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Title vs. Concession: Two Different Ball Games

October 6, 2006

Those looking to own their own slice of Costa Rica’s natural beauty will find an attractive real estate market in Costa Rica, in which both Ticos and foreigners can own land.

Outside of Costa Rica’s national reserves and beaches, all land is fair game for those looking to own. But Costa Rica’s pristine coasts are for public or restricted use and are regulated by coastal municipalities.

However, experts say those looking to buy land should keep an eye out for title fraud, and those seeking a concession should understand their contract well to avoid legal problems.

The 1977 Maritime Zone Law was passed to protect Costa Rica’s coastal natural resources by dedicating the first 50 meters of the coastline to public use. The next 150 meters are considered a “restricted” zone, which coastal municipalities manage and can concession out. With the exceptions of coastal cities and towns such as Puntarenas, Jacó and Golfito on the Pacific and the Caribbean port of Límon, the Martime Zone Law applies to all coastal municipalities, according to Arcelio Hernández, a lawyer for Bufete Hernández Mussio in the central Pacific beach town of Jacó (643-3058).

The way a concession works, Hernández said, is that the land is owned by the state but is administered by the municipalities. Once they have established zoning plans – and many municipalities have yet to do so – municipalities can concession out the land to a person or licensed business.

The spirit of the law was to set aside Costa Rica’s rich coasts for Costa Ricans, Hernández said. Someone applying for a concession with a municipality must be a Costa Rican citizen, or must have been a legal resident for at least five years. However, licensed businesses can also apply for concessions, as long as at least 51% of the businesses’ shares are in the name of a Costa Rican.

Hernández said that in some cases foreigners end up indirectly running concessions because after the company has received the concession, it sells all of it shares to a foreigner.

Concessions generally last for 15 years, though the terms of each concession are established in a contract between the concessionaire and the municipality, and the length of contract can vary, according to Hernández. He said most concessions can be renewed when a contract expires.

“The difference between a concession and titled land is that land under concessions remains in the hands of the state,” Hernández said, adding that there are no restrictions on who can and cannot obtain a title.

Those seeking to build on titled or concession land should go through their respective municipalities for building permits, Hernández said.

Fraud and Legal Troubles

Those seeking a title should be aware of a growing title fraud problem, and those seeking concessions should study their contracts well, according to Juan Carlos Ruiz.

Ruiz works in project development for Stewart Title Costa Rica (www.stewartcr.com, 258-5600), a company that offers title and concession insurance, with offices in San José, the northwestern province of Guanacaste and Jacó.

Though title insurance is not very popular among Latin Americans – Ruiz said the majority of his customers are North Americans – demand is increasing for the service as Costa Rica’s growing real estate market invites fraud.

He said concessions carry a certain amount of risk, too, for someone misunderstanding the regulations in a contract.

“There can be a problem in the future because they could be buying something that has enormous legal problems,” Ruiz said.

Though legal contract issues have always been a problem, he said his company is beginning to see an increase in title fraud cases.

“We’ve seen a lot of problems in the coastal zones and titled properties outside of San José,” he said. “We’ve found many falsified documents in the public registry.”

He said those buying land outside of San José who intend to use it for a second home are at risk of fraud.

“Foreigners and even Costa Ricans buy and leave,” he said. “People know they’re not there very much, so they sell them a title falsely, and then turn around and legally sell the title to someone else.”

 

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