The Buying Process
Common and Avoidable Problems
Environmental & Squatters
Costa Rican law provides rights for squatters. The Costa Rican constitution allowed for those who do not own land to find unused agricultural land and remote areas and establish a home. The rights of a squatter grow stronger and stronger based on the amount of time they spend in a given spot.
Political and social issues run deep with squatter situations. If you are considering purchasing a property with a history of squatters then you should change your mind! Costa Rican law makes it very difficult to remove squatters, especially once the land has changed hands to a new owner. If the individual wishes to allow people to stay on their land for over a year, then you cannot kick them out once you purchase the property. Possession, as in the U.S., rules in a court of law. If some one has been on a piece of land for ten years or more, they can register at the National Registry as full owner of the land!
When a squatter problem comes up, it is important to take swift action to protect your property rights. Within the first three months, you must file a civil procedure and or charge them formally with criminal take over. Once three months have passed, the eviction process becomes more difficult and compensation may be required to do so.
If the time period that the squatters have been on your property is between three months and ten years. You must go to court in order to repossess your land. These proceedings typically take years to take effect. After ten years it is too late and it is almost impossible to evict squatters!
Avoiding squatters:
When you buy a property with squatters, have it written into the sales contract that they are to compensate the tenants as part of the execution of the sale. Your property manager could potentially gain ownership rights if you are away from your property for more than a year. To guard against this, have your lawyer add in a squatters clause in the deeds of sale.
Squatters typically target land and homes that look untended too. Make sure your property management company does a good job around the property. Put up solid fencing and signs displaying your name and legal registration number.
The Buying Process
Common and Avoidable Problems
Expropriation
If the Costa Rican government can prove, in court, that public interest requires land to be taken from private hands, then upon payment of the assessed value of the property, the government can take your land. There have been cases where foreign owners have not been property compensated upon expropriation, but there are only a few such cases recorded. Many of these were before 1995 when there was no direct law pertaining to these circumstances. Today, it is uncommon for an issue like that to arise.
Ley de Expropriation was passed in 1995 which laid out the exact procedure and legal obligations of all parties involved with expropriation. This law enabled foreigners to have international arbitration rights, improved compensation and restricted the circumstances that allow for expropriation. Regardless, it is important to check the Registry for future zoning and planing to avoid dealing with these problems.
Expropriation is done by the Costa Rican government to create nature reserves and national parks. Infrastructure improvements like road building or power plants may cause expropriation as well.
Expropriation is deemed necessary by having a 2/3 vote in the Legislative Assembly where they agree that it is in public interest to take the land. Most recently, this has been done for the Liberia International Airport and hydro-electric power plants in Guanacaste.
For those buying rural plots it is important to make sure that you are not near a small airstrip that is being upgraded or land that is designated as reservoir land.
Costa Rica Real Estate FAQ Index Catalog
Why Costa Rica Real Estate
- Stable government; Currency,Infrastructure,Values foreign investment, Protects foreign investment
- Investment security; excellent lending market, ROI, low tax rate, intrinsic value, insurable title/home
- Healthcare; high-quality, high tech, inexpensive, easy access, insurance
- Economic; stability, foreign investment, government, investment potential
- No ownership restrictions; valued by government, no restrictions, same rights as natives
- Proximity to the U.S.; 10 major North American cities with a 3-5 hour direct flight to Costa Rica
- Culture; high standard of living, friendliness to foreigners, education, low crime rate
- Nature; beaches, rainforest, protected lands and species, eco-tourism, diversity
The Buying process
- Finding a broker; certified, experience, track record, language, area knowledge
- Calculating value; comparative value, asking price, investment potential, true value, municipal
- Purchasing; incorporation, appraisals, home inspections, attorneys, contracts, survey map, registration, notary, taxes, titles, closing
- Financing; mortgages, documentation, banks, property protection, using retirement fund
- Types of properties; stand-alone house, apartments, gated communities, condominiums, timeshare
- Building; land & title, permits, size, utility of land, civil engineer, architect, construction, contractors
- Protecting the investment; insurance, making claims, property management
- Oceanfront real estate; defined, taxes, usage, foreign ownership
- Common & avoidable problems; liens & encumbrances, expropriation, environmental & squatters
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The Buying Process
Common and Avoidable Problems
Liens & Encumbrances
Liens and encumbrances are legal terms that generally relate to a stake of claim or ownership to a parcel of real estate belonging to some one other than the individual to which that property is registered.
These types of situations can severely affect the ability of the owner to sell for a reasonable price. As the owner of a property like this, you are at a serious disadvantage. It is important to make sure that you do not become the owner of a property like this without knowing it. At the National Registry, you can look up any property by owner and region to find any liens and encumbrances. If you can realize that a parcel of real estate has some type of dispute before the sale, this can be used as a leveraging tool for you to use to get a great deal on a piece of Costa Rican real estate.
When at the National Registry you can find any other annotations against the property. Meaning, a legal notification regarding the property was submitted. Easements should also be listed such as: interference with underground piping or electrical lines, or pieces of the real estate allow for public use.
The most common type of lien is, as one would expect, a creditor such as a bank has placed an unpaid security or collateral on the property. Defaulted or late bank mortgages are typically the lien you would find on a property. Costa Rican law does allow for outstanding debt to be paid with the sale of a property so this type of lien, while it should be recognized by the buyer, is not prohibitive within a Costa Rican real estate transaction.
A consensual mortgage is a mortgage where the land or property was used as security for a loan. In this case, the real estate can be sold in this manner to pay off the debt.
When a bond is secured by the mortgage on a property, the property can still be sold. However, the debtor is not personally liable for any balance unpaid. The bond holder can collect the principal plus interest at the rate designated to the bond at its inception. So this bond, unlike the consensual mortgage, can be passed through to the next owner by endorsing it.
Tax or public utility mortgages are created when there are back taxes for the land, municipality or public utilities. In this case, whoever owns the property at a given time is responsible for payment. So if you purchase a property with this type of lien, you are "left holding the bag!"
Easements, as mentioned earlier, are a common type of lien where there is ownership interference between the registered owner and total legal ownership. After ten years, easements expire much like in the U.S. Costa Rican law deems that exclusive usage for this long converts something to private ownership if there is no documented dispute in the National Registry.
