Doing a real estate deal in Costa Rica is not so different than what you’re used to back home. However, one aspect that can make it seem so is the terminology. I’ve listed below ten Costa Rica real estate terms you ought to know. You will probably hear most of them during the course of your real estate activity in Costa Rica. Some are simply Spanish translations of concepts you’re already probably quite familiar with.
1. Escritura
My clients always ask me if they will get a deed to the property at closing. In the U.S. the “deed” is the legal instrument that grants title to a property from the grantor (seller) to the grantee (buyer). In Costa Rica it works a little differently.
The legal mechanism in Costa Rica for transferring title is known as the Escritura. It is the most important document you will sign at the closing. It is the document that will be recorded in the National Registry, so it must be in Spanish. The closing attorney, acting as a Costa Rican notary, has responsibility for drafting, executing and recording the Escritura. He will also translate the document to the buyer, verbally in English, at closing. The Escritura doesn’t include “magical language” as does our U.S. deed. It simply lays out the full detail of the transaction, including any mortgage or lease-back that might be involved. For that reason, it can be a very long document and the major (and most boring) time spent at closing will be having the attorney translate it into English.
2. Water Concession
In Costa Rica all water rights belong to the government and are held for the benefit of the public. And that includes water flowing across or bordering the property you are purchasing. In order for you to have the right to draw water from a source, either on or off you property, you must have a water concession. Usually in order to obtain a permit to build on your property, you will have to show access to a legal (or concessioned) source of water, or at least the ability to tap into a metered source (more on that with the term Asada below).
Concessions are not necessarily hard to obtain, but they are time consuming. It can take up to a year to get one. What can you do in the meantime? Well, you can use the water source available to you without one, it just won’t be legal. In some municipalities, you can obtain a building permit without a concession, as long as you can show that you have access to a water source that ultimately can be concessioned. In other municipalities, you can’t build until you have the concession. It pays to know what you’re up against in this regard.
3. Maritime Zone
In Costa Rica there is a law that has been around since the 70’s known as the Maritime Zone law. It is the major area of law in which Costa Ricans are favored over foreigners when it comes to property rights and ownership. The Maritime Zone is defined as the 200 meters from the high tide mark. The first 50 meters is public property. You cannot stop anyone from walking down the beach and accessing the ocean in front of your property. The next 150 meters can be “concessioned.” Here’s another use for that term, albeit a different one than the water concession noted above.
A Maritime Zone “concession” is basically a lease from the government, meaning the municipality where the property is located. It is normally granted for 20 years. There are costs involved, including an annual fee. If you misuse the concession, or fail to pay required fees, then you are in danger of losing the concession. If you have improved the area under concession and lose the right to it, you will also lose the investment in those improvements. Concessions are routinely renewed, but they don’t have to be.
Another thing about concessions is that they can only be granted to nationals, i.e., ticos, or to corporations for which a majority of the shares are owned by nationals. My understanding is that permanent residents of Costa Rica can also be granted concessions, if they have lived in the country for at least 5 years.
4. The SPA (Sales and Purchase Agreement)
Generally offers are made via a very informal letter of intent, often drafted by the real estate agent. However, once fully signed, the letter of intent will quickly be replaced by a more formal contract, which will be drafted by counsel. The is the Sales and Purchase Agreement, which is more commonly referred to in the biz as the SPA. It is drafted in English if the parties communicate in that language. It is never recorded, so does not need to be in Spanish. It will contain similar terms as do typical real estate contracts in the U.S.
5. Servidumbre
Servidumbre is simply the Spanish translation for easement and is legally defined much in the same manner as an easement on property in the U.S. There are many types of easements, such as rights of way, view, easements to power companies for maintenance of lines and equipment, etc., etc. A particular easement you are very likely to come across is known as the servidumbre agricola, or agricultural easement. It is law in Costa Rica that when a farm is subdivided, interior lots are automatically granted easements of access across lots adjoining public roads.
6. Plano Catastrado
This is the Spanish name for survey in Costa Rica. It is very important to ask for and review carefully the plano for the property you are purchasing. I recently had a situation in which the very astute buyer I was representing noticed that the property he had been shown was outside of the border of the plano for the property. He noticed the discrepancy by overlaying the plano onto a Google Earth map. It was not my listing, but another agent’s. Nevertheless, I had a hard time believing what the buyer was telling me. After sending a surveyor out to re-measure the lines, we discovered that the buyer was absolutely right. Needless to say, that deal cratered.
7. Proxy Letter
Many times buyers and sellers cannot be present for closings in Costa Rica. In that case a power of attorney must be issued to someone in Costa Rica who can sign for the non-present buyer or seller at closing. Getting a power of attorney executed in the U.S. that will be valid for use in Costa Rica can be difficult. You will have to have it notarized and then apostilled. A way around this is known as the “proxy letter.” If you have set up a corporation in Costa Rica to take title to the property, a proxy letter can be signed that basically authorizes the corporation to grant a power of attorney to someone in Costa Rica to sign for you. Execution of the proxy letter outside of Costa Rica is a much simpler process and only requires a notarized signature, but not the apostille. The use of proxy letters is very common in Costa Rica real estate closings.
8. Uso de Suelo
Many buyers are looking for properties in areas where there is no municipal zoning laws or regulations in effect. Sometimes they want to develop the property commercially, but there is no guarantee if such use is allowed. That’s where the “uso de suelo” comes in. It will be granted by the municipality where the property is located and will tell you, in very general terms, what use can be made of the property. It will also tell you things like what the setbacks are from water courses shown on the registered plano.
The uso de suelo can also serve as insurance against problems down the road. Development of land can get political in Costa Rica. If the use you want to make may be in competition with someone else’s project, especially a politically powerful someone else, you might have problems getting permits later on. Having the uso de suelo in place early on is a good way to guard against such problems.
9. Asada
In rural areas of Costa Rica, the public water supply for a given community is controlled and regulated by the local Asada. If you want to tap into this “metered” water source, you have to deal with the Asada. Many times properties will both utilize the Asada as a water source for human consumption, as well as sources located on the property itself for animals and irrigation.
10. Hectare
If you’re going to purchase property in Costa Rica you need to get familiar with the metric system, at least the part of it that most often applies to real estate. The metric term you will probably hear most often is the hectare. A hectare, or hectarea in Spanish, is approximately 2.5 acres. It consists of 10,000 square meters, whereas an acre is approximately 4,000. Visually, you can picture in your mind a hectare as being roughly equivalent in size to a regulation soccer field. When dealing with large farms in rural areas, you also might come across the term “manzana”, which consists of just under 7,000 square meters. Dimensions of homes in Costa Rica might be stated in square meters, rather than square feet. So, it pays to know that a square meter is 10.8 square feet.
There certainly are other and more exotic terms that you might come across in Costa Rica. However, knowing the above ten is definitely a good start.
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