Do I have to have an attorney to close on a real estate transaction?
As a buyer yes you have to have an attorney represent you. The attorney will do the due diligence on the property to ensure that it is free and clear of all liens, mortgages, encumbrances and so on. The attorney will also be responsible for writing the deed and registering the property in the national property registry system under you name of corporation.
Can I own the property in my own name or should I use a Corporation?
Yes you can own the property in your own name however if you do not plan on living here full time is better and safer to own the property through a Costa Rica Corporation. They are neither expensive nor hard to set up. The attorney you chose to represent you can handle all of this.
Liability Protection: While it's true that a corporation does not provide absolute immunity from liability, it can offer a layer of protection. In the context of property ownership, if an individual were to cause an accident or face legal issues unrelated to the property, the corporation's assets may be treated separately from personal assets. This separation may help safeguard the property held within the corporation from certain legal claims.
Business Ownership: The primary reason for many individuals to establish a corporation in Costa Rica is often related to business ownership. If you plan to operate a business in the country, owning property through a corporation can simplify administrative processes and legal compliance.
Estate Planning: Using a corporation in estate planning can have advantages. By structuring the corporation in a way that allows for the inclusion of heirs or family members as partners, it may facilitate a smoother transition of assets upon the passing of the owner. This can be a more straightforward process compared to the probate or inheritance procedures in Costa Rica.
It's important to note that the effectiveness of using a corporation for liability protection and estate planning can depend on the specific legal and regulatory framework of the country. Additionally, individual circumstances vary, so it's crucial to consult with legal professionals who specialize in Costa Rican law and have expertise in real estate and estate planning. As laws and regulations may change over time, it's advisable to seek up-to-date advice from a trusted attorney in Costa Rica to make informed decisions based on the current legal landscape.
What are closing costs expenses?
A reasonable estimate for closing costs in Costa Rica is approximately 4% -5% of the property's cost or registered value, whichever is higher.
Notary Fees: Notary services are required for the legal transfer of property. Notary fees typically range from 1% to 1.25% of either the registered value of the property or the sale price, depending on which amount is higher. It's important to note that in Costa Rica, notaries must also be licensed attorneys.
Real Estate Transfer Tax: This is a tax paid directly to the Costa Rican government and is equivalent to 1.6% of the registered value or the agreed-upon sale price, whichever is higher. Documentary Stamps: Documentary stamps represent a tax and are calculated as 1% of the registered value or the agreed-upon sale price, whichever is higher. These fees are essential components of the overall cost of acquiring property in Costa Rica, and potential buyers should factor them into their budgeting and financial planning. Additionally, it's advisable to work closely with a qualified attorney to ensure a smooth and legally sound real estate transaction, considering the specific circumstances of the property and the buyer. As always, due to potential changes in regulations or fees, consulting with local professionals and keeping information up to date is crucial for anyone involved in real estate transactions.
Are Real Estate Agents Licensed in Costa Rica?
Yes, there is licensing for Real Estate Agents in Costa Rica. Unfortunately, it is not a requirement by law, but we, as an industry, are working very hard to change that. The government of Costa Rica does not legally require Real Estate Agents to be licensed and in general they are very lax about most requirements in other businesses and professions. Hair stylists don’t need a license and neither do massage therapists, personal trainers or most contractors. It is up to each industry to take control of their own destiny and change it, just like the USA did 50 or 60 years ago. As a prospective Buyer or Seller, choosing among the many Real Estate Agents in Costa Rica can be a tough decision. How you choose your agent can be based on many different factors. Two key factors are whether or not your Real Estate Agent is Licensed and are they registered with the banking authority SUGEF?
Fortunately, the government of Costa Rica is changing their ways. Recently, the country passed a law, that requires ALL Real Estate Agents and Property Managers to be registered by SUGEF. SUGEF is the government authority that oversees all banking, investments and money transactions. Escrow agents and Money Management companies are registered with SUGEF as an example. In order to be able to be registered with SUGEF the individual must be a permanent resident or a citizen of Costa Rica. They must have a background check done by the Costa Rica OIJ and a USA background check done by the FBI. Their bank accounts will be monitored by SUGEF as well as the banks themselves, and if a person receives a commission or handles third party funds, and they are not registered, their accounts will be immediately shut down.
Professional Real Estate Agents in Costa Rica formed their own boards over a decade ago and have encouraged everyone in the industry to join. The classes are based upon the same requirements as NAR in the United States (National Association of Realtors) and we monitor and police ourselves, adhering to the highest standards of ethical practices.
The two main Real Estate Associations in Costa Rica are CRGAR (Costa Rica Global Associations of Realtors) and CCCBR (The Costa Rican Chamber of Real Estate Agents or Camara Costarricense de Corredores de Bienes y Raices in Spanish). Both associations together are pushing the Senate to pass a law making it mandatory that all Real Estate Agents become licensed according to a standard of ethics you would expect in this industry. We hope in the next couple years to have this accomplished.
In the meantime, it is up to the Buyers and Sellers to help us weed out the fly by night agents in our industry.
If you are trying to choose among the many Real Estate Agents in Costa Rica, please ask them the four following questions:
Are you a Legal Permanent Resident or Citizen of Costa Rica?
If their answer is NO, or vague at best, immediately stop communicating with them and find another agent. Ask to see their Cedula, which is their Costa Rica identification. If they are not a Permanent Resident they are working illegally. First of all, anyone who hasn’t even taken the time to invest in their own ability to stay and work legally in this country surely isn’t going to have your best interest at heart. Secondly, they are just looking to make enough commission to stay a little while longer in paradise, before they pack up and move to another destination. Their only concern is their income, NOT finding you the correct, best and safe investment and they surely won’t be here later on when you move or need to resell your property.
Are you licensed by CRGAR or CCCBR?
Anyone who is representing themselves as an agent, who hasn’t taken the licensing classes, obviously can’t be educated about all the intricacies involved with purchasing property in a foreign country. Find yourself another agent who treats real estate as a career and not just a way to pay the bills or something to do to keep from being bored.
What do you own in Costa Rica?
Show it to me. This is an essential question. It is amazing how many real estate agents don’t own a piece of property themselves, but rather rent a house or a condo. How can you expect to get investment advice from someone who hasn’t even purchased a property with their own money? Surely this person is not in this business for the long haul and can’t be very good at what they do if they don’t even make enough money to buy a small piece of paradise themselves.
Are you registered with SUGEF?
This is obvious. If the answer is NO, then immediately say goodbye to this individual and find yourself another agent.
Michael Mills - I am registered with CRGAR and SUGEF and have been selling real estate in Costa Rica since 1999. My wife and I own our own home and a few other properties in our area.