Why Buy Costa Rican Real Estate
Foreigners can freely and safely purchase real estate in Costa Rica, with the caveat that as anywhere, buyers need to be aware of local laws, customs and procedures, and obtain appropriate professional guidance and assistance. An exception to the right of foreigners to own property is that beachfront property (within 200 meters of the mean high tide mark) is inalienable state land. Although a concession to use these lands can be obtained from the local municipal government, and these can bought and sold, the concession is required to be in the name of a Costa Rican, a legal resident, or a Costa Rican Corporation controlled by a Costa Rican or a resident. Some other categories of lands, such as those in national parks or along the nation’s borders, are also inalienable state lands.
In the past, a great deal of land in Costa Rica was untitled, especially in rural areas, and lands owned by foreigners that were not put to use, cleared of forest and closely guarded were likely to be invaded by squatters. These were often protected by land reform laws that favored their cause, as well as indulgent judges. Over the past two decades, however, most of the country’s lands have been registered, and national policies favoring foreign investment and conservation have put a brake on these types of activities. However, the underlying legislation which enabled the occupation of lands is still mostly in place, and it is therefore very unwise for a foreigner to purchase rural lands without ensuring that the land is titled and taking other precautions to protect the property. Although it is much more likely today that the landowner will eventually prevail against squatters, this can still be an expensive and time-consuming process.
Another area where prospective landowners should take precaution and undertake due diligence is ensuring that zoning laws and other land use restrictions don’t preclude the uses that the buyer plans to undertake on the land. While once Costa Rica was almost devoid of limitations on construction, today national legislation and municipal zoning plans restrict building in protected areas; establish setbacks from rivers, streams and springs; create aquifer recharge areas;identify geologically unstable lands; and limit the density, type and size of buildings and other types of infrastructure. In addition, constructions of certain types require environmental impact assessments, and in some cases, more in-depth studies. Finally, most buildings or significant expansions require a building permit based on plans prepared by an architect or engineer.
At times, local governments have issued building permits for projects that violate national norms; therefore a landowner should not assume that the issuance of a permit by the municipality necessarily signifies that the construction is legal.
Another important issue is that should be resolved before purchasing property concerns the availability of water, electricity and other public services. While public services are available in most areas, in the countryside it may be necessary to drill a well or take water from a spring or a stream, in which case a concession from the Environment Ministry is required.
When buying homes or businesses that have already been built, other issues come into play, such as the quality of construction and resale value. In the real estate and development boom of the last decade, many projects were quickly built without adequate planning, or corners were cut to maximize profits. In some cases, constructions went up without necessary permits or in violation of building norms. Part of the buyer’s due diligence in these cases is to seek to identify these types of problems through inspections, speaking with neighbors or other owners within a development, or inquiring about the reputation of the builder or developer. Regarding resale values, the buyer also should be aware of market prices and trends for the region.
On a more positive note, the rapid growth of construction in Costa Rica has created a broad pool of experienced builders and craftsmen throughout the country, as well as many talented architects and designers, many with a strong interest and experience in green or sustainable construction. In addition, all kinds of building materials, equipment, tools and fixtures, many unknown here a decade or so ago, are now readily available in Costa Rica. And while imported building materials can be expensive, labor costs are significantly lower than in developed countries.