Here we address the FAQ’s and essential aspects of purchasing and owning real estate. We are here, with you, 100% throughout the entire process, start to finish, and beyond.

1. Can Foreigners Buy Real Estate in Costa Rica?

Absolutely. Whether you’re a legal resident of Costa Rica or not, the doors to property ownership are wide open. Your passport serves as your primary identification throughout the initial acquisition process, whether you’re looking for a retirement haven, an investment property, or a commercial venture.

2. Property Ownership in Costa Rica

All real estate properties in Costa Rica are meticulously documented in a centralized system at the National Registry known as Folio Real, which acts as the property title number. As part of the legal due diligence, your attorney will perform a title search in the public National Registry. The National Registry, headquartered in San José, is the authoritative body responsible for maintaining records of all titled properties in Costa Rica. This digital repository holds registered surveys, certifications of property, corporate documents, etc.

3. Cash is KING!

Financing options are available within Costa Rica, but the rates and terms are most likely much less attractive than you are accustomed in your native country. Rates can be anywhere from 6% to more than 14% with at least a 50% down payment. Therefore, organizing your purchase funds prior to visiting Costa Rica is highly recommended. Knowing the source of funds you will utilize to fund your purchase is important homework to complete upfront, whether you will draw the funds from income savings, from the sale of an existing property (investment or primary residence) withdrawal from or against a 401K, from an IRA fund, from a HELOC (home equity line of credit), etc.

4. Making an Offer

When making an offer on a property in Costa Rica, your initial offer will be in an written format, simple 2 page document, clearly stating all basic terms and conditions. Once both parties agree on an offer, a Costa Rican attorney will draft the official purchase and sale agreement. This agreement serves as the legal document governing the transaction. It’s customary for the buyer to deposit the agreed-upon amount (10% of the purchase price) into an escrow account upon signing the agreement.  When you make an offer, we will provide you with a spreadsheet of estimated closing costs.

5. Retaining a Costa Rican Real Estate Attorney

Engaging a seasoned real estate attorney is crucial for ensuring a smooth property transaction. We recommend a portfolio of local attorneys, each with the additional credential of a Notary Public (Notario Publico), as they are vital for certain transactions. In Costa Rica, a Notary Public is distinct from North America, requiring the individual to be an attorney who undergoes specialized training and examination to attain this status. Only a Notary Public can record a property purchase in the National Registry. 

6. Opening an Escrow Account

You will open a Costa Rican escrow account (E&T) once the initial offer is accepted.  The escrow agent will communicate a list of the specific documents required which are typically; 6 months of bank statements, previous income tax statement, if the money you're using to purchase came from sale of a property or cashed investments (401K) then those statements need to be sent also. The Escrow company will detail all of these instructions you need to complete, along with the instructions to wire the 10% deposit.  You can open the escrow account once you have returned to your home country, it can all be done by email, and then the deposit wired from your bank to the escrow account.The Escrow company will confirm their fees which are typically $1,000 US. Your real estate attorney and escrow agent will guide you through the steps to ensure a smooth transaction. When engaging in real estate transactions in Costa Rica, it’s crucial to be aware of the ‘know your customer’ (KYC) process. The KYC form is a standard requirement in the country’s banking industry. This form might appear intrusive, but it’s a necessary step to ensure transparency and adhere to Costa Rica’s strict money laundering regulations. By understanding the significance of the KYC form, buyers and investors can be better prepared for its requirements and navigate the process with ease, ultimately contributing to the country’s efforts to combat money laundering.  Once your account is open, you will wire the initial deposit to the account.  Finally, once the purchase of your property is ready to close, you will receive a financial closing statement from the escrow agent, detailing every line item of the purchase cost, with a final amount you will wire to the escrow account in order to fully fund the purchase.

7. The Due Diligence Process

Due diligence begins when the Sales & Purchase Agreement has been fully executed. It includes legal verifications of the corporation holding the property, which is a necessary step of the real estate buying process in Costa Rica. If there are any liens or embargoes on the title of the property, your lawyer will request that the seller clear them out before proceeding with the purchase of the property. Your real estate agent and attorney will help you understand all tax rules and regulations that apply to the property.

A combined team effort of realtor and attorney partner together throughout the purchase process, on your behalf, to coordinate and conduct a variety of Due Diligence studies indicated below.  We are your boots on the ground here in Costa Rica once you have returned to your country of residence after the tour.

Property hunters and real estate agents typically notice cosmetic defects when walking through a property. The purpose of the due diligence process is to do a thorough inspection of all of the details of a property. In a home, this will include plumbing, electrical, foundation, and roof integrity, a home inspection is conducted by a qualified inspector, whom produces a 20-30 page written report including photographs and comments on all existing structures found within a property. The cost of an inspection report for an average 2,500 ft2 home is $850.

On undeveloped property (raw land), you will want to obtain a soil test ($1,000+), check if utilities are available, and confirm that you can easily obtain a construction permit in future. All types of properties require boundary verifications to be completed by a topographer ($450+).

If you purchase in a condominium or a gated community, for instance, the attorney will obtain written documentation regarding the cost of annual fees and exactly what is covered by these fees. A thorough title search reveals vital information such as property ownership, boundaries, location, and any existing mortgages or liens.

Access to public utilities (water, electricity, internet) etc are also confirmed by the attorney during the due diligence process.  Post closing, the attorney will transfer the ownership of those utility accounts to you.

8. Choosing the Right Ownership Structure for Your Property

Properties can be owned personally under your name & passport #, this is sufficient for a primary residence and if you plan to live in Costa Rica full-time.  If you plan live in Costa Rica part-time, or purchase as an investor, holding the property in a Costa Rican corporation is the correct route to ownership. 

Your real estate attorney will offer guidance on how to register your corporation in Costa Rica. You can register it in your name, jointly with a spouse or business partners. Discuss the legal aspects of these options with your attorney to determine the best fit for your situation.

Quick facts for owning a corporation for real estate in Costa Rica:

Types: Two primary corporation types are Sociedad Anónima (S.A.) and Sociedad de Responsabilidad Limitada (S.R.L.)  S.R.L. is more common for simple asset holding (a primary residence or raw land), while S.A. is for complex businesses/investments and sometimes recommended for income-generating properties.  In either case (SRL or SA) you may use a number for the name of the corporation (randomly generated by the government system) or you may choose a specific name which your attorney will conduct search in the National Registry to confirm the name is available for use.  Creating a numbered corporation is slightly less expensive, approximately $1,000 vs named approximately $1,500. This option is entirely your choice.

Opening: Incorporating a company requires two incorporators appearing before a Costa Rican Notary Public, and a company can be owned by a single individual after registration.

Annual costs for corporations:

Company Tax is around $115 by January 31.

Shareholder and Beneficial Owner Disclosure Form (form D-101) is around $200 by April 30.

Annual shareholder meetings must be held and recorded in the shareholder minutes book.

Power of Attorney: Owners may confer a Power of Attorney for certain acts on behalf of the corporation, typically before a Notary Public.

Advantages:

Corporate Personality: A corporation is legally recognized and needed for various services.

Limited Liability: Members’ liability is generally limited to their contributions.

Perpetual Succession: A company remains the same entity even with changes in members.

Transferable Shares: Shares can be sold or transferred.

Earning Income: Easier for businesses and permits.

Opening a Bank Account: Simplified with a corporation.

Dissolving: Can be done but may incur transfer taxes and capital gains taxes upon sale.

Consider the benefits and requirements when deciding to use a corporation for real estate in Costa Rica.

9. The Closing Process

Closing involves a meeting between you, your real estate attorney, the seller and their attorney, the realtor(s), and the escrow agent, to execute the necessary closing documents. Your presence, as the buyer, is not absolutely necessary. If you won’t be present in Costa Rica for the closing, you will designate a power of attorney (your realtor or someone within your attorneys’ team) to represent you.  Your attorney will provide proxy letter which you as the shareholder(s) of the corporation will sign, authorizing a third person also by means of a special power of attorney to execute the closing documents on behalf of the company.

10. Annual Taxes and Additional Costs of Property Ownership

As a property owner in Costa Rica, you will be subject to an annual real estate property tax, amounting to 0.25% of the property’s registered value. During your due diligence, your attorney will help you navigate the tax regulations and other potential costs related to your property:

Condominium fees: If you’re part of a condominium or gated community, you receive comprehensive documentation outlining fees and their coverage.

We always recommend our clients obtain a home insurance policy which includes coverage for any damage caused by acts of nature. Separate and additional coverages can be obtained for contents. In the case of income properties, when a structure is being inhabited by tenants, we recommend a liability policy that protects the homeowner and provides coverage for any potential personal injuries.

Beyond this, typical ongoing maintenance is involved for your property, again whether land or a home. If raw land, we recommend having a service that will maintain your property boundary lines annually, with perhaps 2-4 other visits to keep the property clear and maintain your views intact (whether mountain or ocean). In the case of home ownership, the costs for gardeners and housekeepers is quite affordable and recommended, as they are experts on the care and keeping of homes & gardens in this climate.