The Complexities of Real Estate Ownership in Costa Rica :

One can assume, in general terms, that the basic principles of property ownership or rights of possession that are prevalent in most democratic nations are also applicable in Costa Rica. Nevertheless, when one analyzes particular situations, it is clear that people can be baffled by the nuances of property rights in this country.

Of course, as in any country that has native populations, in Costa Rica there are very specific laws that protect the lands of the native peoples, but that is a subject for another article.

The “Political Constitution of the Republic of Costa Rica” is of course the most important law that regulates property rights. Article 23 of the constitution guarantees the inviolability of your private domicile which can only be searched and seized by order of a judge or to prevent a crime or some grave damage.

The Constitution also guarantees the right of private meetings under article 26 and by logical deduction one can interpret that every person has the right to use their private property as they see fit (subject to growing limitations), even as a meeting place for which no permit is required. Of course, care must be taken to analyze if the meetings take on a more commercial aspect and therefore would need a municipal permit or if a permit from the Ministry of Health is necessary.

One of the most important articles in the Constitution is article 45 which regulates the power of the state to expropriate private property or to establish limitations to property rights in general.

This has generated an ongoing discussion as to whether this power is limited to situations in which the state must demonstrate that there is a public interest need that justifies the expropriation or if the state can cause the expropriation because it considers it can generate a larger tax base and therefore obtain greater public funds by a different use of a land area.

Also, there is always the argument if the state should indemnify the owner based on the registered price of the property (usually much lower than market value) or the true market value.

The power of the state to impose limitations on property has been seen by many as an indirect way of expropriation without having to indemnify the property owners. For example, the state establishes certain limitations to protect certain environmental elements but does not expropriate and therefore does not indemnify. Of course, it is reasonable and necessary to establish limitations on property use, especially as we understand more and more how important it is to protect certain areas but his can lead to governmental abuse.

For example, what is the smallest lot size that should be allowed in a certain jurisdiction? That will depend on many aspects, such as water availability, roads, flora and fauna issues and many others. The implementation of Master Plans has become an important issue in many communities because different persons can feel deeply affected by certain limitations.

For example, the consequences to property values or tax bases which are affected by declaring an area to be urban instead of rural, versus, the loss of income because the developer cannot subdivide his property into smaller lots.

The Costa Rica Civil Code is the next most basic property law. It is a code established on the Napoleonic Code which collected a number of rural traditions in France in the 19^th century and is therefore a law that has a very rural aspect to it which was mainly based on the right of possession. Since then, a large number of property laws have been implemented, among them all laws related to agrarian property.

Perhaps the most important concept to understand is that the right of property is the accumulation of several other rights (possession- exclusion- sale- transformation- defense and others), the principal one being the right of possession. The right of possession is fundamental to property rights because it allows the person possessing the property the right to defend it legally. The best example is the case of rental.

The tenant is not the owner, but he is in possession of the property and that possession grants him the right to defend it, even against the owner. For example, by law in Costa Rica, rental contracts cannot have a term of less than 3 years and therefore the owner of that property will not be able to recover the possession for at least 3 years, with some exceptions.

In Costa Rica there is a National Registry (Registro Nacional) which is divided into various departments, such as the registry of corporations, the registry of vehicles, the registry of mortgages and others.

The most important registry is the registry of properties. When a property is registered it immediately acquires a seal of legitimacy which is granted by the fact that the registry has verified, through various procedures, that this property truly exists, has the correct measurement indicated, is located in the proper area and belongs to the true owner or owners.

Nevertheless, in some exceptional cases, unscrupulous individuals have been able to game the system and register properties illegally and have caused great harm to buyers and investors. This is why it is imperative a prospective buyer hire a reputable lawyer that can search and analyze the property title because the fact that a property is registered is not a total guarantee that the title is free and clear, although it should be.

When a property is registered the title is the legal registration. In other words, the owner does not need a document to demonstrate his right of ownership because his title can be searched in the registry and one can easily obtain a certification for that property. The property is given a number upon registration which is composed of three aspects:

The province where it is located and that goes from 1 to 7
The property number
Three digits which indicate how may co-owners the property has, “000” means there is only one owner, whereas “002” means there are two co-owners and so on.

The complete property number is referred to as “Folio Real” and it will describe the nature of the property (i.e. if it is a simple lot, or a house or a farm, etc.); it will indicate the geographic location (province, county and district) but not the address; it will establish the property borders by indicating who are the neighbors; it will indicate the size of the property, the name of the owner, the percentage of ownership, the plat map number, the value of the property (contractual price paid), the type of ownership which can mean that the person has full or limited ownership, whether the property has any legal limitations, mortgages, liens or encumbrances and many other aspects.

It is also important to mention that the statute of limitations for properties can have important consequences for those parties interested. For example, if a person feels threatened or dispossessed by someone else, he has an immediate judicial course of remedy which is called “Interdicto” which is a summary procedure to establish who has the right of possession ONLY; while a full blown ordinary lawsuit, which would take much longer, is the proper venue for discussing rights of ownership.

Costa Rica has a strong influence of agrarian law. In fact, article 69 of the Constitution establishes the rights of special property contacts for the rental of a tract of land which the property owner grants in exchange for a portion of the production. It is considered an agrarian contract of society because each party contributes an aspect of the necessary elements, land, labor, capital, knowledge, organization and others.

The law considers a property to be subject to agrarian law if there is a biological cycle that is overseen by the “empresario agrícola” in other words the agrarian businessman. That concept of “empresario” is because the production must be, at least, enough for the farmer and his family to live. These are all very relative concepts that must be argued in court and the fact that a property is subject to civil or agrarian law can have profound consequences.

As a rule of thumb, the more urban a property is, the more certain one can be of the title and the more rural a property (usually much larger, with many more natural elements), the more uncertain the title becomes.

About the Author

Lic. Jorge Montero B. is an attorney educated in the U.S.A. and in Costa Rica. He holds various specialties and Master’s Degrees in Criminal, Commercial, Environmental and Agrarian Law from the University of Costa Rica and has over 30 years of litigation, contract and counsel experience.