Costa Rica Real Estate Laws

 INVESTING IN REAL ESTATE

Just like in the United States, Canada, and Europe, there are different types of property available to buyers that can be owned on a personal capacity or through a corporation; regardless of the owner's nationality (with the exception of concessions in maritime zone). Understanding the various types that are available for purchase is critical in the evaluation process. Below are the property types that can be purchased in Costa Rica and the implications of each type of ownership for the buyer.

1. Fee Simple
The most comprehensive form of property ownership in Costa Rica is fee simple ownership. In this respect, the conditions for this type of ownership are the same for Costa Rican nationals as they are for foreigners. The concept of fee simple ownership is the same in Costa Rica as in the United States, Canada and Europe; namely, fee simple ownership gives the owner of the property the absolute right to materially own the property, use it, enjoy it, sell it, lease it, improve it, among other things, subject only to conditions outlined in the Costa Rican Laws.

2. Concessions in the Maritime Zone
Beachfront property is more commonly known as "concession property." In Costa Rica, 95% of beachfront property is concession property and is governed by the Shoreline Zone Law (Law No. 6043) and other specific regulations including but not limited to special dispositions ensuing from local governments i.e. municipalities and Costa Rican Board of Tourism (ICT). These legal dispositions set forth the conditions under which foreigners and local residents can lease concession property.

In Costa Rica, a concession is defined as the right to use and enjoy a specific portion of land located on the shoreline zone for a pre-determined period of time and based on a predetermined use of the soil (zoning or master plan, known as "Plan Regulador"). The Government, through its corresponding municipality, grants this right by means of a private agreement between concessionaire and municipality that is further recorded in a Public Registry. This agreement also establishes a yearly concession fee that is paid based on an appraisal performed by government financial authorities.

Costa Rica's maritime zone is comprised of 200 meters (approximately 600 feet) starting at the mean high tide mark and heading inland. The 200-meter zone is government owned. No individual or company can own the 200-meter zone. The maritime zone is divided into two strips of land:

a. The first strip is 50 meters (approximately 150 feet) wide is known as the "public zone" and is absolutely public. This zone is not available for ownership of any kind. No development is allowed, except for construction approved by government entities i.e. marinas. Furthermore, this area is deemed public; therefore, it is available for use and transit of any individual.

b. The following 150 meters (approximately 450 feet) can be subject to occupation or lease by individuals or companies, either through a concession with the respective municipality (in case of residential and commercially exploitable portions of land) or a management plan with the Ministry of Environment and Energy (MINAE), in the case of environmentally sensitive, low density, portions of land. In both cases, the property can be used, although not owned (same as with a lease).

Both concession agreements and management plans are entered between private parties and the Government for a limited period of time (5 to 20 years at Government's discretion); however, most concessions and management plans are granted for 20 years. During this period, the concessionaire pays a fee for the use and occupation of such government land. Renewal for equal and consecutive periods is negotiated between private parties and the corresponding government authority; such renewal is usually based on the concessionaire's ability to comply with its commitments and obligations during the previous agreement. Such obligations may include having assumed the compromise to build on that concession land, subdivide it or perform other acts of development or improvement on the land, in which case, the concessionaire will be required to obtain all appropriate permits from the local municipality.

Unlike fee simple property, foreigners do not have the same rights as citizens when it comes to leasing maritime zone concession land. The law establishes that foreigners cannot be majority holders of concession land. A foreigner can, however, enter into a partnership with a Costa Rican citizen where the Costa Rican national appears as the majority holder of the concession land. An exception to this prohibition applies to foreigners who have resided in Costa Rica for at least five years, who can also appear as majority holders of a concession. Nevertheless, alternative mechanisms can be analyzed on a case by case basis.

3. Condominiums
Traditionally, the concept of "Condominium" is associated with apartment buildings and townhouses. In Costa Rica, however, there is a specific law called "Condominium Property Law" that provides a framework for development of different types of properties, including single family residence projects, finished lot projects, vertical and horizontal property condos, among other.

This law allows a developer to restrict and regulate certain aspects of the development. Each Condominium development has its own by-laws containing all applicable conditions, restrictions and regulations applicable to owners in such development.

Condominium property ownership is fee simple ownership, but usually carries with it a few additional restrictions set forth by the developer, such as architectural guidelines, land use restrictions, and other limitations that may be placed on each branch property. For the most part, condominium laws are designed to protect the integrity of a development and maintain the "look and feel" of the project.

This information was provided as a courtesy by MV Law.