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Costa Rica Real Estate Basics

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Real Estate Brokers and Agents in Costa Rica

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. Financial transparency is a core pillar of the company’s culture overall.

Real estate agents may also not be inclined to 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.

US Real Estate Brands Are NOT Run Using US Real Ethics Standards

Remax, Coldwell Banker, Century 21, Keller Williams, and other franchised brands seen in most US real estate markets do not generally adhere to North American rules of ethics from NAR or as required to be a licensee or broker in a particular US state.

In the Gold Coast, it’s not unheard of for agents or even franchise owners to solicit the rights to represent a seller and then bring an offer to which they are a silent partner on the buy side.Always ask how a particular real estate professional conducts themselves from an ethics perspective before assuming they have your best interests in mind.

Rights to Property in Costa Rica

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 you if you are viewing a concession property.

How Costa Rica Properties Change Hands

Properties are often bought and sold by transferring the shares of a corporation (C corp, LLC). This saves on transfer fees and has sometimes kept property taxes low as no new value is registered at time of sale.

Costa Rica Property Taxes

pool3Property taxes are .25% annually of the last transfer value or the assessed value.  Read more about property and other taxes

There is also a luxury tax on properties of higher values.

For many years, Costa Rica did not have a capital gains tax applicable to real estate. That changed and while properties owned prior can pay a one-time grandfathered in rate, the gain on sale of appreciated property is now taxable.

Costa Rica Real Estate Ownership Records

Unlike in the United States where counties generally manage property ownership records, property ownership is recorded in the Registro Nacional in Costa Rica, which is a publicly available database. Each property has an identifying number called a Folio Real.

Surveys

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 it was recorded with a unique identifier.

Condos

Condominiums are a recognized property class in Costa Rica and have unique folio reals for each unit as well as their own set of rules at the national level as well as individually within their bylaws. CRPM is in the process of documenting all of the Gold Coast area condominium developments. Find info already available on:

Ownership Structure

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.

Condominium Owner Associations/Home Owner’s Associations

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.

Methods of Subdividing Costa Rican Land

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 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).

Voluntary Real Estate Associations

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.

Note that while CRGAR has at times suggested that membership is also membership in NAR, members are not bound by North American ethics standards.

CRGAR statements about creating Costa Rica’s first MLS are also inaccurate. Many attempts to create MLS systems have been launched and failed since high-speed internet made it feasible in the early 2000s. Membership in CRGAR is not common in Costa Rica’s larger cites.

Costa Rica Real Estate Commissions

Commissions vary based on the property type and urgency of sale. The most common commission for residential properties in the Tamarindo area is 6% plus VAT.  Commissions are typically treated as deductions from the balance to be paid to the seller.

Sometimes commissions are higher on raw land or when developers are bringing lots of properties to market at the same time.

Many agents or brokers in the area are in the practice of accepting fees outside of the buy-sell agreement between the parties. Ask your agent or broker if they have ever or in the case of a specific transaction, have been offered fees by the other party that have not been disclosed.

How Value-Added Tax Applies in Real Estate Transactions

VAT or value-added tax is 13% and applicable to real estate commissions (not total sale price).  6% plus VAT equates to 6.78% of the sale price, typically reduced from the seller’s check at closing.

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