Real Estate

Land values in Costa Rica have been steadily rising over the past 10 years, and there is every reason to believe it has only just begun for this tropical destination.

Costa Rica’s past growth and obvious future growth ensure that Real Estate investors will continue to enjoy an excellent return on their investments and re-sale market, both in terms of increasing land values, and an ever-increasing amount of qualified buyers.

When comparing Costa Rican property on a global level, one finds property in Costa Rica is clearly a much better investment opportunity than any similar tropical destination.  Property Rights Costa Rica’s laws and constitution, based on a well-developed tradition of Democratic government, include secure property rights for the private ownership of land. These laws are extended equally to foreigners as well as residents. Neither citizenship, nor residency, or even a presence in the country is required for land ownership. There are almost no restrictions to the ownership of land in Costa Rica, with the exception of direct beach front. To a prospective off-shore investor, the receptiveness of the host country to be invested in is an important consideration of the investment. This is especially true for Real Estate.

Few countries in the world welcome foreigners so well, and have such magnanimous laws that allow for, and protect, the property rights of foreign investors the same as citizens. Costa Rica’s open door policy to foreign investment combined with secure property rights has made it a number one pick for foreign Real Estate investment. Just like in the United States, Canada, and Europe, there are different types of property available to buyers. Understanding the various types that are available for purchase is critical in the evaluation process. Below are the property types that can be purchased in Costa Rica and the implications of each type of ownership for the buyer.

Fee Simple

The most comprehensive form of property ownership in Costa Rica is fee simple ownership. In this respect, the conditions for this type of ownership are the same for Costa Rican nationals as they are for foreigners. The concept of fee simple ownership is the same in Costa Rica as in the United States, Canada and Europe; namely, fee simple ownership gives the owner of the property the absolute right to materially own the property, use it, enjoy it, sell it, lease it, improve it, among other things, subject only to conditions outlined in the Costa Rican Laws.

Concessions in the Shoreline Zone

Beachfront property is more commonly know as “concession property.” In Costa Rica, 95% of beachfront property is concession property and is governed by the Shoreline Zone Law (Law No. 6043) and other specific regulations including but not limited to special dispositions ensuing from local governments (i.e. municipalities) and Costa Rican Board of Tourism (ICT). The said legal dispositions set forth the conditions under which foreigners and local residents can lease concession property. In Costa Rica, a concession is defined as the right to use and enjoy a specific portion of land located on the shoreline zone for a pre-determined period of time and based on a predetermined use of soil (zoning or master plan, known as “Plan Regulador”). The Government, through its corresponding municipality, grants this right by means of a private agreement between concessionaire and municipality that is further recorded in a Public Registry. This agreement also establishes a yearly concession fee that is paid based on an appraisal performed by government financial authorities.

Costa Rica’s shoreline zone is comprised of 200 meters starting at the mean hightide mark and heading inland. The 200 meter zone is government owned. No individual or company can own the 200 meter zone. The shoreline zone is divided into two strips of land:

i) The first strip is 50 meters (approximately 150 feet) wide is known as the “public zone” and is absolutely public. This zone is not available for ownership of any kind. No development is allowed, except for constructions approved by government entities (i.e. marinas). Furthermore, this area is deemed public, therefore, it is available for use of any individual.

ii) The following 150 meters can be subject to occupation or lease by individuals or companies, either through a concession with the respective municipality (in case of residential and commercially exploitable portions or land) or a management Plan with the Ministry of Environment and Energy (MINAE), in the case of environmentally sensitive, low density, portions of land. In both cases, the property can be used, although not owned (same as with a lease). Both concession agreements and management plans are entered between private parties and the Government for a limited period of time that ranges between 5 and 20 years, at Government’s discretion; however, most concessions and management plans are granted for 20 years. During such period, the concessionaire pays a fee for the use and occupation of such Government land. Renewal for equal and consecutive periods is negotiated between private parties and the corresponding government authority and, such renewal is usually based on the concessionaire’s ability to comply with its commitments and obligations during the previous agreement. Such obligations include having assumed the compromise to build on that concession land, subdivide it or perform other acts of development or improvement on the land, in which case, the concessionaire will require to obtain with all appropriate permits from the local municipality.

Unlike fee simple property, foreigners do not have the same rights as citizens when it comes to leasing shoreline zone concession land. The law establishes that foreigners cannot be majority owners of concession land. A foreigner can, however, enter into a partnership with a Costa Rican citizen where the Costa Rican national appears as the majority holder of the concession land. An exception to this prohibition applies to foreigners who have resided in Costa Rica for at least five years, who can also appear as majority holders of a concession.

Condominiums

Traditionally, the concept of “Condominium” is associated with apartment buildings and townhouses. In Costa Rica, however, there is a specific law called “Condominium Property Law” that provides a framework for development of different types of properties, including single family residence projects, finished lot projects, vertical and horizontal property condos, among others. This law allows a developer to restrict and regulate certain aspects of the development. Each Condominium development has its own by-laws containing all applicable conditions, restrictions and regulations applicable to owners in such a development. Condominium property ownership is fee simple ownership, but usually carries with it a few additional restrictions set forth by the developer, such as architectural guidelines, land use restrictions, and other limitations that may be placed on each branch property. For the most part, condominium laws are designed to protect the integrity of a development and maintain the “look and feel” of the project.

Property Ownership Land Records

Costa Rica boasts a safe form of title registration to protect buyers from hidden claims. In many ways, the Costa Rican system of maintaining property records is far superior to systems in use by more developed countries such as the United States. All documents are centered in the National Registry, where both titles and surveys are recorded.

Records are kept in a central computer system as well as on microfilm, and in original form. Duplicates of all records are updated daily, and sent to two separate fireproof vaults in separate locations from the registry. Any change in the status of a title, or any claim that might affect it, must also be noted on the title registry page, thus making it easy to verify. Those who purchase land in Costa Rica should get professional advice, which includes a search of the title in the Registry, so as to confirm there are no liens or encumbrances on it, and to establish its proper ownership. Once the transaction is completed, the purchaser should receive documents to prove the sale was registered in the Registry.

Property Taxes

The yearly taxes on properties in Costa Rica are very low. Yearly property taxes based on 0.0025% of the declared value of the property. This declared value is a common law practice in which a property’s value according to the government is very low, almost always lower than the sales price.