Types of Real Estate in Costa Rica

Property Type Descriptions

If you are thinking of buying real estate in Costa Rica, then it is important that you understand the real facts about property types and zoning.

Private Land / Titled or Fee Simple

This is land located outside of the maritime/beach zone. In Costa Rica, titled property can be owned by foreigners in they have the same rights as a Costa Rican citizen. There are two documents which describe titled or fee simple property. The title/deed itself or escritura is the most important. Titles are registered in the national registry or Registro Nacional, and show ownership along with any liens, mortgages, or judgments. The second document is the registered survey map or plano catastrado. The property survey is used to record measurements, geographical location and size as well as other useful information like whether the land falls inside protected areas like national parks and reserves. The title and the survey are different from each other and yet refer to the same property. The survey is NOT the ownership document and may even be written with the previous owners name. Ownership of the land is recorded in a separate department of the national registry. Both parts must be checked to verify that ownership and mapping coincide with the same piece of land.

The first time a property is inscribed with the title there is a three-year period of time where third parties can make a claim. Any new claims must provide a large amount of proof before a title can be challenged. After three years, a claim can still be filed but calls for extraordinary circumstances. Ten years is the established statute of limitations for any such claims.

Private Land/ Untitled or Possession Land

A large amount of properties in Costa Rica falls in this category. Although many lands are untitled, it does not mean that they do not qualify for title. Some meet the requirements and others don’t. On a possession type property, it is the recording of the legal transaction (bill of sale) that establishes possession and ownership rights…not a title. The reason for this is that for many years, farmers and settlers (for any number of reasons) never applied for their title but possessed them in a “legal manner”, established boundaries and transferred rights through private documentation. When properly recorded, these rights are completely legal, fully transferable and can qualify for inscription in the national registry as fee simple title. Possession rights can be legitimately demonstrated recorded through private documentation by researching the history of the property. This can be done through a lawyers protocol book that shows a properly recorded bill of sale. The bill of sale shows transfer of ownership and describes the surrounding properties, well defined landmarks and their location in respect to the property. Pages from the lawyers protocol book are then registered in the national registry.

In 1941, a titling procedure called Ley de Informacion Posesoria was created by the government as a means for landholders to record or register their land that has been held in possession. Many lands have been registered using this procedure. Minimum requirements to qualify for a registered title to possession land are a registered survey and verifiable history of legitimate possession passively and publicly for a minimum of 10 years with no disputes. The remaining parts to complete the title process are notarized statements from adjacent property owners along with a judges inspection and review of all documents. This process, done with the help of a lawyer, can take up to a year and cost between $1,500 and $3,000 depending on the size of the land. Possession lands cannot be liened or mortgaged as they have not yet been recorded in the national registry.

A serious buyer may choose to pay for the title process after the sale and/or make it a contingency of the sale.

Beach Lands

Also known as the Maritime Zone, these lands are dealt with differently. The Maritime Zone (ZMT) is defined as the 200 meter strip of land along the shoreline, calculated from the “average high tide”. It is owned by the state and jointly administered by the local Municipality and the federal institution of ICT (Costa Rican Tourist Institute). The ZMT is defined by two sections, the first 50 meters is public and cannot be developed or claimed by private entities. The next 150 meters or “restricted zone” can be legally claimed and occupied by private citizens by soliciting the Municipality for the rights through a “concession application” called a Solicitude de Concesion.

Until the concession is completed, the legal instrument that constitutes the right of occupation is called a Permiso de Uso, essentially a lease, which is registered with the Municipality by submitting a Solicitude de Concesion. According to the law as it is written, the lease holder has the right to occupy the land and build a temporary structure.

Legally registered occupants can transfer their rights by way of a Cession de Derechos, where the registered occupant “gives up his rights and passes them on to another person”. Transferring rights is a simple process but there is a very specific format that must be followed. The transfer or traspaso MUST be ratified by the Municipal Board or Consejo. Even though the law does not require an attorney to process lease transfers and concessions, the vast majority of people who buy land inside the ZMT, logically, go through an attorney. However you must follow up with your lawyer to make sure he is keeping the pressure on the municipality to finish the work.

Zoning and Concessions

The Plan Regulador and Concession
The 1976 law for land regulation called for the government to zone the maritime land along the costs. This involves geological, ecological, topographical and economic studies. It also requires analysis of beneficial uses in order to produce a zoning map. The government has not had the resources to fulfill its obligation under this law. This has forced the government to rely almost exclusively on individual owners to do their own regulation plan and zoning with private funding. The process is expensive, time consuming and very tedious. Consequently, very little beach front property has actually been zoned in Costa Rica. A lot of expensive, beautiful homes and developments have been built on the maritime land without the safety of an approved Plan Regulador. The level of controversy over this problem has accelerated from almost a non-issue to a fairly hot topic. So far, no one has been forced to tear down or evacuate their homes and everyone anticipates that the Costa Rican officials and the violators will ultimately find a workable compromise. This has always been the Costa Rican way.

Over time, individual sections of shoreline property will be declared as having “touristic aptitude”, thus qualifying that section of land for traditional style zoning which is implemented through a zoning proposal or Regulatory Plan called a Plan Regulador. Once the zoning plan is elaborated and approved by the corresponding institutions: ICT, INVU and the Municipality, the legal occupants inside the newly zoned area can then activate their Solicitude de Concession and transform their Permiso de Uso into a concession lease, a permanent and more specific form of ownership outlined in the ZMT Law. A concession lease is as close to a title as you can get even though the land technically is still owned by the state. Concessions for residential and tourist projects are automatically renewable assuming terms of the contract are met by the holder. Taxes are reassessed for each concession and are usually higher than the occupation and usage tax.

Even though there has been a substantial amount of development in the ZMT, to this day, Most of the coastal lands in the country still do not have approved zoning or Concessions. Considering that legal development cannot take place without approved zoning, most of the development inside the ZMT country wide is technically illegal. Also, since concessions are only granted once there is approved zoning, most of the occupants have a usage permission and not a concession. In most cases, existing development will be approved once zoning is actually implemented.

The transfer of usage rights to beach property is a private agreement between the parties because technically, the law does not allow the sale or purchase of state domain. That is why a registered value appears in the public transfer documents which is much less than the actual purchase price. Costa Ricans and/or foreigners with five years of residency or greater can occupy beach property directly in their own name. All other foreigners must utilize a Costa Rican corporation to register their rights to occupy a beach parcel. The corporate board of directors may be formed by foreign residents but the corporation must have at least fifty percent of its shares held by a Costa Rican national. Many of these are S.A. This stands for Sociadad Anonima or Anonymous Society which is the most common type of corporation used because shareholders have anonymity. Another option is the limited liability corporation which is S.R.L. that stands for Sociedad de Responsabilidad Limitada. A typical agreement is made so at the time of closing, the Costa Rican shareholder endorses their shares over to the foreign shareholder. These are bearer shares and are registered in the corporate books. Some lawyers have recommended another method by holding the shares in a “legal trust” as opposed to endorsing shares at closing.
Refuge – Alternative to the Maritime Lease

In 1992, The Ministry of Environment and Energy or MINAET created a new law called The Law for Conservation of Wildlife No. 7317. This decree by the central government offers a program for landowners allowing them to declare their land as a “protected zone” while maintaining ownership rights and allowing certain development and or other activities. This program also extends to the ZMT. In these cases, administration of the ZMT essentially changes from the local municipality to MINAET. A traditional zoning plan is not required. Rights are requested through a management plan. The management plan describes the project and land usage, be it a residence, tourist project, scientific, capacitation, agriculture or other uses of public and social interest. Basic guidelines for environmental impact and sustainable development are spelled out in the new law, however, large projects are required to present a more detailed study. The purpose of these refugios is to place more lands in state protection while still allowing low impact development. For refugios in the Maritime Zone, concessions are not awarded. Instead, renewable usage contracts are issued. A fixed occupation tax or canon is paid yearly to MINAET but refugios are exempt from real estate tax. This is an alternative for maritime property occupants around the country since rights can be 100% foreign owned. There are many factors to determine if a property qualifies for this status. It is important to compare the benefits for each case.