Building on Costa Rica Property
"Buying and Building on Your New Home Site"

Purchasing and Constructing on Costa Rica Real Estate



Before anyone makes their first true shopping adventure into the Costa Rica Real Estate Market they need to have a basis knowledge of what is involved in the entire process, from making an offer on a parcel of land your building permits. Hopefully this brief outline will assist the first time buyer as well as the experienced buyer who had problems on a previous real estate transaction.

DO NOT quit learning after reading this brief, which is only furnished to give you, the buyer, a general knowledge of part of the process. This is a compilation of known problem issues we have seen in past real estate transactions, including our own. I highly suggest reading this and any other similar material to familiarize yourself with the basics BEFORE finalizing any purchase or starting construction on any Costa Rica Real Estate.

Have a Title Check Performed, get title insurance and talk to the neighbors

We reccomend that any real estate purchaser should use Stewart Title to perform a title check and write a title insurance policy before finalizing any Costa Rica real estate transaction. Assure the report contains, as a minimum, the following information on any property you are interested in purchasing.

   ¤  The name of the current Tile Holder - make sure it agrees with who you are dealing with
   ¤ A copy of the National Register report for the specific property involved
   ¤ Maps, plans and related records from the National Registry
   ¤ A recent tax appraisal
   ¤ A record of outstanding tax payments or any record affecting the title opinion
   ¤ A copy of any recorded liens or mortgages

Check with the neighbors to ascertain if the current title holder has been in possession and occupying the property for for at least the last three years.

Satisfy yourslf that you are not purchasing property that has a tenant. ALL house rentals or leases in Costa Rica run for a minimum of three years, regardless of the terms in a written or verbal contract stating that a shorter lease or rental agreement has been agreed upon.

If the present owner has not held title to the property for at least thiry-six months consult with an attorney regarding the possibility of having an objector to the sale coming forward during a three year period after you acquire title.

Transfer of Ownership

If you are purchasing oceanfront property or real estate along a river you need to ascertain if the property lies in the Maritime Zone or is located within a restricted zone along the river. If it does you need to ascertain without a doubt if the real estate in question is Maritime property or titled property (very little oceanfront property is titled).

If the property is in the Maritime Zone you will need to take numerous steps to ascertain the true status of the land in question. I highly suggest you contact us for a free indepth discussion and reference to an attorney well versed in transfers of Maritime Zone real estate. I can avow that very few Attorneys in Costa Rica have a cup full of information or history in transferring Maritime real estate, and many who do have grossly erred in the process costing their clients thousands in unnecessary expense.

If you are purchasing titled property the transfer is very straight forward and must be completed by a deed transfer. You will want your attorney to preside over the transfer and notorize all associated paperwork in the presence of both you and the seller. Be sure you have read the information above before reaching this point in the sale.

The process of picking an attorney to transfer ownership in Costa Rica seems to adhere to the following scheme.

   ¤  If are are not financing the sale using owner financing you have the right to select an Attorney of your choice.
   ¤ If the seller is financing 50% or more of the real estate sale, he has the right to use an Attorney of his choice.
   ¤ If the seller is financing a lesser amount he may request additional documents, but he should pay for the duplicated expense.

Closing Costs on Costa Rica Real Estate Sales

Closing costs are generally shared by the buyer and seller. DO NOT do as I did. I failed to obtain a written agreement stating this understanding. At closing the seller refused to share any part of the closing costs. Leaving me two options, pay 100% of the costs or stop the purchase. I ended up paying all legal fees, government transfer fees and taxes; a costly error on my part.***NOT FINISHED

Expect to share or negotiate payment of the following fees:

   ¤  A transfer tax equal to 3% of the "stated " registered value of the property. - NOTE The word "STATED"
   ¤ Documentary Stamps 0.55% of the "stated" sales price
       Public Registry fee of 0.50% of the "stated"value on the documents

Notary Fees based on the actual sales price
      ¤ 1.5% of the first 5 million Colones PLUS
      ¤ 1.25% of the excess

If the real estate is Mortgaged the buy will be responsible for paying additional 0.5% to 1% of the actual selling price.

These are the minimum fees that may be charged by the Notary. Under certain circumstances (with client approval) the notory may charge more.


The Building Process

The laws of Costa Rica law requires that all building permit applications must be submitted by a Costa Rica licensed architect or engineer. It would be extremely counter-productive to start this process without first hiring a licensed architect / engineer to assist you during this process. The only exception to this is for buildings or structures of less than approximately 735 square feet.

Fees for Architect and Engineering Services

The Association of Engineers and Architects has set up a system whereby the allowable charges are tied directly to the value of the  construction. The fee structure is presently set as follows:

   ¤ Preliminary studies 0.5%
   ¤ Pre-project design 1.0 to 1.5%
   ¤ Construction plans and preparation of technical specifications 4.0%
   ¤ Preparation of a materials and construction budget 0.5 to 1.0%
   ¤ Construction and project supervision on a weekly basis3%
   ¤ Supervision of the project on a daily basis 5%
   ¤ Total project oversight and management 12%

For projects where the Architect or Engineer must be away from home expect to pay a Per Diem and car allowance for the applicable time spent on your construction.

You can alway pick and choose which portions of the work you are willing to oversee and assume responsibility for project completion standards.

Acquiring the Construction Permits

As a minmum permits applications must be requested from the local agencies responsible for housing, electric and telephone service, water service, health and engineering services. Inquire locally to ascertain if permits are required at a level above the local municipality.

If you are planning to construct a single family home larger than 735 square feet you will have to provide the following documents:

   ¤ Four copies of the construction plans
   ¤ Four copies of the property plot plan showing the building in relation to the property boundaries
   ¤ Four copies of a permit check list
   ¤ Two copies of your property deed
   ¤ A copy of the written contract with your architect
   ¤ The approval from the water company
   ¤ A copy of your approved electrical design plan

Real Estate Offices in Golfito and Playa Zancudo
English and Spanish - Inglés y Español
Phone Costa Rica Country Code (506)  +   2776 · 0168
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