Investing in Property In Costa Rica

Investment Opportunities In Costa Rica

Land values in Costa Rica have been steadily rising over the past 10 years and there is every reason to believe it has only just begun for this tropical destination.

Costa Rica's past growth and obvious future growth ensure that real estate investors will continue to enjoy an excellent return on their investements and re-sale market, both in terms of increasing land values and an ever-increasing amount of qualified buyers.

When comparing Costa Rica property on a global level, one finds property in Costa Rica is clearly a much better investment opportunity than any similar tropical destination.

Property Rights In Costa Rica

Costa Rica’s laws and constitution are founded on a the principles of a Democratic government and include secure property rights for the private ownership of land. These laws apply to residents and foreigners. Citizenship, residency, or even being in the country is required for owning land is Costa Rica. There are few restrictions to land ownership and those restrictions generally apply to beach front property. Costa Rica is one of the few countries that welcome foreigners with open arms and has such all-inclusive laws that protect and provide for not only the citizen, but the foreigner as well. Due to Costa Rica’s open door policy to foreign investment and the country's secure property rights, it is a number one pick for foreign real estate investors.

Fee Simple

The most comprehensive form of property ownership in Costa Rica is fee simple ownership. In this respect, the conditions for this type of ownership are the same for Costa Rican nationals as they are for foreigners. The concept of fee simple ownership is the same in Costa Rica as in the United States, Canada and Europe; namely, fee simple ownership gives the owner of the property the absolute right to materially own the property, use it, enjoy it, sell it, lease it, improve it, among other things, subject only to conditions outlined in the Costa Rican Laws.

Concessions in the Shoreline Zone

In most countries, beachfront property is generally known as “concession property.” In Costa Rica, 95% of beachfront property is concession property and is governed by the Shoreline Zone Law (Law No. 6043) and other specific regulations ensuing from local governments (i.e. municipalities) and Costa Rican Board of Tourism (ICT). The said legal dispositions set forth the conditions under which foreigners and local residents can lease concession property.

In Costa Rica, a concession is defined as the right to use and enjoy a specific portion of land located on the shoreline zone for a pre-determined period of time and based on a predetermined use of soil (zoning or master plan, known as “Plan Regulador”). The Government, through its corresponding municipality, grants this right by means of a private agreement between concessionaire and municipality that is further recorded in a Public Registry. This agreement also establishes a yearly concession fee that is paid based on an appraisal performed by government financial authorities.

Costa Rica’s shoreline zone is comprised of 200 meters starting at the mean hightide mark and heading inland. The 200 meter zone is government owned. No individual or company can own the 200 meter zone. The shoreline zone is divided into two strips of land:
i) The first strip measures 50 meters (approximately 150 feet) is known as the “public zone” and is absolutely public. This zone is not available for ownership of any kind. No development is allowed, except for constructions approved by government entities (i.e. marinas). Furthermore, this area is deemed public, therefore, it is available for use of any individual.
ii) The following 150 meters can be subject to occupation or lease by individuals or companies, usually through a concession with the respective municipality. The property can be used, although not owned (same as with a lease).

Concession agreements are entered between private parties and the Government for a limited period of time that ranges between 5 and 20 years, at Government’s discretion; however, most concessions are granted for 20 years. During such period, the concessionaire pays a fee for the use and occupation of such Government land. Renewal for equal and consecutive periods is negotiated between private parties and the corresponding government authority and, such renewal is usually based on the concessionaire’s ability to comply with its commitments and obligations during the previous agreement. Such obligations include having assumed the commitment to build on that concession land, subdivide it or perform other acts of development or improvement on the land, in which case, the concessionaire is required to obtain all appropriate permits from the local municipality.

Unlike fee simple property, foreigners do not have the same rights as citizens when it comes to leasing shoreline zone concession land. The law establishes that foreigners cannot be majority owners of concession land. A foreigner can, however, enter into a partnership with a Costa Rican citizen where the Costa Rican national appears as the majority holder of the concession land. An exception to this prohibition applies to foreigners who have resided in Costa Rica for at least five years, who can also appear as majority holders of a concession.

Condominiums In Costa Rica

Traditionally, the concept of “Condominium” is associated with apartment buildings and townhouses. In Costa Rica, however, there is a specific law called “Condominium Property Law” that provides a framework for development of different types of properties including single family residence projects, finished lot projects, vertical and horizontal property condos, among others. This law allows a developer to restrict and regulate certain aspects of the development. Each Condominium development has its own by-laws containing all applicable conditions, restrictions and regulations applicable to owners in such a development. Condominium property ownership is fee simple ownership, but usually carries with it a few additional restrictions, set forth by the developer, such as architectural guidelines, land use restrictions, and other limitations that may be placed on each branch property. For the most part, condominium laws are designed to protect the integrity of a development and maintain the “look and feel” of the project.