... Buying? Building? Here's what you need to know
(Part 1: Buying) ...
by Lic. Roger A. Petersen
Attorney At Law
Author of The Legal Guide to Costa Rica
Buying property
and constructing buildings or a home can be an intimidating process, even
when you are at home in the culture and know what to expect and plan for.
In a foreign country, the same processes can be downright frightening.
In a new setting, you need to learn what the usual way to go about things
is and also who is legally and ethically responsible for what-in other
words you should invest some time in learning how things work and how
to protect your investment.
Fortunately,
in Costa Rica there is a defined process through which an intelligent buyer
and builder should proceed. In addition, there is a licensing body for
architects and engineers, which also sets standards for fees should you
decide to build. But let's start at the beginning.
I want
to purchase property in Costa Rica. What is required?
So you've
found, either through a real estate agent or your own searches, a piece
of property that is perfect for you. Once you have negotiated a sales price
and the seller has accepted your offer, then the legal procedures for transferring
ownership of title begin.
How is
title transferred?
In Costa
Rica, property is transferred from seller to buyer by executing a transfer
deed (escritura) before a Notary Public. Unlike common law countries, such
as the United States and Canada, where the role of the notary is limited
to authenticating signatures, in Costa Rica the notary public has extensive
powers to act on behalf of the state. The notary public must be an attorney
and she or he may draft and interpret legal documents, as well as authenticate
and certify the authenticity of documents.
In order
to close on the property, the buyer and seller must select a notary/attorney
who will draft the transfer deed and register the sale in the Public Registry (Registro Nacional). The local custom is that the buyer may select his
or her notary/attorney to draft the transfer deed if paying cash for the
property. If the purchase price is financed, there are generally three
alternatives for selecting the notary/attorney.
1. If a large
percentage of the purchase price is being financed by the seller and a
mortgage needs to be drafted to guarantee payment, then the seller may
request that her or his notary/attorney draft the transfer deed.
2. If a property
is purchased 50 percent cash and 50 percent financed, it is common for
the buyer's attorney and seller's attorney to jointly draft the transfer
deed and mortgage in a single document. This is known as co-notariado.
3. Finally,
the buyer nay insist that his or her notary/attorney draft the transfer
deed and let the seller's notary/attorney draft a separate mortgage instrument.
In this case, because the mortgage is being drafted separately, it carries
a higher registration fee. The registration fees are discussed below in
the section on closing costs.
At your option,
the property can be purchased in an individual's name, jointly with other
persons, or in the name of a corporation. the decision as to ownership
should be based upon your particular situation and after consultation with
your attorney.
How can
I ensure that I have clear title to the property?
Costa Rican
law requires that all documents relating to an interest and/or title to
real property be registered in the property section of the Public Registry
(Article 460 of the Civil Code). Most properties have a titled registration
number known as the folio real, and the records database can be searched
with this number or by name index. The Public Registry report (informe
registral) provides detailed information on the property, including the
name of the title holder, boundary lines, tax appraisal, liens, mortgages,
recorded easements, and other recorded instruments that would affect title.
Since Costa
Rica follows the doctrine of first in time, first in right, recorded instruments
presented to the Public Registry are given priority according to the date
and time in which they are recorded. Obviously, every situation differs
and in some cases a review of the Public Registry record will not be enough
to uncover all encumbrances. That is why it is important that the buyer
have her or his own attorney conduct an independent title search and investigation
rather than rely on the seller's attorney.
How about
closing costs?
The general
custom is for the buyer and seller to share equally in the closing costs.
this can be modified by agreement and usually depends upon the particular
transaction. Closing costs involve three things: government taxes and fees,
notary fee, and mortgage costs, if any.
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