Investing in real estate in Costa Rica, particularly in Guanacaste, can be a good decision. Our northern Pacific coast attracts more and more foreigners every year while luxurious leisure residences, condominiums, flats or villas are being sold even before they are built.
Where not so long ago stood small and isolated fishermen towns, now stand commercial centers, office buildings, modern condominiums and suites, five star hotels and dream houses of the highest standing and architectural styles.
These real estate developments, however, are not exempt from tricky legal obstacles and bureaucratic ambushes, which you have to be conscious of when entering the real estate game in our Rich Coast. Whether you are an investor with a big project in mind, or the average guy wishing to own your little piece of paradise, the following lines are intended to give you a few clues on what “dangers” lay ahead, and how to sort them out.
But a word of advice: leave behind the I-can-do-it-myself attitude. It’s important to be aware just how different things can be in a foreign country, with its own mentality, language and legal system. For instance, foreigners wishing to buy real estate here commonly ask about ownership title in the sense of a transferable certificate, and our system of Public Registry and notarized deeds is completely unknown to many North Americans.
This means you’re going to need some support, someone to guide you through the process of achieving your dream. Contrary to some northern jurisdictions, going to the lawyer is not the last step in the process, but should be one of the very first. A legal expert in particular can be very helpful in deciding even the simplest matters of what exactly you want to buy or build.
Legal advice must be tailor-made since everyone has something different in mind. However, in the early stages what is needed is referred to as performing ‘due diligence’ with respect to a property, or a projected purchase-development transaction.
In general terms, due diligence covers “the process of research and analysis that takes place in advance of an investment”. When used in reference to real estate, the idea is to have a professional check the target land for any legal problems it may have, identifying issues in all possible aspects, and finally allowing you to count on having all the information available to understand the potential risks involved in the investment, through the final recommendation the lawyer will put forward to you.
Due diligence will necessarily include a thorough Registry search (informe registral), which shows the owner of the property, the nature of the land, any legal encumbrances or liens attached to the piece of land, pending claims or ongoing judicial proceedings where the land is disputed, etc. It will also indicate whether the land you are buying has any building limitations. As well, if the property is owned by a company --- which is very frequently the case here in Costa Rica --- it is necessary to perform a search on the company, to make sure the “seller” has sufficient power to do so on behalf of the company.
If the property is registered land, then all the information will be available at the National Public Registry, but it could also be the case that the offered estate is untitled land, in which case the risks of buying are increased.
Another scenario, less advisable, involves acquiring “permission or occupation right” instead of real ownership. This is consistently the case with most beachfront properties. These inaccurately-named “properties” may in fact not be owned by anyone, as they remain Public or State Property if they lay within 200 meters into the land from the high-tide mark, known as the Maritime Zone. In such cases, due diligence studies must include research as to the municipal concession file on such “occupied” land.
Due diligence must also look into the tax records of the competent body to check for any problems of unpaid taxes, etc. And if developing a more complex project, such as condominium units, other municipal permits, authorizations, and applications must be previously obtained before actually building.
Due diligence, when performed by a competent professional, must absolutely also check on possible environmental restrictions which could seriously compromise your project. For instance, you will need special permits to cut down trees, or to alter a water source, and eventually will require a specific environmental permit which is granted by our Environmental Agency, SETENA, upon completion of a series of administrative formalities.
There are still many of other variables and details that would need to be reviewed by the attorney performing due diligence for your specific case. Only through a professionally- conducted due diligence would you be capable of knowing what you are buying and if it is worth going for.
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