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Costa Rica Legal System

Costa Rica's legal system is based on the Roman-Continental Law.
Practical Implications: Written law, very strict and specific formalities for contracts, agreements etc., procedures and regulations are more detailed.
There are many rules and regulations for certain transactions that are compulsory.

Conflicts among parties must always be settled or solved through Court and in some cases in Arbitration Centers.

Real Estate Law in Costa Rica

land Titles are guaranteed by the State.
All information, transactions, encumbrances, provisional annotations are recorded and shown in the Central Public Registry.

All Real Estate contracts and agreements must be in writing, made by an Attorney/Notary Public, filed at and recorded with the Public Registry.

*In C.R. only Attorneys can be Public Notaries, and only they have authority to grant legal effects to contracts.

Ownership is not transmitted by means of transferring a title document, but instead through written contracts that must be recorded in the Public Registry by an Attorney/Notary Public.

Mortgages, Easements, Preliminary Agreements, etc. must also be recorded in the Public Registry by an Attorney/Notary Public.

Beaches, islands and land surrounded by water bodies cannot be owned, and coastal properties have very specific and strict rules.

Standard Steps in a Costa Rica Real Estate Transaction

  1. Agree on a deal.
  2. Buyer must, through the Attorney/Notary Public, make the legal search for clear and clean title, absence of encumbrances, unwanted easements, judicial annotations and garnishments, foreclosures, etc.
  3. Confirm that the property complies with the recorded survey map (i.e. boundaries, dimensions, location).
  4. If need be, sign a Preliminary Agreement (Purchase Option, Promise to Buy-Sell, First Refusal, and others.)
  5. Attorney/Notary Public must make the purchase agreement in the Protocol Book, signed by the parties, and an Escritura will be filed with the Public Registry.
  6. Legal Fees and Transfer Taxes must be paid upon signing to the Attorney/Notary Public in order to present the document to the Registry.
    (Transfer Taxes: 2.3% of the value of the purchase. Legal Fees: Fixed rate that varies according to the value of the transaction.)
  7. Purchase undergoes internal procedure in the Registry and the transfer is recorded.
  8. Registry emits a Certification of Ownership guaranteeing the Title.

Different types of standard real estate contacts and agreements

  • Purchase Offers, Purchase Options and Promise to Buy-Sell Agreements.
  • Purchase Agreements.*
  • Mortgages.*
  • Transformation of private property into Condominium.*
  • Segregation and transfer of lots from a mother property.*
  • Guarantee Trusts.
  • Escrows and other guarantees.

* All these documents are compulsory to be submitted with the Public Registry.

RELATED LEGAL MATTERS

Property is usually purchased through a LLC known in Costa Rica as a Sociedad Anónima or S.A.

An S.A. can be incorporated by any foreigner, it requires a minimum of two incorporating partners ( although it can be owned 100% by a single person after its registration), a minimum of 4 Directors, and it must have a legal address in Costa Rica

Processing time for incorporating an S.A. is on average two weeks.

Purchasing through an S.A. has many advantages.

Contracts written both in Spanish and in English are legally valid.

Watch out for compulsory formalities in contracts and procedures.

Doing Business in Costa Rica

A.- Incorporate an S.A., a subsidiary or act as an individual.
B.- Rent an office, obtain Internet and telephone lines.
C.- Register with local Municipality for commercial license.
D.- Register with Tax Office.
E.- Commence operations.
Average set-up time: 4-6 weeks.


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