How to Buy a House in Costa Rica as a Foreigner

For many, owning property in Costa Rica represents a compelling opportunity, offering natural beauty, a stable democratic environment, and a welcoming culture. Understanding the specific procedures for acquiring real estate in this Central American nation is a fundamental first step for any prospective buyer.

Legal Framework for Foreign Property Ownership

Foreign nationals possess property ownership rights in Costa Rica equivalent to citizens. This includes “fee simple” title, granting absolute ownership and rights to use, enjoy, lease, sell, or develop the property, subject to local laws.

Property title can be held in a personal name. Many foreign buyers, however, establish a Costa Rican corporation, such as a Sociedad Anónima (S.A.) or a Sociedad de Responsabilidad Limitada (S.R.L.), to hold the property. This corporate structure offers benefits like liability protection and streamlined future ownership transfer. Trust ownership, where a local bank holds title while the investor maintains beneficial ownership, is an alternative for some restricted properties.

The National Registry (Registro Nacional) serves as the central public record for all property titles, liens, and encumbrances in Costa Rica. It ensures the security and transparency of property transactions. All property titles and their associated details, including mortgages or judicial annotations, are officially registered here, providing a comprehensive legal record.

Securing an independent, reputable Costa Rican attorney is important. This legal professional represents the buyer’s interests, providing guidance through legal requirements and ensuring due diligence. While a Notary Public is involved in formalizing the transaction, the buyer’s independent attorney safeguards their concerns throughout the process.

Property in Costa Rica is primarily categorized as either “titled” or “concession” property. Titled properties, outside the 200-meter maritime zone, offer full ownership rights. Concession properties are within the maritime zone, specifically the 150-meter restricted area beyond the initial 50-meter public zone from the high tide line. These are long-term government leases, typically renewable every 20 years. Foreigners generally cannot be majority owners of concession land unless they have resided in Costa Rica for at least five years, often requiring a Costa Rican citizen to hold at least 51% of the ownership if the property is held through a corporation.

Financial Considerations and Planning

Understanding the financial implications is fundamental when purchasing property in Costa Rica. Beyond the agreed-upon purchase price, several additional costs contribute to the total investment. These closing costs typically include transfer taxes, notary fees, and legal fees, which collectively can range from approximately 3% to 4.5% of the property’s declared value or purchase price.

The largest portion of these costs is the property transfer tax, set at 1.5% of the higher value between the fiscal valuation and the contract price. National Registry fees amount to 0.5% of the property’s value, paid for legally recording the change of ownership. Notary Public fees, which are legally set, typically range from 1% to 2% of the property’s value, often structured on a tiered scale. For example, fees might be 2% for properties up to 10,000,000 Colones and decrease incrementally for higher values.

Other potential closing costs include various documentary stamps, such as an Agrarian Stamp, Fiscal Stamp, National Archives Stamp, Bar Association Stamp, and Municipal Stamp, which collectively add around 0.1% to the transaction. A 13% Value Added Tax (VAT) is also applied to legal and notary fees. While real estate commissions are typically paid by the seller, usually ranging from 5% to 6% of the final price, buyers are generally responsible for all their closing costs.

Financing options for foreigners purchasing property in Costa Rica differ significantly from many other countries. Cash transactions are the most common method for foreign buyers due to the challenges associated with local bank mortgages. Local banks often impose higher interest rates, shorter loan terms, and may require the buyer to hold residency status for a considerable period. International lenders, such as using equity from a property in one’s home country, can sometimes provide an alternative financing avenue.

Ongoing ownership costs should be factored into financial planning. Annual property taxes are 0.25% of the registered property value. Property owners are required to file a Property Declaration Form with their local municipality every three to five years to update the property’s value. For higher-valued properties, a luxury home tax may apply, with tiered rates ranging from an additional 0.25% to 0.55% for properties exceeding approximately $700,000 USD.

Homeowners’ Association (HOA) fees apply for properties within condominiums or gated communities, varying widely based on the community’s size and amenities, covering services like maintenance, security, and common area upkeep. Additional recurring expenses include utilities such as electricity and water, along with costs for property maintenance and insurance.

The Property Acquisition Process

Initiating the property acquisition process in Costa Rica often begins with identifying suitable properties through reputable real estate agents or online listings. These resources provide access to a wide array of options and local market insights. Once a property of interest is located, the next step involves submitting an offer and engaging in negotiations with the seller. This phase typically involves a back-and-forth discussion on price and terms until a mutual agreement is reached.

Following a preliminary agreement, a due diligence phase commences, typically lasting around 30 days. During this period, the buyer’s attorney conducts a comprehensive investigation to verify the property’s legal and physical status. A thorough title search is performed at the National Registry to confirm clear ownership, identify any existing liens, mortgages, or encumbrances, and uncover judicial annotations that could affect the title. This action ensures the property is free from undisclosed claims or restrictions.

Verification of boundaries and surveys is another important component of due diligence. A licensed surveyor may be engaged to ensure the physical property lines match the registered plans at the National Registry. This step helps prevent potential boundary disputes and confirms the actual usable area of the property. Zoning and land use regulations are also meticulously checked with the local municipality to confirm the property’s designated use and any restrictions on development or building permits.

For certain properties, particularly larger or rural parcels, environmental assessments may be necessary to identify any ecological restrictions or protected areas that could impact the property’s use. A professional home inspection is recommended to assess the structural integrity, electrical systems, plumbing, and overall condition of any existing structures. While properties are often sold “as is,” an inspection provides valuable information about potential issues like pest infestations or water damage, especially given Costa Rica’s climate. Verification of utility connections, such as water and electricity, ensures access to essential services.

Upon successful completion of due diligence, an “Option to Buy/Sell Agreement,” also known as a Promesa de Venta, is typically drafted and signed. This initial contract outlines the terms of the transaction, including the purchase price and closing timeline. A non-refundable deposit, typically around 10% of the purchase price, is placed into an escrow account. This deposit is refundable if due diligence reveals unsatisfactory results, but generally not if the buyer simply changes their mind.

A Notary Public, who is also a licensed attorney in Costa Rica, plays a legally required role in formalizing the transfer deed (Escritura de Traspaso). The Notary Public drafts the necessary legal documents and ensures the transaction adheres to all legal requirements. While the Notary Public formalizes the sale, the buyer should continue to rely on their independent attorney for representation and advice throughout the closing process.

The closing procedures involve the signing of the transfer deed, which is the formal legal document transferring ownership. All applicable transfer taxes and notary fees are paid at this stage. The Notary Public then submits the executed deed to the National Registry for final registration, officially transferring the title to the buyer. For transferring the purchase price, secure methods such as international wire transfers to an escrow company in Costa Rica are commonly used. Escrow services are recommended to protect funds and ensure compliance with anti-money laundering regulations, as funds may be frozen if their origin is not properly documented.