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Beach Land Occupants Are Renters, Not Owners

January 4, 2008

Dear Tico Times:

Your recent front-page article Property Owners Reeling from Tax Sticker Shock (TT, Dec. 14) is very deceptive in characterizing Maritime Zone concession payments as taxes. You really should publish another article of equal length and prominence to correct yourselves and more fully explore the implications of recent developments.

The outraged foreigners cited in your article express themselves as though they own beachfront property. In reality, they purchased rights of occupancy in the 200-meter strip above the high-tide line designated as the Maritime Concession Zone. No such occupant owns the land, since the Maritime Zone is by law property of the state of Costa Rica. The concession payments that occupants of the Maritime Zone make to the local municipality that administers that zone can, therefore, best be conceived as rental payments, not taxes.

Annual rental payments of 5% of the true value of a property are quite a bargain, but annual tax assessments of 5% of the property value are bordering on confiscatory.

Therefore, the key question is:Why do all these foreign renters on beachfront property think they own the property that they ve actually been renting from the state of Costa Rica? I dare say that most of the blame lies with irresponsible real estate agents and lawyers.

A retired couple who paid $200,000 for what they thought was an incredible deal on beachfront property is now waking to the realization that they actually purchased the right to pay the municipality $20,000/year in rent. They made a spectacularly poor investment decision. Keep in mind, however, that although that couple may return to Canada or the United States in financial ruins, subsequent renters will be delighted to purchase that same right from them for a much more modest sum.

Beyond that human tragedy, this recent trend toward charging realistic rents in the Maritime Concession Zone could have very positive effects in Costa Rica s beach communities.

Only enterprises with significant cash flow, or individuals with high net worth, will be able to afford the annual payments, which will encourage the establishment of money-making businesses that attract customers to the zone. Houses occupied by elderly foreigners on fixed income will tend to convert to rental properties occupied by a steady stream of vacationers.

Some lots will be abandoned as the renters realize that they can t pay the rent. This will encourage the establishment of a 200-meter buffer area above the high-tide line, with attendant advantages conferred to the local community. The concession payments will provide steady income to local governments, which, if well-managed, will benefit property owners and those Maritime Concession Zone renters who decide to hang on.

There has been much talk of late of converting the Maritime Concession Zone in portions of the country to fee-simple property. I m sure that the occupants of Costa Rica s Maritime Concession Zone are lobbying hard for such a change in property rights, but the rest of us should just say no.

Kevin Ludeke

San José

Editor s Note: Costa Rican law refers to concession payments as canones, which translates to levy or tax, according to the Oxford Spanish Dictionary.

 

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