Buying real property in Costa Rica is a little different than buying it in other parts of the world. Learning how to do a little preliminary due diligence or, in simple terms, property homework, is good for everyone to know. This will help them stay clear of the bad and zero in on good opportunities in Costa Rica’s growing real estate market.
The term real property is generally defined as land, anything erected on, growing on, and everything of a permanent nature over or under it, including minerals, oil, and gases.
Allan Garro, of Garro Law, says this is not true in Costa Rica. “Real property does not include the rights to everything under the land or above it for that matter,” said Garro. The government administrates all resources including water for the public interest, he said. To use resources, paperwork needs to be filed with the appropriate agencies to obtain a concession to exploit minerals, water and other resources. Many trees and animals are also protected and cannot be cut or killed without permission. And, these are only some of the caveats.
When buying real property in this country, deep due diligence is necessary and qualified professionals should do it. Title insurance is not the same here as it is in other parts of the world. However, attorneys are not needed to get started. Here are some basics:
All titled real property in Costa Rica has a folio real number. It is made up of three basic parts in the format of P-NNNNNN-DDD. The P is the province. Costa Rica has seven provinces: San José 1; Alajuela 2; Cartago 3; Heredia 4; Guanacaste 5; Puntarenas 6; and, Limón 7.
The second set of numbers, NNNNNN, is a sequential series assigned by the national public registry, referred to in Spanish as Registro Nacional. The last three, DDD, tend to confuse many property buyers. It stands for undivided interests.
In real property law, an undivided interest refers to any right in property, but it has no boundaries, fences or separation of any kind. Each owner has the equal right to enjoy the entire piece. A property with 000 for the DDD value means it has only one owner. If the value is 010, the parcel has 10 owners and so on. Most Ticos divide their property in this way for marriage, inheritance and other reasons. If a buyer wants to obtain a property with multiple owners, all must agree to sell, or there is no deal.
There also are two more identification letters used for some properties. The first, duplicado or “duplicate” is a correction element to differentiate properties that ended up with the same number when the property system went computerized. The other, horizontal (the same word in English) is to indicate properties in a condominium.
Once this number system is understood, it is time to move on and gather some property information. It is important to note before doing so that all lots and parcels in Costa Rica are called fincas or “farms” no matter their size.
Most due diligence starts with the following basic documents for real property: 1. certificación literal de inmuebles (real property certification); 2. consulta de historia de fincas (property history report); 3. certificación plano catastrado (plat certification); and, 4. consulta de plano (plat report).
The real property certification summarizes information about a property including ownership, size, annotations, liens, restrictions, mortgages and other elements. The history report lists all activity recorded at the Registro Nacional.
The plat certification is a plat map of the property, and its size should match the size on the real property certification. The last on the list is the plat report. This outlines any subdivisions linked to the parcel in study.
All this information is obtainable by anyone online. Sometimes it is a good idea to get familiar with the documents and pull them up before spending money on an expensive professional. However, their interpretation is another story, which in most cases requires a good knowledge of the law.
With the basic online information, a buyer interested in a property can see who owns it, how many owners there are, how big it is and if there are any problems that scream stay away. Usually, the anotaciones y gravamenes “annotations and liens” section is where things get tricky, and a competent person should be consulted to unravel the meanings. Annotations could be pending legal actions against the owner.
Knowing this information, Joe and Jane Expat can now be a little more informed when they start looking for their dream home in Costa Rica. When they find something they really like, and the price is right, the first thing they should ask their real estate agent or property owner is for the folio real number. Unbelievably, some property owners do not know it, and others have never heard of the number. When this happens, it can be looked up at the Registro Nacional by the owners name. Once they obtain the number, they can start their property homework.
The next step in the due diligence is investigating the owners. If a Tico owns the property, getting a credit report is a good idea. Seth Derish, of PrivateEyes.com, said in an interview that information on foreign owners can also be obtained from the country of origin.
If a company owns the property, one needs to get a certificación de personeria juridica. In English, this is referred to as a legal status certification or legal resume. The most important thing on this document is who has the legal power to sell the property and what are the restrictions, if any, to do so. In many companies, there is more than one person with sufficient legal powers. If the individuals with powers of attorney are different from the stockholders, it is a good idea to find out who the stockholders are and see if they have approved listing and sale of their property. There are times when stockholders do not have a clue their property is on the market. The press is full of these stories. Property fraud is rampant in Costa Rica.
The expats and other foreigners buying real estate in Costa Rica that get into trouble are usually the ones that know nothing about the process, requirements and laws. Learning the basics in any endeavor is a good idea, especially when it comes to buying real estate whether it be here or elsewhere.
Garland M. Baker, a certified international property specialist, is a 44-year resident and naturalized citizen of Costa Rica. His firm provides multidisciplinary professional services to the international community. Reach him at firstname.lastname@example.org. Baker has undertaken the research leading to these series of articles in conjunction with A.M. Costa Rica. Find the collection at http://crexpertise.info, a complimentary reprint is available at the end of each article. Copyright 2014, use without permission prohibited.