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An Overview of Property Rights in Costa Rica

Property Rights

 

If you’re staying in Costa Rica for an extended time period and will be investing in real estate, it’s important to familiarize yourself with property rights.  As a foreigner, you have the same property rights as a Costa Rican, and the same system which protects citizens will protect you.  In Costa Rica there is no requirement for citizenship or even residency to own land.  The reason for this open door policy is economic; this is one way in which Costa Rica brings in foreign investors and strengthens the economy and real estate market.  There are very few restrictions on land ownership in Costa Rica; before you purchase land, however, you should learn the circumstances in which you could feasibly lose some or all of your property rights.

Maritime Zoning in Costa Rica

While beachfronts in Costa Rica are public property, they can sometimes be purchased (this is not the case in some countries, like Mexico).  The rules governing the ownership, sale and usage of beachfront property are laid out in the 1977 Maritime Zoning Law (Ley sobre la Zona Marítimo-Terrestre – Ley Número 6043).  The rules regarding beaches are pretty specific, so you’ll need to have a thorough understanding of them if you’re thinking of purchasing a property that borders the beach.  

Specifically, the beaches themselves are public property and nothing can be built on them.  This includes the strip of land spanning 200 meters from the water (measure using the high-tide line, not the low-tide line).  It is illegal to build any structure inside the 50 meters which are closest to the high-tide line.  Building within the rest of the 200 meter span is highly restricted.  This area is known as the Martime Zone, or Zona Marítima.  The 200-meter strip extends over 1,500 kilometers along the east and west coasts of the country.  While a third of it is open to development (under the restrictions we’re discussing), the rest is park land which is protected from development under national law.

You can only build here if your construction is somehow related to a project which already exists (housing or tourism) or if the property in question was titled to the 50-meter mark and not the 200-meter mark prior to the enactment of the law in 1997.  In these cases, it is possible to lease the land from 50 meters on from the municipality.  The municipality in turn is controlled by the Costa Rican Tourism Institute (ICT).  The majority of the land which can legally be developed along the two coastlines has already been claimed—only small percentage is still open for building.

There are two different types of beach properties in Costa Rica.  If the property was acquired prior to 1977, it’s known as a titled property.  In 1977, the Maritime Zoning Law was enacted, though it was not applied retrospectively to old titled properties, which were grandfathered in under the previous regulations.  These properties can be transferred freely, whereas properties acquired after 1977 are known as untitled properties.  By contrast, you can only obtain an untitled property through a special type of long-term government lease known as a concession.  A concession lasts five to twenty years, and it is usually renewed without a problem, but this is at the government’s discretion.

Not only can the government decide not to renew your concession, but it also may choose to transfer your concession to another lessee.  There is actually no history of this happening in Costa Rica, but it’s important you know the government’s rights.  Costa Rica’s landscape is also transforming rapidly.  Within the past decade there has been a lot of buildup, and it wouldn’t be unexpected for the government to decide your concession would be more valuable for the country as a whole if it was given to a commercial developer.  A luxury hotel on the beachfront would bring more money into the country than your private residence, for example.  If the government were to take the land they leased to you, they would have to reimburse you for the value of any property which you’ve constructed there.

The bottom line here is that a concession is not the same thing as ownership—you can only lease the land in the Maritime Zone, and only under the restrictions which are set by the law.  If you are a foreigner with a corporation which holds a Maritime Zone concession, you cannot own more than 49 percent of that corporation and hold onto your concession.  If you become a resident for five years, however, that rule goes away.  

Squatter’s Rights in Costa Rica

In Costa Rica, unregistered land can be distributed to landless people by dint of squatter’s rights.  It’s useful to know this in the case that you own land, since the land could transfer in part or in full to squatters under certain circumstances—namely that you own the land but you haven’t developed it at all.  As long as you build something somewhere on your land, it is considered to be in use, and therefore safe from squatters.  The alternative is to contract security to patrol your property on a regular basis to look for squatters.  

If undeveloped land is squatted in for more than one year without the owner or the owner’s representatives intervening in some way, the legal rights to the land begin to transfer to the squatters.  After a year elapses, the squatters still don’t have the right to stay on the land if you tell them to leave, but you do have to pay them for their investment in it.  If the squatters are left alone for a decade, the ownership of the land legally transfers to them.  Technically this isn’t the case if the squatters know you own the land and knowingly invade your property, but if they truly believe it is unregistered land, it can theoretically become theirs.  This is why if you must take responsibility for your land, even if you’re away for a long time and don’t have any development there.  If you don’t take care of it, it may no longer be yours.

Environmental Protection Laws

Around three quarters of Costa Rica’s land is set aside in the form of National Parks and other nature preserves.  While this was not the case historically, the country has become a global leader where preservation is concerned, and takes extra steps to protect plant and animal life on land and in the sea.  There are over thirty environmental laws which protect the environment in Costa Rica and most likely will have an impact on your life at some point if you’re staying in the country.  Here are the environmental agencies you should be aware of.

MINEAT: The Ministerio del Ambiente, Energía, y Telecomunicaciones, or Ministry of Environment, Energy, and Telecommunications. This agency regulates mining, the lumber industry, well drilling, and more.  

SETENA:  The Secretaria Técnica National Ambiental, or National Technical Environmental Secretariat.  This agency is in charge of matters relating to development, including real estate and commercial building.  SETENA’s role is to evaluate whether real estate or commercial growth is impinging on the local ecologies.  SETENA must review development plans and approve or deny them in order for developers to proceed with their work.  The agency has a bad name among developers since it slows down their work tremendously; it can take up to two years for SETENA to complete a study.  These efforts toward environmental protection are part of what makes Costa Rica a beautiful place to live or work, however.

Rental Laws

In Costa Rica, you are welcome to rent out your property to another person, but you should be aware of their rights first.  La Ley General de Arrendamientos Urbanos y Suburbanos Ley 7527 is the law which relegates rental situations and outlines the rights of renters.  This law regulates residential property rental rights and not rental contracts relating to commercial or agricultural properties.  This law does not apply to short-term vacation rental contracts, so long as the establishments which are doing the renting are registered with the Costa Rican Tourism Board as hotels or bed and breakfast establishments.  

Rental rights are more favorable to landlords now than they were in past years.  It’s a good idea to talk to an attorney before you decide to rent out a property, and make sure you always get an English translation of all rental contracts before you sign them.  Here are some of the laws that will pertain to you.

A rental agreement can be written or oral, but it’s best to get your contracts in writing so that they are easier to reference and use as evidence, if necessary.  Likewise, you should keep thorough records, including receipts of all payments.  Mention the term of the contract explicitly, or it will be assumed to be three years in court.  You cannot specify a shorter time period for a stay—all rent contracts in Costa Rica are considered valid for three years, no matter what, unless the property is damaged or the rent isn’t paid.  Renters must be notified if their contracts aren’t going to be renewed at least three months in advance, otherwise the contract renews itself automatically.  Rent must always be paid within seven days of the due date, otherwise you are free to evict.  You should always make out contracts in Spanish. 

As a landlord, you’re allowed to increase rent charged in colones by 15 percent each year, higher if the inflation over that period warrants it.  A government body called the Junta Directiva del Banco Hipotecario de la Vivienda regulates the additional percentage which you may be able to tack on.  Rent raises must never exceed the rate of inflation, and rent charged in dollars or any other foreign currency cannot not be raised during the term of a contract.  The security deposit must be equal to or less than one month’s rent.  

Another right you have as a landlord is to inspect your property on a monthly basis or whenever circumstances require that you do.  The renter or a representative must be present for you to do so.  If the renter (or you) makes improvements to the property, those improvements remain with the property after the contract ends.  Renters must report damage to property to owners right away.  If an owner fails to respond in a timely fashion and repair the property, the renter may deduct the cost of the repairs from their rent and fix the property themselves.

If a property is transferred while a renter is occupying it, that renter’s contract also transfers along with the property.  The new owner may only evict the renter if the owner or a family member will be using the property as a primary residence.  Otherwise the renter may stay through the contract’s duration. 

 

 


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