SO you’ve found your piece of paradise in Costa Rica and you’re ready to buy. What do you need to know and what steps need to betaken? Properties are transferred from the seller to the buyer by the execution of a transfer or conveyance deed (escritura de traspaso) before a notary public. Notaries in Costa Rica must be attorneys and are responsible for preparing and supervising the execution and recording of all publicly registered documents. Depending upon a notary’s professionalism (and the clarity and security he or she provides), the process may range from merely appearing at the office and quickly signing documents and exchanging money to a much more sophisticated process involving clear and concise purchase agreements, professional escrow services, extensive title searches and reports, owner’s and surveyor’s affidavits, trust agreements, prompt registry of documents, certified money transfers and title guarantees. All titled land in Costa Rica is registered in the public land records of the National Registry. The registry assigns a folio real (matricula), a permanent identification number, to each property that has been officially recorded.

The search of the public records (estudio), will provide detailed information about the property such as the name of the person or entity holding the title, the name of the previous owner, the location of the property, boundary lines, survey number, mortgages or liens, declared value of the property, encumbrances (right of ways or easements) and any other recorded documents that may affect the title. The property report will normally show an existing registered survey of the property, though in some cases a survey does not exist. Property can not be transferred if the land does not have a registered survey and the survey must be referenced in the deed of transfer. When the property to be transferred is owned by a corporation, it is essential to perform a corporate search in the Commercial Section of the registry to verify that the corporation is in good standing and that the proposed signatory has the capacity to sign on behalf of the corporation. The transfer deed is signed by the buyer and the seller (as well as the notary public). The deed is recorded in the notary’s record book and a copy is presented to the Registro for annotation and registration. After the National Registry reviews the deed and any potential defect is corrected, the property is registered in the name of the new owner. Make sure that the transfer deed is indeed recorded, not just presented to the registry.

The registry will not record a transfer deed without the full payment of transfer taxes, documentary stamps, notary fees and property taxes. Transfer taxes and documentary stamps are approximately 2.5% of the purchase price and notary fees are set by law at 1.25% of the purchase price. You can hold title to property in the name of an individual, the names of several individuals or in the name of a corporation. Holding title in the name of a registered corporation provides greater flexibility in estate and tax planning, liability and overall general management. Some will suggest that you purchase the shares of the corporation that currently owns the property rather than transferring title to a new corporation to avoid the transfer taxes. However, while you will acquire the assets of the corporation, you will also acquire any liabilities of the corporation, disclosed or not disclosed. The legal system in Costa Rica provides adequate assurances and protections for foreigners to legally and confidently invest and hold title to property. However, if the law is not fully followed and the transaction is not properly executed, losses can occur. Insist on experienced legal and notary representation in real estate transactions and the services of a reputable escrow agent to act as an intermediary liaison for the disbursement of the funds relating to the purchase.

Contributors - October Friday 2004