The Steps to Purchasing Property, from A to Z
Purchasing property in a foreign country is a very delicate process that must be handled carefully. In Nicaragua, this is no exception.
However, if the correct steps are followed, the process can result in a safe and secure purchase of real estate.
The correct way to buy property here involves three important steps: a thorough title search; closing on the property and registering it in the new buyer’s name; and acquiring title insurance.
A title search is an investigation of the legal history and current legal status of the property. This step provides the buyer with information about the current legal ownership of the property, the exact location of the property and the exact area and dimensions of the property.
Title search will also reveal the legal status of the property – whether or not there are any pending liens, encumbrances, back taxes and/or other information about a history of confiscation or agrarian reform that may have affected the ownership of the property in the past.
The title-search investigation is conducted in various public offices, such as the Public Registry, the Office of the Municipality, and the Cadastral Office, among others.
This is a vital step to buying property here; it is not recommended that investors purchase property without first knowing its legal history and current status. Remember that a good title search is the foundation of a secure property purchase.
Once the title search is done and the investor knows that the property is clean and clear, the next step is to proceed with closing on the deal.
This step materializes with the purchase and sell contract or “Compraventa de Bien Inmueble,” which is done in a public deed signed by both parties (buyer and seller).
The purchase contract must contain the following information: identification of the parties, terms and conditions of the purchase, price of the purchase and acceptance.
After the closing is done, the property must be registered in the various public offices under the new owner’s name. The three legal papers, or “legal slips,” involved in the registration process are: the cadastral certificate, the cadastral appraisal certificate, and the tax certificate from the municipality.
It is important to remember that all back taxes and new transfer fees will have to be paid to get the deed registered in the new owner’s name. These taxes include: real property tax, transfer tax and registration fee.
The real property taxes must be paid at the corresponding municipal offices in the municipality in which the property is located.
These taxes are 1% of the price reflected in the Public Deed or the cadastral value of the property, whichever is higher. The transfer tax is 1% and is calculated in the same way as the real property tax.
The registration fee is the fee required by the Public Registry in order to record the Public Deed under the new owner’s name.
This fee depends on the value of the property and is C$5 (US$0.3) for each C$1,000 (US$57) of the price reflected in the deed. After closing on the deal and registering your new property, it is recommended you apply for title insurance.
This will give the buyer more confidence about the purchase by covering any potential loss due to a flaw in the title.
Once the title insurance policy is issued, the buyer will have full legal security over his or her property and the purchase process will be completed.
By following these steps a buyer can have the legal security of correctly purchasing a property.
Amilcar Navarro is a lawyer with García & Bodán law firm in Managua.
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