Formalizing Property Transfers and Registration
You’ve negotiated the purchase of a piece of real estate and reached an understanding with the other party.
Whether or not you’ve signed a sales purchase agreement or an option contract, as previous steps to the actual transfer it is crucial to know that for the sale of the land to be valid, effective and enforceable, the seller and purchaser must formally sign an escritura de traspaso. This is a transfer document signed before a Costa Rican notary public – different from the concept of notary public in North America – directly in the notary’s “protocol book.”
You might think that by hiring a professional to handle this transaction, your interests would be fully protected. You might also think that the document itself and the steps to be taken after it is signed are fairly standard.
However, this is often not true, and many transactions end up incorrectly registered, missing important declarations by the parties and never allowing the land transfer to occur.
Familiarizing yourself with the most common statements and safeguards related to the escritura de traspaso is an essential step to avoid many of these problems.
Choice of Notary
The notary is fundamental in the implementation of the transfer. If the buyer is not receiving financing for the purchase, it is customary for this party to choose the notary for registration of the transfer; if financing is involved, it is usually the seller’s choice.
This principle, which can be negotiated differently by the parties, usually speaks to the need for control over the property registration process, assuming that if the seller has received the whole purchase amount, his interest in the transaction has basically ended and it is the buyer who is motivated to make sure that what was purchased is registered in his or her name. There is also the assumption that when there is a balance due, the creditor must stay involved in the registration process to make sure that the protection of his debt is guaranteed and the corresponding mortgage gets duly recorded.
Filing, Payment of Transfer Taxes and Legal Stamps
Signing the escritura de traspaso alone does not suffice to record the transfer. After this closing stage, the notary must file a notarized copy of the transfer document at the Public Registry, which must show payment, in full, of all transfer taxes and legal stamps calculated according to specific rules established by the government.
Failure to present the escritura de traspaso to the Public Registry means that the property will remain in the name of the previous owner, and the land will be subject to not only possible fraudulent new sales by said previous owner but also annotations and possible foreclosure by people claiming obligations from or filing lawsuits against the previous owner.
Lack or incomplete payment of transfer taxes and/or legal stamps will not only put in jeopardy the proper registration of the land in the new owner’s name but will also eventually lead to the filing being annulled and taken off the title.
These potential consequences relate to the notary you choose to act for you, since his or her efficiency in undertaking filing, and honesty regarding the funds received from the parties for making payments directly, affect the final outcome of the transfer.
No land transfer can take place if a registered survey (plano catastrado) is not quoted and associated with the property on the escritura de traspaso. Failure to meet this requirement will make the filing defective and, if not rectified, will eventually annul it from the title.
The survey must be registered and must match the characteristics of the property as stated on the transfer document, with the exception of properties that have been subdivided, for which the Public Registry permits differences between the registered conditions and the survey.
In the case of transfers in which only a portion of the land is being sold –subdivisions – the survey must also be authorized or stamped (visado) by the municipality of the county where the property is located.
Differences in Measurement and
Conditions of the Land
It is important for the escritura de traspaso to include a statement that the sale comprises all land within the stated boundaries, even though it might have a larger measurement in the future. It is common to encounter substantial differences in size on surveys made at different times and by different surveyors, and this possibility must be foreseen on the document to allow for such differences to be included in the transfer and avoid future disputes.
Also, the escritura de traspaso usually includes a statement on the condition of the land and the title, but many times it is not as complete as it should be. A good piece of advice would be for it to expressly state that the transfer is being made free of liens, encumbrances and annotations, as well as free from any leases, usufruct, temporary or permanent occupation rights and squatters, and with all municipal, territorial and/or national taxes and charges paid up to the closing date. If the land is part of a condominium, a statement indicating that maintenance fee payments are up-to-date should also be included.
Identification of Buyer
A common mistake is the misspelling of names, especially foreign names and surnames. This can cause complications in the ownership and in future sales, so special care must be taken to make sure that names are spelled exactly as they appear on passports, and that passport numbers are correctly noted.
The negotiation of the land purchase may have also included certain obligations to be carried out by the seller after closing, such as water connection, electricity, development, roads, etc. The preferred method of guaranteeing fulfillment of such obligations would be to stipulate some type of holdback or escrow to be released upon completion. Even if a holdback or escrow are not agreed upon, these commitments by the seller should be included in the escritura de traspaso, and, though they will not be evident at the Public Registry, they will be established in a formal manner that would permit action by the buyer in the event of breach.
Some overall advice: be very aware of how your property acquisition is carried out and make sure that all steps are completed in registering the property in your name. It is also a good idea to ask for proof of registration from the notary in charge and to check the accuracy of this proof by accessing the Public Registry’s database at http://220.127.116.11, which at that point should show the name of the new owner.
For more legal advice, contact Lang & Asociados at 204-7871 or visit www.langcr.com.
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