The Home Buying Process in Costa Rica
Daniela Quiros, Sunday, 3 November 2013
This article is part of a series of 8 articles about buying property in Costa Rica. The other articles in the series cover the following topics:
The real estate purchase process can be conditionally divided into six main segments that require intense research, preparation, negotiation and legal paperwork done in compliance with the law.
Once you have found the property, or a list of properties that you might want to consider buying, there are two significant inquiries that you need to make: the National Registry inquiry and the Letter of Intent, as a trying ground in the negotiation process.
Know the legal status of the property.
In most cases, buyer’s legal attorney makes a Registry study to determine the property’s status. In case you are working with a real estate agent, the latter can do it for you. Even the Buyer himself can run a quick search in the online database of National Registry because it is a public database. You can do so by going to , registering and running a check with the property’s requisites. You must have the exact number of the property which consists of the number of Province, the Folio Real number, and the number of the property right. This combination is on the Folio Real of the property.
If no questions arise during the verification, proceed to negotiation. In case additional inquiries are needed to ensure that the property is ‘clean,’ you, or your lawyer, may want to inquire into possible non-registered restrictions on the property. Besides, assuring that the area is properly supplied with water, electricity, sewer, and the like is very important before you start negotiating on the price.
Negotiate with the Seller.
The attorney, or real estate agent, will submit an Offer, or Letter of Intent, to the Seller or his agent. This is when you negotiate the price and key aspects of the deal. Why do we suggest submitting a Letter of Intent instead of oral statements between the Buyer and the Seller, or their intermediaries? It is a necessary means of Buyer’s protection in case the Seller might be negotiating with a different Buyer, or maybe conspiring to sell the property twice.
Draft the Sale and Purchase Agreement.
Once the preliminary negotiations have reached the point of agreement on terms and price, your lawyer will draft the formal pre-sale agreement. Having as many legally binding documents of your and Seller’s intentions as possible is a sure way to protect your investment. The Buyer can have an independent appraisal. However, it may not reflect the market value of the property. If you wish to sign a pre-closing contract stating all intentions and the price, it may be somewhat expensive, and you will need legal assistance. However, this is a sure way the pre-closing contract will be honored.
The Term of Due Diligence.
During this somewhat lengthy period, a thorough study of the property takes place. This is when the Buyer ensures that the property has no legal issues, liens, or other restrictive matters pending against the property. Also, it is essential to make sure if the property has a free simple title. It is necessary that the Buyer and his attorney are granted ample time for this investigation. A Buyer may request soil tests, surveys, home inspections involving professional services. It is highly important that the Buyer makes sure that he is buying the property that is being demonstrated to him. You need to see the plot map. In case it is unavailable, or you doubt if the existing one is accurate, you can request a new map. A surveyor, or property research firm, provides this service. In case the Seller is selling the property with an existing company, you need to research the company’s legal status.
The Closing.
Once all research is completed with due diligence, the penultimate stage begins – closing of the deal which takes place in the presence of a Costa Rican Notary Public. Your lawyer and the Seller’s lawyer draft the terms and conditions of the deed and proceed with the signing. The Notary Public registers the property under the new owner, or the company. Likewise, if the property is acquired with an existing company, the parties sign a Shares Transfer Agreement, and the Notary Public makes the corresponding changes in the company’s ownership in Registro Nacional, the National Registry.
All paperwork, including the deed, is in Spanish. If you do not speak Spanish, or your level is insufficient to understand the legal verbiage, you can hire an interpreter. Likewise, your lawyer may be your interpreter. It is often the case with lawyers in Costa Rica. The deed must reflect the fact that the Buyer fully understands the conditions of the deal and all the documents have been translated to his native language. Translation and interpretation will add up additional costs to the deal and are not included in the notary’s initial fees.
Declare your proprietary rights.
Your lawyer must present the original copy of the deed to the National Registry as soon as possible. The Buyer can do it himself, but this bureaucratic procedure must be accurate and precise to avoid any complications in the future. For example, in case another sale of the same property takes place, the Buyer, who annotates his proprietary rights first will be the one with the priority, leaving the second Buyer with the only option of suing the Seller for fraud.
Once you register the deed, the Buyer obtains the Testimonio, or proof of registration, and the original of the deed. All registration seals must be perfectly visible with all the relevant transactions registered.
The purchased property will have a Folio Real number stating the relevant data about the owner. Folio Real is a public record and, therefore, can be obtained by anyone. You can have an independent notary register your proprietary rights. The Buyer must make sure that the registration in the National Registry has taken place. Do not leave this issue unattended, under any circumstances. If your purchase is not completely and accurately registered, you are likely to face dire consequences with problems transferring the property in the future. You will not be able to sell the property without finalizing the registration.
This article is part of a series of 8 articles about buying property in Costa Rica. The other articles in the series cover the following topics:
The real estate purchase process can be conditionally divided into six main segments that require intense research, preparation, negotiation and legal paperwork done in compliance with the law.
Once you have found the property, or a list of properties that you might want to consider buying, there are two significant inquiries that you need to make: the National Registry inquiry and the Letter of Intent, as a trying ground in the negotiation process.
Know the legal status of the property.
In most cases, buyer’s legal attorney makes a Registry study to determine the property’s status. In case you are working with a real estate agent, the latter can do it for you. Even the Buyer himself can run a quick search in the online database of National Registry because it is a public database. You can do so by going to , registering and running a check with the property’s requisites. You must have the exact number of the property which consists of the number of Province, the Folio Real number, and the number of the property right. This combination is on the Folio Real of the property.
If no questions arise during the verification, proceed to negotiation. In case additional inquiries are needed to ensure that the property is ‘clean,’ you, or your lawyer, may want to inquire into possible non-registered restrictions on the property. Besides, assuring that the area is properly supplied with water, electricity, sewer, and the like is very important before you start negotiating on the price.
Negotiate with the Seller.
The attorney, or real estate agent, will submit an Offer, or Letter of Intent, to the Seller or his agent. This is when you negotiate the price and key aspects of the deal. Why do we suggest submitting a Letter of Intent instead of oral statements between the Buyer and the Seller, or their intermediaries? It is a necessary means of Buyer’s protection in case the Seller might be negotiating with a different Buyer, or maybe conspiring to sell the property twice.
Draft the Sale and Purchase Agreement.
Once the preliminary negotiations have reached the point of agreement on terms and price, your lawyer will draft the formal pre-sale agreement. Having as many legally binding documents of your and Seller’s intentions as possible is a sure way to protect your investment. The Buyer can have an independent appraisal. However, it may not reflect the market value of the property. If you wish to sign a pre-closing contract stating all intentions and the price, it may be somewhat expensive, and you will need legal assistance. However, this is a sure way the pre-closing contract will be honored.
The Term of Due Diligence.
During this somewhat lengthy period, a thorough study of the property takes place. This is when the Buyer ensures that the property has no legal issues, liens, or other restrictive matters pending against the property. Also, it is essential to make sure if the property has a free simple title. It is necessary that the Buyer and his attorney are granted ample time for this investigation. A Buyer may request soil tests, surveys, home inspections involving professional services. It is highly important that the Buyer makes sure that he is buying the property that is being demonstrated to him. You need to see the plot map. In case it is unavailable, or you doubt if the existing one is accurate, you can request a new map. A surveyor, or property research firm, provides this service. In case the Seller is selling the property with an existing company, you need to research the company’s legal status.
The Closing.
Once all research is completed with due diligence, the penultimate stage begins – closing of the deal which takes place in the presence of a Costa Rican Notary Public. Your lawyer and the Seller’s lawyer draft the terms and conditions of the deed and proceed with the signing. The Notary Public registers the property under the new owner, or the company. Likewise, if the property is acquired with an existing company, the parties sign a Shares Transfer Agreement, and the Notary Public makes the corresponding changes in the company’s ownership in Registro Nacional, the National Registry.
All paperwork, including the deed, is in Spanish. If you do not speak Spanish, or your level is insufficient to understand the legal verbiage, you can hire an interpreter. Likewise, your lawyer may be your interpreter. It is often the case with lawyers in Costa Rica. The deed must reflect the fact that the Buyer fully understands the conditions of the deal and all the documents have been translated to his native language. Translation and interpretation will add up additional costs to the deal and are not included in the notary’s initial fees.
Declare your proprietary rights.
Your lawyer must present the original copy of the deed to the National Registry as soon as possible. The Buyer can do it himself, but this bureaucratic procedure must be accurate and precise to avoid any complications in the future. For example, in case another sale of the same property takes place, the Buyer, who annotates his proprietary rights first will be the one with the priority, leaving the second Buyer with the only option of suing the Seller for fraud.
Once you register the deed, the Buyer obtains the Testimonio, or proof of registration, and the original of the deed. All registration seals must be perfectly visible with all the relevant transactions registered.
The purchased property will have a Folio Real number stating the relevant data about the owner. Folio Real is a public record and, therefore, can be obtained by anyone. You can have an independent notary register your proprietary rights. The Buyer must make sure that the registration in the National Registry has taken place. Do not leave this issue unattended, under any circumstances. If your purchase is not completely and accurately registered, you are likely to face dire consequences with problems transferring the property in the future. You will not be able to sell the property without finalizing the registration.
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