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Buying property in Costa Rica: scams and pitfalls

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Everything you need to know is included in our Costa Rica Property Pack

Foreigners are increasingly considering Costa Rica for real estate investments, enticed by its natural beauty and business opportunities.

For those who aren't familiar with the area, getting into the property market there can be quite a challenge. You may encounter unexpected issues and pitfalls, so it's essential to stay vigilant.

Both our property-owning customers and our local associates have brought a range of concerns to our attention. We've listed them all in our Costa Rica Property Pack.

This article provides a brief overview of potential pitfalls that may arise during the property buying process in this country.

Is it safe or risky to invest in real estate in Costa Rica?

Generally, the process is safe, but one must be cautious.

For instance, there have been cases where buyers have been duped into purchasing properties with disputed titles or those in protected areas where construction is prohibited.

A notorious example is the coastal property scam, where foreigners have bought properties in the Maritime Zone, only to find out later that strict building regulations apply.

A significant pitfall is the lack of clarity in property boundaries. Due to historical reasons, many properties in Costa Rica do not have a registered survey, or the existing surveys are outdated.

This can lead to disputes over land boundaries. Foreigners, unfamiliar with the system, can easily fall into these traps, sometimes buying properties that are smaller than advertised or encroach on neighboring lands.

While Costa Rican law protects property rights, including for foreigners, the transparency of the process can be murky. The legal framework is in place, but the execution can be laden with bureaucratic red tape.

This is not necessarily malfeasance but often a product of a system that relies heavily on manual processes.

The judicial system in Costa Rica is known for its slow pace.

Resolving property disputes can take years, a factor that potential buyers must consider. The case of the Arenal Lake dispute is a good example, where a number of foreigners found themselves in a prolonged legal battle over land that was suddenly claimed by the government for environmental protection.

It's imperative to conduct thorough due diligence. This includes verifying the property title in the National Registry, ensuring compliance with municipal regulations, and checking for environmental restrictions.

Hiring a reliable, bilingual attorney who specializes in Costa Rican real estate law is crucial.

The government does regulate the real estate market, but the enforcement of these regulations can be inconsistent.

The 'Zona Marítimo-Terrestre' law is a case in point, where the government has strict rules about foreign ownership within 200 meters of the high tide line, yet enforcement can be spotty, leading to confusion and legal issues for unwary buyers.

Many foreigners have faced challenges with the intricacies of the legal system and the Spanish language. There are numerous instances where language barriers have led to misunderstandings in property transactions.

Moreover, cultural differences in business practices can lead to unexpected delays and frustrations.

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Avoid these pitfalls when purchasing property in Costa Rica

The concept of "Zona Marítimo-Terrestre"

When buying residential property in Costa Rica, a common pitfall specific to this country that you may not be aware of is overlooking the "Zona Marítimo-Terrestre" (Maritime Terrestrial Zone) regulations.

This is a unique aspect of Costa Rican law. The first 200 meters of land measured from the high tide line is considered public and is heavily regulated.

Of this, the first 50 meters are inalienable public property, while the next 150 meters are available for restricted use through concessions.

The mistake often happens when foreigners buy properties close to the coast without realizing the implications of the Zona Marítimo-Terrestre. They might believe they have full ownership of the land, but in reality, they are only granted a concession, which is similar to a lease and comes with various restrictions. This concession is subject to specific conditions and can be affected by municipal regulations.

The frequency of this issue is relatively high among foreigners, particularly those attracted to Costa Rica's beautiful coastlines.

Many are drawn to the idea of owning beachfront property without fully understanding the legal framework governing these areas.

It's crucial that you thoroughly research and understand these regulations and possibly consult with a local legal expert before purchasing any coastal property in Costa Rica to avoid this pitfall.

The risk related to "derecho de vía"

Another specific pitfall you should be aware of when buying residential property in Costa Rica involves the concept of "derecho de vía" (right of way).

In Costa Rica, many properties, especially in rural or less developed areas, may not have direct or guaranteed access to public roads. This means that access to your property could depend on a right of way through neighboring lands, which is not automatically assured.

The mistake occurs when a foreign buyer assumes road access to the property is guaranteed, akin to what might be expected in other countries.

However, in Costa Rica, if your property does not border a public road and there is no established "derecho de vía", you might find yourself unable to legally access your property.

This can become a significant issue, leading to disputes with neighbors or requiring legal action to establish a right of way.

This problem is not uncommon, especially in more secluded properties that foreigners often find appealing for their privacy and natural surroundings. To avoid this, you should ensure that the property has legal access or an established "derecho de vía".

It's advisable to have a reputable lawyer conduct a thorough due diligence process to confirm the existence and legality of access roads to the property you are considering.

This can save you from future access issues and potential legal complications.

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"Uso de suelo" or land use certificate

A less commonly known but significant pitfall in buying residential property in Costa Rica is related to the "uso de suelo" (land use) certificate.

This certificate defines what activities can be legally conducted on the property.

It is a crucial document, especially in Costa Rica, where land use regulations can be very specific and strictly enforced.

The mistake often occurs when foreign buyers assume that they can use the property for any purpose they desire, such as building a home, starting a business, or farming. However, the uso de suelo certificate might restrict the property to specific uses that do not align with the buyer's intentions.

For example, a property might be zoned only for agricultural use, prohibiting any commercial or residential development.

This issue is particularly relevant if you're planning to buy property for a specific purpose, like building a vacation home, a rental property, or a commercial venture.

The frequency of this issue is not negligible, especially among foreigners who might not be familiar with the concept or importance of a land use certificate in Costa Rica.

"Plano Catastrado" or cadastral property map

Another specific and often overlooked pitfall when buying property in Costa Rica concerns the "Plano Catastrado" or cadastral (property) map. This is an official document that outlines the exact boundaries and measurements of a property.

The issue arises from discrepancies that can exist between the physical boundaries of a property and what is recorded on the Plano Catastrado.

Foreign buyers sometimes make the mistake of relying solely on physical landmarks or the seller's word regarding property boundaries. However, in Costa Rica, it's not uncommon for there to be mismatches between the perceived and officially registered property limits.

This can lead to disputes with neighbors, legal issues, or even the discovery that the actual size of the property is different from what was believed.

The frequency of such issues is notably higher in rural or undeveloped areas, where formal property demarcations are less commonly established and maintained.

Before purchasing, you should ensure that a recent and accurate survey has been conducted and that it aligns with the Plano Catastrado. It's advisable to hire a reputable surveyor and lawyer to verify the property's boundaries and ensure they match the official records.

This step is crucial in safeguarding your investment and avoiding future boundary disputes or legal complications.

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"Concesión de agua" or water concession

Another unique and often overlooked issue when buying property in Costa Rica is related to water availability and the legalities surrounding water rights, particularly the "concesión de agua" (water concession).

In Costa Rica, water is considered a public good, and its use, even on private property, is regulated by the government.

The common mistake here is assuming that access to water sources on or near your property automatically grants you the right to use that water. However, in Costa Rica, you may need a water concession from the relevant environmental authorities, especially for properties in rural areas or for certain types of development.

The frequency of this issue is particularly high in areas where water sources are scarce or heavily regulated.

This can be a significant problem if you plan to develop the land for agricultural, commercial, or even certain types of residential use, and you find out after the purchase that you can't legally access or use the nearby water as you intended.

To avoid this pitfall, you should verify whether a water concession is required for your intended use of the property and, if so, ensure that such a concession can be obtained.

This involves not only checking the current status of water rights but also understanding the potential for changes in water regulation in the area.

"Anotaciones" or annotations on the property title

A specific and often unexpected pitfall when buying property in Costa Rica is dealing with "anotaciones" or annotations on the property title. Annotations are notes made on the property title that can indicate various legal conditions or pending actions affecting the property.

They can range from liens and mortgages to boundary disputes or environmental restrictions.

The mistake often occurs when foreign buyers overlook these annotations or fail to understand their implications fully. For example, you might purchase a property thinking it has clear title, only to discover later that there are legal claims against it or restrictions on its use.

These annotations can significantly affect your ability to use or resell the property and may involve lengthy legal processes to resolve.

This issue is not infrequent, especially since annotations on the title can be complex and might not be immediately apparent to someone unfamiliar with Costa Rican property law.

To avoid this pitfall, it is crucial that you conduct a thorough title search and have all annotations explained and resolved before proceeding with the purchase.

This typically involves working with a knowledgeable local attorney who can interpret the annotations and advise on any necessary steps to clear the title.

It's also advisable to obtain a recent "certificación literal" of the property from the Public Registry, which provides a detailed report of the property's legal status, including any annotations.

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Ley de Zonas Costeras" (Coastal Zone Law)

An often-overlooked but critical aspect to consider when buying property in Costa Rica is understanding the implications of the "Ley de Zonas Costeras" (Coastal Zone Law).

This law impacts properties located near the coast and involves specific regulations that are unique to these areas.

The mistake here lies in not fully comprehending how this law affects property rights and usage. For example, the law includes regulations about construction limits, conservation requirements, and public access to beaches.

You might find yourself restricted in terms of how close to the beach you can build, what type of structures are permissible, or even face requirements to allow public access through your property to reach the beach.

This issue is especially relevant if you're considering purchasing beachfront or near-beach property, as it's not uncommon for foreigners to be attracted to these locations without being aware of the specific legal landscape. The frequency of encountering problems related to the Ley de Zonas Costeras is significant in coastal areas, and the implications can be substantial, affecting both the value and utility of the property.

To avoid this pitfall, it's crucial to investigate and understand the specific regulations that apply to any coastal property you are considering. Ensure that you consult with legal professionals familiar with the Ley de Zonas Costeras and its implications for property development and rights.

This step is essential for making an informed decision and ensuring that your property investment aligns with your expectations and legal requirements.

"Territorios indígenas" or indigenous territories

A unique and often unexpected issue in purchasing property in Costa Rica is understanding and dealing with "indigenous territories" or "territorios indígenas." These are lands legally designated for the country's indigenous communities and are governed by special laws and regulations.

The mistake here occurs when a foreign buyer unknowingly purchases land within these territories. In Costa Rica, properties within indigenous territories are often subject to different legal standards and restrictions.

For example, there might be limitations on ownership, transfer, and use of the land that are not immediately apparent to someone unfamiliar with these specific regulations.

This issue, while not common in the general property market, can be a significant pitfall for those interested in rural or seemingly undeveloped areas, where indigenous territories are more likely to be located. The implications of buying land in an indigenous territory can range from legal challenges in asserting ownership to restrictions on development and use of the land.

To avoid this pitfall, it is essential to conduct thorough research and ensure that the property you are interested in is not located within an indigenous territory.

This involves not only reviewing the property title and local land records but also understanding the broader context of land rights and indigenous territories in Costa Rica.

Consulting with a lawyer knowledgeable in Costa Rican property law and indigenous rights is crucial to navigate this aspect properly and ensure that your property purchase does not infringe on these specialized legal areas.

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"Ley Forestal" or Forestry law

A unique and critical pitfall to be aware of when buying property in Costa Rica is related to environmental protection laws, particularly the "Ley Forestal" (Forestry Law). This law includes regulations that protect certain types of land, especially those with primary forests, wetlands, or other important ecological features.

The mistake happens when foreign buyers acquire property without realizing that it falls under strict environmental protections.

You might find that the land you purchased cannot be developed or altered due to its ecological status. For example, if your property includes primary forest, there may be significant restrictions on clearing land, constructing buildings, or altering the landscape in any way.

This issue is particularly relevant if you are considering purchasing large tracts of land, rural properties, or properties near national parks or reserves.

The frequency of encountering problems related to the Ley Forestal can be high in these areas, and the consequences for violating environmental regulations can be severe, including hefty fines and legal action.

To avoid this pitfall, it is essential to conduct an environmental assessment of the property before purchasing.

This should include verifying whether any part of the property is subject to environmental protections under Costa Rican law. Consulting with environmental experts and legal professionals who specialize in Costa Rican environmental law is crucial.

They can help you understand any potential restrictions on the property and ensure that your plans for the property are legally and environmentally feasible.

The risk awareness of the "areas de protección" risk

Another specific pitfall when buying property in Costa Rica is the potential for encountering "areas de protección" (protection areas) around rivers, streams, and springs.

In Costa Rica, there are specific legal requirements regarding the distance between any construction and these natural water sources. This is governed under various environmental and water laws.

The mistake occurs when a foreign buyer purchases a property with plans to develop it, without being aware of these protection area requirements. For instance, you might plan to build a structure close to a scenic river or stream, only to find out that there's a legal buffer zone in which no construction is allowed.

The required distance can vary, but it's often substantial enough to significantly impact development plans.

This issue is not uncommon, especially in more rural or naturally rich areas where buyers are drawn to the beauty of the natural surroundings. However, failing to comply with these protection areas can lead to legal issues, including orders to halt construction, fines, or even the demolition of already constructed structures.

To avoid this pitfall, it’s important to have a clear understanding of the property's topography and its proximity to natural water sources. Before purchasing, you should consult with an environmental expert or a lawyer who can inform you about the specific regulations regarding protection areas in Costa Rica.

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