1. In a Costa Rican real estate transaction, there is no implied or legal fiduciary arrangement between an agent and a principal. This is true for real estate agents and attorneys. What this means in practice is that an agent or an attorney can represent both parties to a transaction and “double dip.” Coastal Realty will always inform you of any conflict of interest.
Real estate agents may also not be inclined to not share their exclusive listings with the hopes of representing both the buyer and the seller. Be sure to clarify when signing a listing agreement how the agent plans to communicate with the real estate community.
Be sure to clarify whether or not your agent and attorney may have a conflict of interest.
2. Foreigners have the same rights to property as nationals with the exception of concession land (typically found in coastal areas that were developed later than the 70s). Be sure you know whether you are purchasing the rights to the property fee simple or are purchasing a concession (lease from the government). Coastal Realty rarely offers concession properties, but will inform if you are viewing a concession property.
3. Properties are often bought and sold by transferring the shares of a corporation (C corp, LLC). This saves on transfer fees and keeps property taxes low.
4. Property taxes are .25% annually of the last transfer value or the assessed value. Read more about property and other taxes
5. Property ownership is recorded in the Registro Nacional, which is a publicly available database. Each property has an identifying number called a Folio Real.
6. Each piece of land has a registered survey (or series of surveys with the most recent being valid). The metes and bounds method is how they are recorded. The survey is called a Plano Catastro. It carries a stamp reflecting the date is was recorded with a unique identifier.
7. Condominiums are a recognized property class in Costa Rica and have unique folio reals for each unit.
8. Legal entities (Personas Juridicas) that are relevant to the ownership of Costa Rican real estate include:
- Sociedad Anonima – (SA) The equivalent of a C corporation in North America. This type of corporation has an identifier that begins with 3-101. This is a tax paying entity if actively conducting business including rentals.
- Sociedad Responsibilidad Limitada – (SRL or Limitada) The equivalent of a limited liability corporation in North America. This type of corporation has an identifier that begins with 3-102. This is a tax paying entity if actively conducting business including rentals.
- Condominium Owners Association/Home Owner’s Assocation – Many people do not administer this properly, but a condo association is actually a legal entity with a unique identifier beginning with 3-109. This entity does not pay taxes as it only exists to allocate expenses to the units.
9. Condominium associations are regulated by the section of the legal code of Costa Rica that is universally applicable. Each condominium also has its own bylaws that regulate matters that are open for interpretation such as late fees for payments. Condominium associations have an annual meeting and typically reelect a president, treasurer and administrator, which are positions with power of attorney to act on behalf of the HOA.
10. Land can be divided by various methods:
- Subdivision in an urbanization creates individual fee simple lots where construction is only restricted by local zoning. Each lot must have frontage on a public road.
- Creation of a horizontal condominium creates ownership of a piece of a property with an undivided interest in the common areas along with the obligation to pay fees for the maintenance of the common areas.
- Subdivision by creation of a agricultural parcels (Parcelas Agricolas) creates lots of minimum size of 5000m2 where construction is limited to 15% of the surface of the lot. Lots may be accessed by an access easement (servidumbre de paso).
11. Brokers and agents are not regulated positions from a legal standpoint in Costa Rica. There are two voluntary organizations that attempt to regulate the practice: CCCBR and CRGAR.
12. Commissions vary based on the property type and urgency of sale. The most common commission for residential properties in the Tamarindo is 6% plus VAT. Commissions are typically treated as deductions from the balance to be paid to the seller.
13. VAT or sales tax is 13% and applicable to real estate commissions (not total sale). Thus, 6% plus VAT equates to 6.78%.