Real Estate Investment Transactions in Costa Rica
Closing on the Purchase
Costa Rica Real Estate Attorneys
Real estate transactions in Costa Rica are handled through attorneys, much like in the eastern states of the U.S. A title company may conduct the closing or may just provide optional title insurance. In either case, real estate attorneys perform the actual title research and coordinate the closing process.
in making a Costa Rica Real Estate Investment, you want to first select an attorney to work with…one that is competent and trustworthy. This can be a challenge as there are more attorneys per capita in Costa Rica than in New York City! Just ask your taxi driver and he’ll recommend his brother-in-law (no kidding!).
We work with and recommend to our clients perhaps the premier Costa Rica law firm specializing in Heredia, Puntarenas and Guanacaste area real estate. However, you are welcome to select any attorney.
Costa Rica Real Estate Property Title
The good news is that foreigners are welcome and encouraged to own titled land in Costa Rica (unlike some other Latin American countries). Titled land in Costa Rica is very similar and equivalent to “fee simple” ownership in North America. All of the properties offered are titled and upon purchase, title will vest in your name (or the name of a corporation if you choose that option; see below).
Title insurance or title guarantees are available in Costa Rica and can be purchased through Latin American subsidiaries of well know companies such as Stewart Title.
http://www.stewarttitlelatinamerica.com/
One factor to keep in mind is that all Costa Rica real estate properties (suitable for a real estate investment) are registered in a centralized government database at the Registro Nacional. If you know a property’s registration number or folio real (and a little Spanish), you can research the title status yourself, online!
http://www.registronacional.go.cr/
Title is transferred through the use of a transfer deed which in Costa Rica is known as a Escritura de Traspaso and must be signed in the presence of a Notary Public. In Costa Rica the Norary Public is an attorney and requires an additional year of specialized training to achieve this highly regarded qualification.
Use of a Corporation When Buying Property In Costa Rica
As a buyer of property in Costa Rica, you have several options regarding how you can take title.
You can own the property in your name individually, jointly with a spouse or other persons or in the name of a corporation.
The most common practice in Costa Rica is to form a corporation and then hold title to the real estate in the name of the corporation. This is typically done for two primary reasons:
- If properly structured, transferring ownership to the corporation can protect the property from liabilities which may be incurred by you in the future, as an individual. Costa Rican courts generally respect the corporate entity, as separate from the individual and with limited exceptions, will not pierce through the corporation to get at the individual.
- When you sell property in Costa Rica, the transaction is subject to a transfer tax of 2.5% of the registered value of the real estate or sales price whichever is greater. This tax is avoided by simply selling your corporation which holds the property, to your buyer. This will significantly reduce your closing costs, and increase your profits!
Closing Costs for Costa Rica Real Estate Transactions
The actual costs to close the transaction will vary, depending on the specifics. Generally, costs may include real estate transfer taxes, documentary stamps, notary fees, title registration, title insurance. If the transaction involves formation of a corporation (highly recommended), this involves additional costs.
Ask any Costa Rica attorney for a closing cost quote and you will most likely hear “about 4.25% of the transaction value.” On a $150,000 lot purchase for example, that would equal $6,375.
Contact Us today for more information.
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