Current market conditions
The natural beauty, pleasant climate, safe political environment, economic stability and friendly people of Costa Rica, are luring investors from around the globe. As a result, the real estate market has been gaining strength over the past decade. You can enjoy a high standard of living with all of its comforts in your coastal properties for much cheaper than similar tropical destinations. Phone lines, cell phone services, TV stations and Internet are available in throughout the country. The water is clean and drinkable throughout the country. The Costa Rican Constitution fully protects foreign ownership of property making it a safe emerging market for international real estate investors. Purchasers of property can also obtain a title guarantee from internationally recognized title insurance companies. Professional advice and assistance from a knowledgeable and professional real estate agent, is the best assurance of a smart decision and a safe investment Jaco is one of the few exceptions whereby property is titled to the oceanfront creating a hot spot for developers. In the last five years Jaco and Herradura have seen a tremendous amount of growth. Condo developments, hotels, food services, golf courses, tennis courts, conference centers, marinas and residential developments have helped to boost the tourism and real estate industries.
Future Outlook and Trends in Costa Rica
Costa Rica´s plan for economic expansion of the country along with the continued development of mid to higher end residences, accommodations, services and amenities will continue to boost the already rapidly growing tourism and real estate industries. Jaco is growing into a more attractive beach destination with high-rises up to 20 stories. Millions of North Americans come to Costa Rica for a lower cost of living, tropical weather and health care whose quality is comparable to North American with prices 50% – 70% less.
Ownership and Corporations
In Costa Rica, foreigners enjoy the same ownership rights as citizens and are fully protected by the constitution. For legal and economical reasons, it is recommended that the purchase of real estate be performed through a Costa Rican Anonymous Corporation. This provides the anonymity which many foreign investors desire, making it difficult for outside parties to obtain information about who owns the shares of the Corporation and thus the property. Also, registering assets under individual Costa Rican corporations protects against any personal liability.
A common practice has been to transfer the shares of an existing company that owns the land to be purchased, instead of transferring the actual property to a third party. This is a faster and cheaper way to achieve the goal of transferring control of the property to the buyer, since it is the shares of the corporation that change hands. Also, no capital gain tax is paid in Costa Rica when a corporation that owns property is sold, due to the sale being a private transaction.
When you acquire the shares of a corporation in Costa Rica along with the company’s assets, the property also becomes its’ liabilities. For this reason, it is essential to perform a corporate search, in addition to performing a title search. This step will verify that the entity being transferred with the property is in appropriate legal standing.
Those who purchase in Costa Rica should receive professional advice from both a licensed Realtor and a qualified real estate attorney.
Title Insurance Title insurance is available but not necessary in Costa Rica due to the laws of civil code. The buyer´s attorney should make a thorough title search prior to closing; after which, one can safely purchase the property. To pay a title company to perform the exact same task prior to closing is redundant and expensive. Still, Stewart Title Costa Rica has been providing title insurance and services giving peace of mind to thousands of U.S. clients as they have invested in Costa Rica Real Estate.
Titled Property Approximately 15% of all beachfront property in Costa Rica is fully titled and should be accurately and safely title-searched. We strongly recommend you hire a knowledgeable professional with legal training to perform and report the title search. This professional will be able to accurately, safely and thoroughly research and determine all relevant aspects on the specific property, such as ownership, liens, encumbrances, annotations as well as follow-up any required further steps.
Contracts in Costa Rica only state what is not regulated by law and are far less complicated than the common law contacts most foreigners are used to. Contracts should include:
1. Names and ID numbers of buyer and seller, whether held by a corporation or personally.
2. Description of the property, including boundaries and size (if known at time of sale), and all numbers identifying the property in the National Registry. Properties being subdivided from a larger property can be sold based on agreed upon boundaries, or based on the square meters of land to be divided off.
3. The total price in either colones or dollars, the deposit amount and the escrow account location. Escrows are usually held by one or both of the attorney´s prior to the sale. More …
4. The closing date or the period for the option.
5. An agreement to the payment of closing costs, taxes, bills, etc. Closing costs generally are split between the parties. (See Closing Cost)
6. Any other agreements, or clauses that apply to a land purchase contract are often achieved through an option to purchase. Options to purchase gives the buyer the right to purchase a described property in a set amount of time. Typically 10-20% of the purchase price is paid to the seller through a broker or attorney (after verifying the property can be legally transferred), for the purchase of the option. Most closings can take place in a matter of days if the property is already registered in the National Registry; however, most options are written for 30-90 days.
Closing costs for a sale include a land transfer tax, a stamp tax, and attorney fees, all of which are based on the price of the property being transferred. Closing costs and transfer taxes and fees typically run approximately 4.2% of the sale price, including the attorney fees for the transaction and registration. Closing costs are negotiable between the buyer and seller.
After the Sale
The purchaser should verify, through his broker or attorney, that the property was properly registered in the National Registry, and receive originals or copies of the documents showing all the proper stamps from the process.
The remaining 85% of beachfront in Costa Rica is concession property, or property leased from the government for a specific period of time. The first 50 meters from the mean tide mark cannot legally be built on by anybody, anywhere in the country, as it is considered public beach. Concession property would affect the 150 meters adjacent to these 50 meters of beach.