Buying Costa Rica Real Estate
Buying property in Costa Rica is a relatively transparent process. However, as with business transactions anywhere in the world, it is important to do your due diligence and work with professionals. The information below can help you to understand the purchase process and our team is also available to answer your questions and streamline the experience should you decide to go ahead with buying real estate in Costa Rica. Please feel free to contact us for further information.
Foreigner Friendly Property Laws
Unlike some of the other countries, foreign entities or people have the same rights when purchasing land in Costa Rica as any national citizen. You can own property outright in your own name or in the name of your corporation. You do not need a local partner, except in cases of beachfront concession property, where special rules apply. There is absolutely nothing to prevent you from purchasing Costa Rica property in your own name, but the majority of buyers form a corporation with the help of a reputable lawyer and then purchase property through that corporation. The reason for this is threefold. One – it may be more beneficial to have your income (from rentals) or capital gain (from sale of the property) taxed within a Costa Rican company rather than having it taxed as personal income. Of course, this depends on the tax laws of the country from which you originate. Two – it allows for simplified estate planning, whereby you can give or will shares of the corporation that owns the property to members of your family. Three – if you ever decide to sell your property, you can avoid paying property transfer taxes a second time by simply transferring the shares of the corporation to the new owner.
The Real Estate Registry
Another plus for property purchasers in Costa Rica is its central land registry which allows your lawyer to confirm that there is clear title to your property as well as to discern if there are any restrictions on the property before the deal goes through. Also attractive are Costa Rica’s very low property taxes – 1/4 of 1% annually. That means if you buy a condominium or home with an assessed value of $200,000, the property taxes per year would be $500.
How to Make an Offer on Costa Rica Real Estate
First, you and your agent will write an offer that suits your circumstances. The offer will be presented to the seller, whether that is a developer or private owner. Either the seller will accept the offer or negotiations will ensue regarding price, terms or both. Once buyer and seller have come to an agreement and have signed the contract, a deposit (usually 10%) is expected. The normal time period for receipt of deposit is two weeks but this time period may be negotiated according to the buyer’s circumstances. All funds should be held in a SUGEF or government registered escrow account.
Final closing would normally be anywhere from 30 – 60 days after both parties agreeing to the terms and signing the contract. This could happen sooner. The timing is often dictated by the due diligence procedure of the attorney.
Your best option for financing in Costa Rica is via owner financing, and there are several legal structures in place that can make owner financing safe for both seller and buyer.
How much are closing costs?
The Buyer is usually expected to pay for the 1.25% notarial fee as this work is mostly on the Buyer’s behalf. The mandatory taxes and fees to pay to transfer a property are 1.5% (share transfer) or 2.5% (property transfer), levied on the highest of the fiscal value of the property or the purchase price. This tax is usually shared equally between the buyer and seller but it is subject to negotiation. The Escow fees may be shared equally by the Buyer and Seller and are between 0.20% and 0.25% of the purchase price (with a minimum amount of a few hundred dollars per transaction). Closing costs are as follows:
1.25% for the notary to register the property in the National Register(Registro Nacional Rebuplica de Costa Rica) and perform closing duties.
1.5% in goverment stamps and fees if you do a share transfer (that is, you assume the shares of an already established corporation that holds/owns a property).
2.5% in government stamps and fees if you purchase a property in your own name or in the name of your own corporation.
0.25% in Escrow fees commonly apply if you’re going to use a third-party escrow such as Stewart Title.
Do I need my own attorney?
Yes. We strongly recommend that you have your own representation in any real estate transaction. The closing costs noted above are inclusive of the attorney fees.
Do I buy in my own name?
Foreigners in Costa Rica can own property in their own names. Purchasing property through a new or existing company or corporation (Ltda or S.A.) is very popular. To buy a property, and even a car, we recommend that the transaction is carried out on behalf of a Costa Rican corporation owned by the buyer. It’s the notary who performs the opening of this company when purchasing a property or any other property of significant value. In this way, you are personally protected if there is a lawsuit of some sort. It is also a good way to save some taxes in your country. The cost is $800 to $1000 for the creation of the company.