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Real Estate Terminology

In order to speak Costa Rican real estate lingo one has to know the correct terminology to succeed in the process.

In our experience these are the most common and most important terms that a potential real estate investor should know:

a) Folio Real: is the unique number assigned to each property to identify it and distinguish it from other properties. This can also be known as the numero de finca.This number is comprised of three parts:

  • the first number indicates the province
  • the second group of six numbers is the number of the property itself
  • the third group of numbers indicates how many co-owners the property has.

- Recorded land: includes all of the properties you will find registered at the National Public Registry. The vast majority of properties that exist today and for recent developments will fall under this category. If a property is not recorded be wary as it is not very common that a property is not recorded.

- Non-recorded land: includes properties that are registered at the National Public Registry, but have not yet been formally recorded. In order to be recorded it will require an attorney and a judicial process. These types of properties are most commonly farmland known as "fincas" that over the years have not yet changed hands or that have been changed through private contracts.

- Nonregisterable land: includes property that cannot legally be recorded at the National Public Registry. This is usually the case of beachfront property that do not have concessions. You cannot in this case then legally purchase the land. Be very careful not to try and purchase this type of land. This could also be National Park land.

b) Transfer or Conveyance Deed: (escritura de traspaso): This document contains all of the stipulations regarding the transfer of real estate including basic information about the buyer, seller, the property, and any special terms of sale, such as easements or mortgages. An attorney who is also a Public Notary must prepare this document and the deed must be recorded in his/her Notary Book as well as at the Public Registry of Property.

Once the deed has been prepared and signed at the close, it is the attorney’s responsibility to record the deed immediately at the Public Registry. The recording process consists of two phases. In the first phase, the notary presents the deed to the public registry for its annotation; from this moment the property is protected against any third party interest. After the registry verifies the deed is structurally correct, the second phase of registration begins and the property is recorded in the name of the new owner. Because Costa Rica operates on a “first in time, first in right” system, registering the deed immediately is critical to ensuring that the new buyer’s rights to the property are ahead of any other claims by third parties.

c) Public Registry of Properties (Registro Nacional): The Ministry of Justice operates the Costa Rican National Registry (Registro Nacional) .  Because the country is so small, the government is able to keep all land records in the same place. The National Registry plays a vital role in the Costa Rican legal system because it is responsible for receiving and recording all documents that relate to real estate transactions, corporations, powers of attorney, trademarks, security interests and more. The general public can search the database of the National Registry via the Internet for real property and vehicle registration information.

d) Notary Public: Attorney licensed by law to perform legal acts with Public Faith. All transactions performed by a Notary are recorded in his/her Notary Book. A public notary is necessary in order to purchase a property. Most attorneys in Costa Rica are also Public Notaries. A notary's primary duty is to provide Public Faith to a transaction, his/her job is also to act as the legal representative of the buyer, providing legal advice and representation throughout the process.

e) Power of Attorney: ( Poder )

(1) This document authorizes a person to act on behalf of another to perform specific actions such as the purchase of a property. This tool is especially useful for clients that wish to close on their property without returning to Costa Rica. It is best to sign the power of attorney before leaving the country because the law requires that the power of attorney be signed in the presence of a Costa Rican notary. Thus, a visit to a Costa Rican consulate in the US is necessary. One exception to this rule, however, is if the property is being purchased through a corporation. In this case, a signed proxy letter will suffice and there is no need to visit a consulate.

(2) Powers of Attorney come in two forms, general and special. General power of attorney allows a representative to sign on behalf of an individual for multiple transactions and must be recorded at the Public Registry. A specific or special power of attorney allows the representative to sign ONLY for the item specified in the power of attorney contract and under the conditions specified there. It is highly recommended that only a specific power of attorney be granted for property purchases to limit the rights of the representative to sign only for the property in question and nothing else. Additionally, The specific power of attorney does not have to be recorded at the Public Registry, however it should be granted before a Notary Public.

f) Survey Plan (Plano Catastrado): In addition to the Public Registry of Properties, which holds all property deeds, Costa Rica also has a Cadastral Office that holds all of the property surveys. In order to transfer, mortgage or acquire a property, a survey must be recorded at the Public Registry. When dealing with property segregations, a municipality authorization is also required on the survey. The official drawing of the property is validated through an approval process by the Public Registry of Properties as well as by the municipality in which the property is located. Because the Public Registry and Cadastral Office are separate entities, it is not uncommon for old property surveys to be on file at the Cadastral Office. If this is the case, it is recommended that a new survey plan be registered with the Cadastral Office so that there can be no dispute over boundary lines.

g) Zoning Permission (uso del suelo): This document can be requested at your local municipality. You should request to see this document BEFORE you purchase any property. This document sets out the guidelines for what is legally allowed to be built on the property and will include such information as height restrictions, percentage of land that can be built on, types of buildings that can be built, etc. If you are planning a commerical project it would be disappointing to find out after buying the land that you cannot go through with your development plans. Make sure that the information contained in your uso del suelo concurs with the idea you have in mind for the property.

h) Appraisal (avaluo): If you decide to do an appraisal, it is called an avaluo. There are several well known firms in San Jose who can provide this service. In some cases, if you purchase land or a home using financing you will pay the bank to do an appraisal, and it is required of you in order to receive financing. There are several factors taken into consideration to evaluate the value of a property, these are all the same factors for properties in North America as well. Many times you will find the banks will under value a property slightly.

i) Water rights (carta de agua o concession de agua): Water rights in Costa Rica is a very important matter when making a real estate purchase. You need to be 100% sure that your property has water; otherwise your property can be worthless. Many people have been scammed on this issue. Just because your neighbor has water does not mean you do, too. This is a much greater issue in the beach areas; where water has now become scarce due to the amount of large developments that have been built. Without water rights you will not be able to obtain construction permits of any kind. In order to be sure you have water or can obtain water for your property request a carta de agua from the current owner. If the seller does not produce this he/she could have a water concession, in which case they would have to tranfer the rights to you at the time they transfer the property to you.

j) Municipal Property Taxes (Impuestos municipales): This is another document you need to request from the current owner of the property, a letter stating that they are up to date and paid in full on their annual municipal property taxes. This statement must be no older than 2 months old, as in many cases people pay their annual property taxes either once a year, twice a year or four times a year. There have been many cases in which the current owner owes so much in back municipal taxes that they sell the property to someone else who can get stuck with excessive payments, even though property taxes are much lower than in North America.

k) Escrow: Most buyers from the US understand Escrow service to include not only the managing of funds for a property purchase, but all of the administrative work required to execute a closing. In fact, in states where an attorney is not required for a real estate purchase, the escrow agent becomes the central party responsible for ensuring that all documentation is in order before the closing.

In Costa Rica, the escrow agent performs many of the same duties. The primary function is the financial service to prevent manipulation or mishandling of funds prior to closing. The escrow agent is a neutral third party with responsibility for issuing checks and executing payments. This system gives confidence to all interested parties (e.g. attorneys, brokers, sellers, buyers) that funds are protected during the buying process and that all funds will be disbursed appropriately to all parties at closing.

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