Preliminary Steps for Acquiring Real Estate in Costa Rica

Purchasing real estate is a significant decision that requires several preliminary steps to ensure the transaction is legal, transparent, and free from future complications. In Costa Rica, these steps are crucial to guarantee that the property is in good standing and that the buyer is protected.

Key Considerations Before Buying Property in Costa Rica

 
1. Check the National Registry
The first essential step is to verify the property in the National Registry. Here, the buyer can ensure that the property they intend to acquire is properly registered and free of liens or encumbrances. A review of the National Registry confirms the ownership of the property, ensuring that the seller is indeed the legal owner. It’s also possible to check for mortgages, preventive annotations, or any other restrictions that may affect the free transfer of the property.
 
2. Review of Tax Matters
Another crucial step is reviewing the tax matters related to the property. This includes verifying that the property is up-to-date on the payment of the Real Estate Tax and the Solidarity Tax for Housing Programs (commonly known as the "luxury home tax"). Failure to pay these taxes could lead to additional financial burdens or even legal complications in the future. It’s important to request receipts or proof of payment for these taxes from the seller to avoid unpleasant surprises.
 
3. Municipal Review
Every property in Costa Rica is subject to municipal regulations, so it is necessary to conduct a review at the corresponding municipality. It’s important to ensure that all municipal taxes are up to date, including the Real Estate Tax and other local fees. Additionally, verifying the permitted land use is essential, especially if you plan to build or make modifications to the property. The land use regulations will determine what kind of activities are allowed on the property, and any discrepancies could limit the buyer’s plans.
 
4. Check the National Cadastre
The National Cadastre is another key entity to consult before acquiring a property. This process involves verifying and matching the cadastral information with that of the National Registry. It’s essential to confirm that the property details, such as dimensions, boundaries, and location, match the records in both entities. This review helps avoid issues like land encroachment, boundary disputes, or discrepancies in the actual size of the property. 
 

Review of Seller Information

In addition to verifying the technical details of the property, such as its location, boundaries, and dimensions, it’s crucial to thoroughly check the seller’s information. This step is vital to avoid fraud and ensure that the transaction proceeds securely and legally.
 
1. Identity Verification and Legal Capacity
The first thing to do is confirm the seller’s identity. In Costa Rica, this process involves reviewing the identity card for individuals or the legal entity’s corporate ID for companies. It’s essential to ensure that the person selling the property is who they claim to be and has the legal capacity to do so. If the property is under a company’s name, you must verify that the person signing has the legal authority to act on behalf of the company.
 
2. Seller’s Background Check
Investigating the seller’s background is an additional step that can provide more security. This includes checking whether the seller has a history of real estate-related litigation or has been involved in fraud or legal issues. This review can be done through judicial records and public databases. A seller with a problematic history could be a red flag, and in such cases, it’s advisable to proceed with extreme caution or consider other options.
 
3. Confirmation of Ownership
It’s essential to ensure that the seller is the legitimate owner of the property being sold. This verification is done through the National Registry, where it’s possible to confirm whether the seller is listed as the property owner. Additionally, it’s important to verify that there are no other co-owners who would also need to sign the sale agreement. Any discrepancies in ownership could complicate the transaction and may require legal or notarial intervention to resolve the issue.
 
4. Review of Special Powers or Mandates
In some cases, the seller may be acting on behalf of another person or entity through a special power of attorney or mandate. In such cases, it’s crucial to review the legal documents granting this power. These documents must be duly registered and updated, and it’s important to ensure that the attorney-in-fact has the specific authority to sell the property in question. If the power of attorney is limited or does not authorize the sale, the transaction could be challenged in the future.
 
5. Seller’s Financial Situation
Although not always possible, knowing the seller’s financial situation can provide insights into the motivation behind the sale and potential risks. A seller facing financial difficulties may be in a rush to close the deal, which could influence the sale conditions. It’s advisable to investigate whether the seller has significant debts or if the property is being sold to settle financial obligations. This can help in negotiating better terms for the purchase and avoiding future issues.
 

Conclusion

Acquiring real estate in Costa Rica requires thorough due diligence and verification of multiple legal and tax aspects. By following these steps, the buyer can ensure that the property is free from issues and that the transaction is conducted safely and legally.

Verifying the seller’s information is a critical step in the process of acquiring real estate in Costa Rica. By confirming the seller’s identity, legal capacity, and ownership, as well as reviewing their background and financial situation, the buyer can minimize risks associated with the transaction.

The assistance of a specialized lawyer is essential to carry out this review thoroughly and to ensure that all legal aspects are properly addressed. At BDO, we have expert lawyers who can guide you through every step. If you have any questions about this process or a project that requires specialized advice, don’t hesitate to contact us—we’ll be happy to assist you.