The Purchase Process

Find out about the steps involved when buying a house or apartment in Costa Rica...

When a property has been found, the first step is to check the property's legal status at the Public Registry of Real Estate Property (el Registro, in Spanish). When a property is sold (or a lien is placed upon it) it must be recorded here, allowing the public to gain access. Registered information about the property includes: its registered owner, transfer deeds, size, boundaries, liens, public rights-of-way (servidumbre) and limitations. To protect against any possible lawsuits or irregularities, a prospective buyer should get a lawyer or notary to search the registry. Anyone can log on to the Registro site and search online for property information, using several search criteria including: the name of the owner (which may be a corporation), corporate number (cedula juridica), or property number (número de finca).

A typical property purchase begins with a signed purchase option (opción de compra) or letter of intent accompanied by a deposit. The deposit is held in escrow by a third party. The buyer then completes a due diligence process and verifies the property's legal status through the Registro. The buyer also checks with the municipality where the property is located to determine if back taxes are owed.

At sale, the property is transferred through a signed and notarised purchase agreement which must be recorded with the Registro. The buyer's lawyer should check to make certain the transaction has been correctly registered by the notary.

Property Transfer Tax, Notary Fees and Title Insurance

At the close of the property sale, transfer taxes must be paid to the state-owned bank, Banco de Costa Rica, which distributes them to several government bodies. Total payment for all taxes and fees is calculated at approximately 2.3 percent of the purchase price. The transfer tax (impuesto de traspaso) is 1.5 percent.

Prior to September 2012 there was no property transfer tax on the sale of corporations that owned Costa Rican property. As a consequence, many owners placed the title to their home in a corporation and then sold the home by selling the corporation through a stock transaction. A new law now taxes the property that is transferred in the sale of a corporation.

When the transaction is registered, the notary certifies that the payment was made. Notary fees are set by law and vary from 1 to 2 percent of the sale price, depending on the size of the transaction. It is customary for the seller and buyer to share the property transfer costs and taxes. However, this is negotiable, with the payer generally able to choose the attorney for the transaction.

Buyers may wish to protect themselves against claims challenging the validity of the property's title. Several companies offer title insurance in Costa Rica with fees averaging about 1 to 1.5 percent of the sale cost. These are usually paid for in total at the time of sale.

 

Disclaimer

Any statements concerning buying a property are based upon our understanding of current laws and practices in Costa Rica which are subject to change. While every effort has been made to offer information that is current, correct and clearly expressed the publisher is not responsible for the results of actions taken on the basis of information contained in this summary, nor for any errors or omissions. Readers are encouraged to seek professional advice concerning specific matters before making any decision.