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HomeArchiveExpert Offers Legal Advice on Buying Property

Expert Offers Legal Advice on Buying Property

B U Y I N Gproperty in CostaRica can be ac o m p l i c a t e dprocess fraughtwith pitfalls if youdon’t know all thelaws and regulationsgoverningsuch transactions.Simple steps toverify the title ofthe land to beacquired and thevalidity and legalrepresentation ofcorporate sellers should always be kept inmind and be among the first moves youmake before undertaking any negotiationfor land in the country.In Costa Rica, most land is titled, andtitles are registered and centralized at theoffices of the Public Registry in San José.Most titles are currently organized bymeans of a computer system called thefolio real, although some, for propertiesthat have had no transfers or other transactionsaffecting them for a long time, are notincluded in the computer system and arestill registered the old way – in specificbooks, pages and entries of hard records atthe registry.Property transfers require the buyerand seller to sign a deed before a notarypublic – different from notary publics inthe United States, Canada or the UnitedKingdom, and required to formalize allreal estate transactions – and for the deedto be recorded at the Public Registry.Title SearchesAll titled land in the country, whetherregistered in the newer folio real system orthe older book/page/entry system, can beaccurately and safely title-searched inorder to determine ownership, liens,encumbrances, annotations or other issuesthat may affect ownership rights or thepossibility of transferring the land to athird party.Title searches on folio real propertiesmay be initiated in the computer system,accessible online at, but will probably need tobe continued in the book/page/entry system,especially when the computer searchshows liens, encumbrances or other propertycharacteristics “inherited” from oldertransactions on the land before it was transferredto the folio real system. Additionally,although the computer system will indicatea list of liens and encumbrances, in mostcases a thorough and complete title searchwill require the review of microfilmed orscanned documents, which are not accessibleonline and can only be obtained at theoffices of the Public Registry.Although, as previously mentioned,the folio real system is accessible online,individuals generally lack the legal trainingnecessary to accurately and thoroughlyinterpret the information, or follow upon any required further steps. It is thereforeadvisable to contract a knowledgeableprofessional to perform and reportthe title search.If the property is owned by a corporateentity, in addition to a title search it is necessaryto perform a corporate search at thecommercial section of the Public Registry;only this step can verify the transferringentity is in good standing and the proposedsignatory of the transfer deed is empoweredto authorize the transfer.Form of OwnershipAlthough titled land can be purchasedin an individual’s name or a company’sname, and foreign ownership is fully permitted,it is advisable to purchase propertythrough a corporation.This structure allows flexibility andmore predictability in areas ranging fromestate planning (if share ownership is properlystructured, the investor can save hisheirs a painful and lengthy long-distanceprobate procedure), tax management (forexample, rules for corporate expenses aremore flexible than for personal ones), andrepresentation (shareholder meetings canfacilitate granting special powers of attorneyor other types of authorization formany actions, thus not requiring physicalpresence in the country).Buying Company SharesA somewhat common practice is totransfer the shares of the company thatowns the land to be purchased, instead oftransferring the land through the PublicRegistry to a third party.The share-transfer system may soundappealing at first, as it saves money onnotary fees and transfer taxes and mayseem like a faster way to achieve the goalof transferring control of the property tothe buyer.However, this course is not advisable,because when you acquire the shares of acorporation in Costa Rica – as in mostother countries – you acquire not only thecompany’s assets (in this case, mainly, theland) but also its liabilities. No mechanismexists to satisfactorily list them or rule outtheir existence. Such liabilities woulddirectly affect the land being acquired.Under such terms, it is advisable to paythe extra cost for a regular transfer throughthe Public Registry. You might consider theextra cost a form of insurance that mayshield you from possible future claims bythe seller’s creditors.Buying Portions of Registered PropertyPurchases of portions of a titled propertyare possible in Costa Rica; this iscalled segregación. Aregistered map of theland to be purchased is required, as well asauthorization from the relevant municipality.This authorization must appear on theregistered map in the form of a stampcalled a visado municipal.Concession LandSeveral areas of the country, mainlythose on the coast affected by the MaritimeZone Law, are not subject to private ownership;their possession is granted as a concessionthat could simplistically be comparedto a lease made from the governmentfor a specified period of time.Concessions are difficult to examine,and in many cases the prospective buyercannot be absolutely certain of what isbeing acquired. This type of transactionshould be avoided if a similar piece of landthat is titled can be found; if not, extra cautionshould be used.BEING an informed buyer means takingthe time to know the basics, understandwhat you are acquiring and perform propertitle and corporate searches. These simplesteps can serve as strong foundations for asuccessful transaction.For more legal advice, contact Lang& Asociados at 204-7871 or


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