FAQs About Building Your Own Home in Costa Rica

 

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Building Your Own Home in Costa Rica Buying Property in Costa Rica Squatters Rights in Costa Rica Real Estate Regulations in Costa Rica Conversion of Measurements

Tips:
Good contractors do exist. Check around. Look for an experienced construction firm that can assist you with permits as well as building. Interview several companies; ask lots of questions.

Make sure that the attorney has done the proper title research confirming that the property is suitable for construction.

Spend as much time as you can on the site; get involved in the building process. This is as near as you'll get to a guarantee that your house doesn't break the bonds of its blue print and become a huge, money eating monster, devouring your bank account, your credit rating and what remains of your sanity.

Hint:
To keep control: dole out the cash to the contractor. Give him what he needs to buy materials. Pay him a bit at a time as the job progresses so the workers will be inspired to do quality work and to finish on time.
 

How do I Research the Property? Do I Need to Hire an Architect or Civil Engineer? How much does an Architect cost? How do I Control the Costs for Construction and Project Supervision? How do I get a Building Permit? How Long Is This Going To Take? How Much will it Cost in Total?  What are a few good House Building Tips? What are the Coastal Building Regulations? What are the 1996 Construction Statistics? How about some Final Tips?

 

Q.  How do I Research the Property?

You may hire an attorney to do the research for you or you may want to do it yourself. First, do a title search. Go to the Registro Publico and request a photocopy of the records of the property you are interested in buying. This will cost you about $1. Make sure you have the name and ID number of the owner of the property prior to your visit to the Registro Publico.

Study the official records carefully, checking for snags in the ownership of the property. Look for liens, mortgages, annotations, lawsuits against the property, public road restrictions, water easements, utilities restrictions or any other type of restriction.

Request the sellers to provide you with the latest version of the property map. This will give you measurements, boundaries and topographic details of the property. If they don't have an official map, you can get one at Catastro Nacional (National Cadastre Office). Cost: about $2. Make sure the official description of the property is consistent with the property itself.

If no map exists, have a registered surveyor draw a property map and register it at the Catastro Nacional. The process can be completed in two to four weeks.

Make sure that the property is not included in a national park or reserve. Search for national park restrictions in the Ministerio de Recursos Naturales, Energia y Minas (Energy, Natural Resource and Mine Department), in the Servicio Nacional de Parques (National Park Service). Also, check with the Direccion General Forestal (Forestry Department) to make sure you can use the property without breaking any forestry laws.

Make a close, personal inspection of the property, note the boundaries, the location and condition of fences and/or property markers. If you think it's necessary, bring in a surveyor to look things over.

Ask for information about your neighbors.

Study the conditions and amenities of the property, things such as topography, electricity, water drainage, telephone services, restrictions on land usage.

Check the property records at the Ministerio de Obras Publicas y Transportes (Roads and Transportation Department) to make sure the county isn't planning to blast a freeway through the living room of your new home.

Look in at Ministerio de Salud (Heath Department), Instituto de Vivienda y Urbanismo (Housing and Urban Development Department) to review the master zoning plans. Check local municipality and Forestry Department plans for land usage restrictions.

 

Q.  Do I Need to Hire an Architect or Civil Engineer?

By law, all applications for construction permits must be filed by an architect or civil engineer who is a member of the Costa Rican Association of Engineers and Architects (Colegio Federado e Ingenieros y Arquitectos). These experts will review your plans to ensure the building meets seismic, electrical and other regulations standards.

 

Q.  How much does an Architect cost? 

Here are the minimum rates charged by members of the Costa Rican Association of Engineers and Architects:

Preliminary study of construction plans and permits,: 0.5% of project cost.

(Such a study may or may not be required, depending on the project.)

Pre-project design: 1% to 1.5% of the price of project cost.

If the architect meets with you to discuss your needs, provides you with drafts of site planning, reviews construction plans and technical specifications of the project: 4.0% of project cost.

Once you have agreed with the layout and design of the property, the architect will draw up the plans. These will include a site plan, distribution plan, elevation and transversal and longitude perspectives, roof design and drainage, design of footings and support beams, structural plans, electrical design, mechanical and sanitary system design, interior finishing and construction. He will provide you with a list of materials necessary for the project, and will prepare a construction budget.

Figure 0.5% of project cost for global budgeting; 1.0% for itemized budgeting.

 

Q.  How do I Control the Costs for Construction and Project Supervision?

Costa Rican Regulations require one of three types of supervision
 

1.  Inspection:
The engineer or architect visits the site once a week, inspects to make sure that the plan is being followed by the general contractor, informs you of the quality of materials being used, and checks the invoices submitted by the general contractor.
Cost: 3% of total construction costs.


2.  Supervision:
Engineer or architect visits your site daily and is more directly involved with the construction.
Cost: 5% of total construction costs.


3.  Management:
Engineer or architect steps in to manage the project.
Cost: 12% of total construction costs.

Before signing any of these contracts make sure that you have a thorough understanding of its contents.

Hearts are broken less by malice than by miscommunication.

 

Q.  How do I get a Building Permit?

You must get a construction permit to build a house of more than 70 sq./m. (750 sq./ft.)

You or your architect must file for permits at the Oficina Receptora de Permisos de Construccion (Permit Reception Office). The plans will be studied by representatives from the MOPT (Roads and Transportation Department), INVU (Housing and Urban Development Department), ICE (Electricity Department), AYA (Water Department), SNE (National Electrical Services), CFIA (Costa Rican Architect and Engineer Association), the Health Department and the local municipality where the property is located.

You will need the following:
 

Four copies of the construction plans Four copies of the property cadastre plan (plano catastrado) Two copies of the property deeds One copy of the architect or engineer's consulting contract (Contrato de Consultoria) Approval from the water department regarding availability of water One copy of your electrical design plan approved by SNE. Condominium, commercial construction or urbanization projects require additional permits. Local Building Permits   IMPORTANT: In addition to the permits listed above, you will need a construction permit from the municipality where your property is located. Each municipality creates and enforces building codes for construction projects in its area.   Q.  How long is this going to take? Property research, first draft 6 1/2 weeks Construction plans:  6 1/2 weeks Building permits: 9 weeks Construction: 33 weeks Total: 55 weeks

 

Q.  How Much will it Cost in Total?

Building a house in Costa Rica is going to cost about $315 to $540 per sq. meter ($29 to $50/ sq.ft.) depending on the quality of work and materials.

So, consult your calculator and you discover that you can build a home large enough to lie down in without hanging your feet out the window (say, 10 by 20 m., or 32 by 64 ft.) for $73,000 to $108,000, not counting land costs. By European or North American standards, that's quite a bargain price, especially if your new home is built on a palm-studded hillside, bathed by tropical breezes, perfumed by sea air with no snow to shovel. Then the price seems a bargain, indeed.

 

Q.  What are a few good House Building Tips?

A. Check for neighborhood zoning laws. In order to maintain local standards (and property values) some locales set down strict rules for style and quality of construction.

B. You cannot built a house within 50 to 100 meters (164 ft. to 328 ft.) of a river.

C. In most locales, you must to leave space for a front yard and a sidewalk.

D. Housing developers keep in mind that Costa Rican law allows you to dedicate only 60 to 70% of your land to be used for building lots. 20% to 25% will be used for property for roads and 5% to 20% for parks.

E. If you have a nice view from your property, play it smart. Buy the land around it.

F. Contractors get a discount on materials. It is always a temptation to build with the stuff that gives them the best markup. Check up on them. Make sure they're using the materials agreed upon.

G. Along both coasts, the first 200 meters (656 ft.) above mean high tide is owned by the government. No building is permitted within the first 50 meters (164 ft.) above mean high tide.

H. The area 50 meters (164 ft.) to 200 meters (656 ft.) above mean high tide may be leased from the local municipality with the approval of the Instituto de Turismo (Costa Rican Tourist Board). Ostensibly, foreigners cannot, legally lease property in this area. However, a clever or desperate person can find ways to circumvent these laws.

I. The ICT discourages the building of anything over three stories high in beach areas.

 

Q.  What are the Coastal Building Regulations?

The Maritime Zone runs for more than 1,500 km. (932 mi.) along both coasts. More than one third of this (590 km. (367 mi.) is open to legal development. The rest is invested in mangrove swamps, National Parks, mouth of rivers and other protected areas.

Most of this land is already developed, most of it illegally. Only a small fraction is still open to development. For instance, the local municipality of Santa Cruz, Guanacaste has leased to developers 40% of the 50% of the land allotted to it in the Maritime Zone.

According to the law, land can be acquired only through temporary 5-20 year concessions, and must be developed according to a detailed regulatory plan consisting of a zoning plan, showing what is going to be built and where, and a construction implementation framework, showing in detail how all this is going to be handled.

The regulatory plans must be approved by
 

A. The local municipality; B. The Costa Rican Tourist Board, and C. The Housing and Urban Development Department (INVU).

Currently, only three hundred building concessions are recorded in the Registro Publico, and only two hundred of these are current and in accordance with the law. However, there are fifteen THOUSAND hotel and tourist developments along Costa Rica's coasts which received government approval but, for mysterious reasons, were able to bypass planning controls required by law.

Most coastal lands under concession are leased at very low prices.

Most beaches are not regulated. Only a few have even been surveyed.

It has been a common practice, through bribery or influence, to take beach land illegally. The land is then sold to foreign investors who believe they are taking legal title to the property.

 

Q.  What are the 1996 Construction Statistics?

Two recent investors: 

Intel spent $500 million to build a 24,000 sq. m. (258,240 sq. ft.) assembly plant in Heredia and Panduit, an American manufacturer of stick-on materials has built a 13 hectares (32.1 acres) facility in Grecia.

 

Q.  How about some Final Tips?

1. Get a bilingual Costa Rican friend to talk to sellers about property and prices. Foreign accents raise prices.

2. Do not be satisfied with the Registro Nacional Records. Explore the property yourself. Check out real estate price in the area. Talk to the people at the local pulperia or grocery store

3. Negotiate in colones

4. If you rehire people who worked for the previous owner, make sure he paid them properly. You, as a new owner, could be liable for sins of the past.

5. Hang onto your telephone lines. They're hard to come by.

6. Keep in mind that your real estate investment may be affected by inflation, devaluation of colon and by the exchange rate of your currency.

7. If you are a landlord, you can evict tenants only if you can prove that you need the property for personal use. You cannot evict tenants as long as they pay their rent on time. By law rent can be increased only by 15% annually unless stated otherwise in the lease.

 

FAQs About Buying Property in Costa Rica

This is not an investment you want to leap into blindfolded. There's too much money involved and too many things can go wrong. Here are a few answers to questions before you leap.
 

How do I Locate a Reliable Attorney? How do I Research The Property Information? How do I Write a Transfer Deed? What are the Closing Costs? How do I Register The Transfer Deed?

 

Q.  How do I Locate a Reliable Attorney?

Ask someone you trust to recommend someone they trust. Your country's embassy or one of your consulates might have some suggestions to offer. The Costa Rican-American Chamber of Commerce is worth a call.

 

Q.  How do I Research the Property Information?

Request your attorney to conduct a title search at the Registro Publico (Public Registry) about the property you want to buy.

By law all properties must be registered in Registro Publico. Most properties have a title registration number called the "Folio Real." Once you have this number you can search the database. The Registro Publico's Report, called the "Informe Registral," contains information such as the name of the title holder, boundary lines, tax appraisal, liens, mortgages, recorded easements, and other records that could affect the title.

Costa Rica follows "first in time, first in right" rule. Additions to a property title are prioritized according to the date they were recorded. So make sure your attorney searches your title back to the beginning. You're laying out a lot of hard earned money for this house, God forbid you should wake up one morning to find some smiling fool standing on your porch, waving a long-lost mortgage-from-hell under your chin, announcing that you have until four o'clock to pack your traps and be on the train back to Anaheim.

 

Q.  How do I Write a Transfer Deed?

This is the document that transfers ownership of the property. The transfer is made with the buyer and seller signing the transfer deed (called an "escritura") in the presence of an attorney. The attorney then drafts the transfer deed and registers the sale at the Registro Publico.

Custom dictates that if the buyer pays in cash, he selects the attorney to draft the transfer deed. If the purchase is financed, then the transfer can be made in various other ways.

A. If a large percentage of the purchase price is financed by the seller and a mortgage needs to be drafted to guarantee payment, the seller's attorney may draft the transfer deed upon seller's request.

B. If a property is purchased 50% cash and 50% financed, the buyer's attorney and seller's attorneys can draft the transfer deed and mortgage in a single document. This process is called a co-notariado.

C. Buyer may have his attorney write the transfer deed and let the seller's attorney draft a separate mortgage instrument. Since the mortgage agreement is being drafted separately, registration fees are higher.

 

Q.  What are the Closing Costs?

By custom, buyer and seller split the closing costs, but the split may be adjusted up or down to fit the occasion.

In any case, you just paid out a bundle of money for your new home. You signed the papers. The place is yours. But don't put away your wallet just yet. Open the door and peek down the hall. You'll find a line of people out there, each with a grin on his face, each holding up a palm the size of a tennis racket.

What they want is –  Taxes

Take a deep breath.

You must buy Documentary Stamps – Agrarian, Hospital, Municipal, Bar Association, National Archive and Fiscal – totaling 0.55% of sale price. You must pay a Real Estate Transfer Tax at 3% of the sale price and a Registration Fee of 0.5 % of sale price

Plus

Notary Fees
1.5 % of the first $5,000 (million colones) and 1.25 % of the balance

And

Mortgage Registration Fees
Usually, the person getting the financing pays for the costs of drafting and registering the mortgage instrument. A mortgage may be issued at the time of the sale by adding a mortgage clause to the transfer deed. A mortgage within a deed costs 0.25% in registration fees and approximately 0.53% in documentary stamps. For drafting the document, the notary receives between 0.5% and 1.25% of the amount of the mortgage.

The good news

It is customary in Costa Rica to register a property at a figure far less than its actual sale price. All transfer taxes and fees discussed above are figured as a percentage of the reduced sale price -- with the exception of the notary. He or she drafted the documents. He or she knows exactly how much money changed hands. He or she collects the full .5 to 1.25% of the mortgage.

Consult your attorney about further consequences of these practices.

 

Q.  How do I Register The Transfer Deed?

To register your transfer deed you or your attorney must bring to the Registro Publico (Public Registry) the following documents:

A. Proof of payment of all taxes and registrations fees
B. Certifications issued by: a) Finance Ministry, confirming that all seller's property taxes were paid; and, b) the local Municipality, stating that buyer and seller are up to date on municipal taxes.
C. Proof that all prior mortgages, liens and judgments (if any) have been resolved


Once all fees are paid, make sure that the attorney who drafted the transfer deed registered it in the Property Section of Registro Publico. It should be registered by the Registro Publico 45 to 60 business day after presentation. Check with the notary to make sure the deed has been properly filed.

Hint: Before you buy the house check conditions of the house during dry and rainy season; talk to the neighbors and ask them if they know of any problems in the house.

 

FAQs About Squatters Rights in Costa Rica
 

What are Squatters Rights in Costa Rica? How do I Avoid Problems With Squatters?

 

 

Q.  What are Squatters Rights in Costa Rica?

According to Costa Rican law, a person can acquire rights to a property if the property owner allows that person to use or maintain possession of the property for more than a year. Once the property has been acquired it can't be taken away, except for reasons such as eminent domain, and then only with proper compensation.

If a person has held possession of a property for at least ten years, that person can go to court, claim full ownership of the property and register the property at the Registro Publico

If a landlord does not take action to evict squatters during the first three months of their invasion, then squatters may not be evicted at all. If the landlord does not take action within a year, the squatter has a right to demand compensation for any improvements he has made to the land.

If you have squatter problems you must act promptly, before the third month of the date the squatter moved in. You need to start an Interdicto (a civil procedure), or level criminal charges, called Usurpacion. Delay may cost you dearly in red tape and legal procedures.

 

Q.  How do I Avoid Problems With Squatters?

Study the title of your property as it is registered in the Registro Publico. Review the ownership status of the property to make sure that ownership and the possession rights are not challenged in a local court. Remember, just because the property is registered, it does not mean that no squatters have infested the land or that other situations might not exist which affect the ownership.

For example:

Study the legal conditions and rights of any worker living or hired by the former property owner. Make sure these workers were properly compensated by the former owner. If you buy the property and rehire the current workers, write a contract citing the date of hire, wages, benefits and conditions of employment, stating unequivocally he or she is a worker and not a possessor.

Make sure the property does not look abandoned. If you buy land that is registered on the National Registry, hire someone to take care of the property and to inform you if squatters are encroaching on the property. However, be very careful! Caretakers may be able to claim rights to the land if they have been living on the property for a certain length of time.

To avoid squatter battles, keep good books, and keep t receipt when you pay the caretaker. You will avoid hassles if you register the person as an employee. (You will need to pay minimum wage, plus Social Security.) Also, it wouldn't hurt to have a friend look in on your property while the caretaker is working.

If squatters invade, this is what you have to do

A. Shoo them away within three months of their arrival.
B. Establish the exact date of the invasion.
C. Document your ownership of the property.
D. Record the squatters with a video camera
E. Have the local Rural Guard come to your property to inspect it and describe the conditions in writing.
C. File the dates with a notary public


If more than the three but less than twelve months have passed since the invasion, you need to undertake administrative eviction. You must file prove the date of invasion, and produce property registries, bills of sale and other documents to prove you are the rightful owner.

If more than a year has passed, you will have to go to court.

 

FAQs About Real Estate Regulations in Costa Rica

General Information How do I Register a Property? What are the Zoning Laws? How are Real Estate Broker Licenses issued? How much are the Taxes? Can I buy Beach Front Property?

 

General Information

In matters of land and property ownership, foreigners and Costa Rican citizens have equal rights under the law (unless the owner bought the land as part of a government program). In these cases, the land can be traded or sold to foreigners only after the original owner has held it for certain period of time.

Foreigners do not have to live in Costa Rica to own property here.

 

Q.  How do I Register of a Property?

Costa Rican properties are registered at the Registro de la Propiedad (Property Registry) which keeps track of all the title registrations. It is a great resource for verifying the status of a title or claim associated with a property.

If you wish to buy land in Costa Rica it is wise to either hire a lawyer or go yourself to the Registro de la Propiedad to search the title and verify that there are no liens against the property or the property owner(s).

Once you buy a property, you need to make sure the sale is properly registered at the Registro de la Propiedad, proof that you are the new legal owner.

There is no local financing for property purchased by foreigners.

 

Q.  What are the Zoning Laws?

Building and subdivision plans must be:
 

A. Signed by a registered local engineer B. Approved by the local Ministerio de Salud (Health Department) C. Approved by the Instituto de Vivienda y Urbanismo (INVU) (Housing and Urban Development Department)

 

Q.  How are Real Estate Broker Licenses issued?

The Ministerio de Economia (Treasury Department) issues real estate licenses on the recommendation of the Chamber of Real Estate Brokers.

 

How much are the Taxes?

Property taxes vary from 0.5% to 1.5% of the declared value of the property. However, Costa Ricans are a calm and resourceful people, so they customarily undervalue their properties by at least 20% when they register it.

The closing costs of a sale include a transfer land tax, a stamp tax, and legal fees. Closing costs run about 5% or 6% of the sale price, an expense divided evenly between buyer and seller. Transfer land tax and stamp tax assessments are based on the declared value. Legal fees are based on the selling price of the property.

Transactions may be conducted in U.S. dollars.

 

Can I buy Beach Front Property?

Costa Rican lawmakers have drawn up very strict rules governing the development of ocean front property along both coasts.

First, according Costa Rican law, the beaches belong to everybody and everybody has a right to use them. The first 50 meters (164 ft.) above the mean high tide line are public land. No one can restrict access to a beach or claim a beach is privately owned, exceptions being landholdings in port areas, old land grants or by some agreements made prior to 1973.

Second, along 80% to 85% of the coastline, the 150 meters (492 ft.) after the 50 first meters (164 ft.) are called the Maritime Zone and are controlled by the government. A foreigner must establish five years of residency to own more than 49% of a lease in this zone. Foreigners can evade the law by assigning the lease to a corporation that is wholly foreign owned or by assigning 51% of the ownership of the land (on paper) to a Costa Rican citizen. Take a careful look at the zoning laws before you start development in any of these areas.

If there is no zoning plan for land you want to develop, hold off on the celebration. If nobody has gotten around to making a zoning plan, then it's up to you to create one on your own and submit it to ICT (Tourist Board), the INVU (Housing and Urban Development Department), and the local municipality for approval.

The "zoning of land" plan you submit must address questions regarding – among other things – public use areas, roads, water and electricity.

If your development dream is located on the 15% or 20% of the coast land not in a Maritime Zone, then you may develop the property without filing a regulating plan. However, developments geared to the tourist industry must be approved by ICT (Tourist Board), anything else requires building permits.

 

FAQs About Conversion of Measurements

Table of Measurements