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BUYING property in Costa Rica can be a
complicated process fraught with pitfalls if you
don’t know all the laws and regulations governing such
transactions. Simple steps to verify the title of the land
to be acquired and the validity and legal
representation of corporate sellers should always be kept in mind and be
among the first moves you make before undertaking any negotiation
for land in the country.
In Costa Rica, most land is titled, and titles are registered
and centralized at the offices of the Public Registry in
San José. Most titles are currently organized by means
of a computer system called the folio real, although some,
for properties that have had no transfers or other transactions
affecting them for a long time, are not included in the computer
system and are still registered the old way – in specific
books, pages and entries of hard records at the registry.
Property transfers require the buyer and seller to sign a
deed before a notary public – different from notary
publics in the United States, Canada or the United Kingdom
and required to formalize all real estate transactions – and
for the deed to be recorded at the Public Registry.
Title Searches All titled land in the country, whether registered
in the newer folio real system or the older book/page/entry
system, can be accurately and safely title searched in order
to determine ownership, liens, encumbrances, annotations
or other issues that may affect ownership rights or the possibility
of transferring the land to a third party. Title searches
on folio real properties may be initiated in the computer
system, accessible online at www.registro nacional.go.cr,
but will probably need to be continued in the book/page/entry
system, especially when the computer search shows liens,
encumbrances or other property characteristics “inherited” from
older transactions on the land before it was transferred
to the folio real system.
Additionally, although the computer system will indicate
a list of liens and encumbrances, in most cases a thorough
and complete title search will require the review of microfilmed
or scanned documents, which are not accessible online and
can only be obtained at the offices of the Public Registry.
Although, as previously mentioned, the folio real system
is accessible online, individuals generally lack the legal
training necessary to accurately and thoroughly interpret
the information, or follow up on any required further steps.
It is therefore advisable to contract a knowledgeable professional
to perform and report the title search. If the property is
owned by a corporate entity, in addition to a title search
it is necessary to perform a corporate search at the commercial
section of the Public Registry; only this step can verify
the transferring entity is in good standing and the proposed
signatory of the transfer deed is empowered to authorize
the transfer. Form of Ownership although titled land can
be purchased in an individual’s name or a company’s
name, and foreign ownership is fully permitted; it is advisable
to purchase property through a corporation.
This structure allows flexibility and more predictability
in areas ranging from estate planning (if share ownership
is properly structured, the investor can save his heirs a
painful and lengthy long distance probate procedure), tax
management (for example, rules for corporate expenses are
more flexible than for personal ones), and representation
(shareholder meetings can facilitate granting special powers
of attorney or other types of authorization for many actions,
thus not requiring physical presence in the country).
Buying Company Shares a somewhat common practice is to transfer
the shares of the company that owns the land to be purchased,
instead of transferring the land through the Public Registry
to a third party. The share transfer system may sound appealing
at first, as it saves money on notary fees and transfer taxes
and may seem like a faster way to achieve the goal of transferring
control of the property to the buyer.
However, this course is not advisable, because when you
acquire the shares of a corporation in Costa Rica – as
in most other countries – you acquire not only the
company’s assets (in this case, mainly, the land) but
also its liabilities. No mechanism exists to satisfactorily
list them or rule out their existence. Such liabilities would
directly affect the land being acquired. Under such terms,
it is advisable to pay the extra cost for a regular transfer
through the Public Registry. You might consider the extra
cost a form of insurance that may shield you from possible
future claims by the seller’s creditors.
Buying Portions of Registered Property Purchases of portions
of a titled property are possible in Costa Rica; this is
called segregation. A registered map of the land to be purchased
is required, as well as authorization from the relevant municipality.
This authorization must appear on the registered map in the
form of a stamp called a visado municipal. Concession Land
several areas of the country, mainly those on the coast affected
by the Maritime Zone Law, are not subject to private ownership;
their possession is granted as a concession that could simplistically
be compared to a lease made from the government for a specified
period of time.
Concessions are difficult to examine, and in many cases
the prospective buyer cannot be absolutely certain of what
is being acquired. This type of transaction should be avoided
if a similar piece of land that is titled can be found; if
not, extra caution should be used. BEING an informed buyer
means taking the time to know the basics, understand what
you are acquiring and perform proper title and corporate
searches. These simple steps can serve as strong foundations
for a successful transaction. For more legal advice, contact
Lang & Asociados at 204-7871 or visit www.langcr.com.
If you want more information about the best real
estate affordable, please contact Costa
Rica real estate and retirement properties or call toll
free 1 888 581 1786. |
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