Before Purchasing Property Know the Proper Steps

SO you’ve found your piece of paradise in Costa Rica andyou’re ready to buy. What do you need to know and what stepsneed to be taken?Properties are transferred from the seller to the buyer bythe execution of a transfer or conveyance deed (escritura detraspaso) before a notary public. Notaries in Costa Rica mustbe attorneys and are responsible for preparing and supervisingthe execution and recording of all publicly registered documents.Depending upon a notary’s professionalism (and the clarityand security he or she provides), theprocess may range from merely appearing atthe office and quickly signing documentsand exchanging money to a much moresophisticated process involving clear andconcise purchase agreements, professionalescrow services, extensive title searches andreports, owner’s and surveyor’s affidavits,trust agreements, prompt registry of documents,certified money transfers and titleguarantees.ALL titled land in Costa Rica is registeredin the public land records of the NationalRegistry. The registry assigns a folio real(matricula), a permanent identification number,to each property that has been officiallyrecorded.The search of the public records (estudio), will providedetailed information about the property – such as the name ofthe person or entity holding the title, the name of the previousowner, 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 recordeddocuments that may affect the title.The property report will normally show an existing registeredsurvey of the property, though in some cases a survey doesnot exist. Property can not be transferred if the land does nothave a registered survey and the survey must be referenced inthe deed of transfer.When the property to be transferred is owned by a corporation,it is essential to perform a corporate search in theCommercial Section of the registry to verify that the corporationis in good standing and that the proposed signatory has thecapacity to sign on behalf of the corporation.THE transfer deed is signed by the buyer and the seller (aswell as the notary public). The deed is recorded in the notary’srecord book and a copy is presented to the Registro for annotationand registration.After the National Registry reviews thedeed and any potential defect is corrected, theproperty is registered in the name of the newowner. Make sure that the transfer deed isindeed recorded, not just presented to the registry.The registry will not record a transferdeed without the full payment of transfertaxes, documentary stamps, notary fees andproperty taxes.Transfer taxes and documentary stampsare approximately 2.5% of the purchase priceand notary fees are set by law at 1.25% of thepurchase price.You can hold title to property in the nameof an individual, the names of several individualsor in the name of a corporation.Holding title in the name of a registered corporation providesgreater flexibility in estate and tax planning, liability andoverall general management.SOME will suggest that you purchase the shares of the corporationthat currently owns the property rather than transferringtitle to a new corporation to avoid the transfer taxes. However,while you will acquire the assets of the corporation, you willalso acquire any liabilities of the corporation, disclosed or notdisclosed. The legal system in Costa Rica provides adequate assurances and protections for foreignersto legally and confidently invest and hold title to property. However, if the law isnot fully followed and the transaction is not properly executed, losses can occur.Insist on experienced legal and notary representation in real estate transactions and theservices of a reputable escrow agent to act as an intermediary liaison for the disbursementof the funds relating to the purchase.Protect yourself from possible loss resulting from title defects by purchasing a titleguarantee.Marco Ureña-Pérez is an attorney and notary at First Costa Rican Title & Trust. Hecan be reached at 225-0501 or e-mail [email protected]