How does the process work? Properties being offered are duly registered with the Costa Rican Public Record Office (Registro Publico), an entity established in 1867. Land transfers (sales) are granted through a public deed. To achieve this, the transaction is recorded by a Costa Rican Notary Public who inserts the title transfer in his Protocol (numbered ledger). A Notary Public must be a licensed Attorney at Law who has practiced law for at least two years and who is endowed with "public trust" and has the right to validate and legalize all contracts and deeds. The purchase deed is presented by the Notary to be duly registered in the public records. Property is registered in the Costa Rican Land Registry Office, where each individual lot will have its own registry number. Ownership of each individual property is then transferred to an anonymous limited liability company (LLC) or to an anonymous liability company(ALC), itself registered in the Costa Rican Registry of Corporations. All of the documents detailing ownership of the land and registry information of the LLC/ALC are available from each appropriate registry office.
Most properties in Costa Rica are registered in a computer system called "Folio Real Melquizads." The system is centralized at the offices of the Public Registry in San Jose. Before buying land, Wellington will guarantee, In writing, free and clear title by performing a title search In the Folio Real. This title search will show all the data on the property, including area, ownership, boundaries, location, mortgages and other liens.
Once a buyer is interested in a piece of property, the next step is to understand the process of acquiring the property.
The following are the basic steps that a purchaser follows when buying property.
- Step 1: Sign Purchase and Sale Agreement.
- Step 2: Deposit funds into escrow account or with an authorized public or private bank, through a fiduciary account; or by using an international bank guarantee cheque.
- Step 3: Title research performed by the Notary Public / Lawyer (search done by Guido Soto y Asociados or Facio Abogados, and information submitted to you personally.
- Step 4: Closing - Execution of Transfer Deed, Endorsement of Membership Units and/or Mortgage Deed and disbursement of funds. Closing will be conducted in the law office of your choice, with the final payment being performed by the authorized attorney, or directly in the bank with the signing over of papers of the property.
- Step 5: Register new owner with Public Registry.
The real estate buying process in Costa Rica need not be intimidating or confusing. By understanding the steps in the process and pitfalls to avoid, a buyer can confidently invest in real estate and enjoy it for years to come! CR Realtor and its affiliates appreciate your trust and opportunity to develop a long term relationship.
Organizing an LLC in Costa Rica
The typical limited liability company (Sociedad de Responsabilidad Limitada or SRL) or anonymous liability company (Soceidad Anonima) must be organized by at least one person before a Costa Rican Notary Public. After such organization, the membership units (called "Quotas" in Costa Rica) may be transferred and it is legally permissible to have an LLC/ALC in which one person is the owner of all membership units.
When you are buying real estate, it is advisable to do it in an LLC's/ALC’s name. In this manner, transfers are easier and the structure is more flexible for other transactions and for organizational matters.
Why an LLC?
By law, any individual, national or foreign, may legally own land in Costa Rica. Nonetheless, for legal and economical reasons, it is recommended that the purchase of real estate be performed through a Costa Rican anonymous LLC/ALC. Advantages of having land registered under an anonymous LLC/ALC rather than in an individual's name are as follows. An anonymous LLC/ALC, as the name indicates, provides a measure of privacy to its owner(s), making it difficult for others to obtain information about who owns the membership units of the LLC and, thus, the land. This provides anonymity which many foreign investors desire. Also, by having your assets registered under a Costa Rican LLC/ALC, it protects you from personal liability under current Costa Rican law. All landowners pay land transfer taxes every time the property is sold. However, once a Costa Rican LLC/ALC owns the land, there is no more land transfer tax to be paid since it is the membership units of the LLC that change hands. Currently, no capital gains taxes are paid in Costa Rica when you sell an LLC/ALC that owns property, since the sale is a private transaction. Moreover, because any income generated under a Costa Rican LLC/ALC will pass through to its owners, United States residents will not be subject to possible double taxation when they sell the property. Inheritance taxes in Costa Rica are high, but an anonymous LLC/ALC has a life of 99 years, which can be renewed for another 99 years. You can be assured that your spouse and your children can enjoy the fruits of your labor without having to worry about such taxes, as long as you leave them the membership units of the LLC/ALC in your will. They can then name themselves as Managers of the LLC and carry on the tradition.
Ownership of recordable assets, such as real estate and cars, has become the primary reason for most of the registered corporations and LLCs/ALCs in the country. These "indirect" methods of ownership are, under current Costa Rican law, the most highly recommended means of managing recordable assets.
|
