maritime Zone runs for more than 932 miles (1,500 kilometers) along both coasts. More than one third of this is open to legal development. The rest is invested in mangrove swamps, national parks, river mouths and other protected areas.

Most of this land is already developed, much of it illegally. Only a small fraction is still open to development. For instance, the local municipality of Santa Cruz, Guanacaste has leased to developers 40% of the 50% of the land allotted to it in the Maritime Zone.

According to the law, land can be acquired only through temporary 5-20 year concessions, and must be developed according to a detailed regulatory plan consisting of a zoning plan, showing what is going to be built and where, and a construction implementation framework, showing in detail how all this is going to be handled.

Regulatory plans must be approved by the local municipality, the ICT, the Housing and Urban Development Department (INVU), and the Ministry of Health.

Currently, approximately three hundred building concessions are recorded in the Public Registry, and only two hundred of these are current and in accordance with the law. However, there are 15,000 hotel and tourist developments along Costa Rica's coasts, which received government approval but, for mysterious reasons, were able to bypass planning controls required by law. Most coastal lands under concession are leased at very low prices. Most beaches are not regulated. Only a few have even been surveyed.

It has been a common practice, through bribery or influence, to take beach land illegally. The land is then sold to foreign investors who believe they are taking legal title to the property. The Costa Rican government has begun cracking down on illegal construction, and has demolished many illegal structures.

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