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DEVELOPER’S RESOURCE CENTER by crbeach.com
By www.CRbeach.com Published: 04/23/2009
ATTENTION DEVELOPERS OF ALL SIZES :
Here at CR Beach Investment Real Estate we believe the Jacó area offers you the greatest opportunity to take advantage of Costa Rica’s real estate market and the new interest in Biofuel properties. Although times are a little rough now, it also might be the perfect opportunity to purchase today and save money. Then you can do the initial preparations-permitting for your project in time for the opening of the new highway from San Jose. The increased attention to this area will be of great benefit to those that have all their permits in place and marketing materials ready to launch.
Our Developer’s Resource Center has the experience, desire, and insider’s knowledge of the area to help you find the property to develop that meets your needs, (please look in our "Land & Lots Listings" and our "Commercial Properties" sections as examples of some of these properties.) Biofuels are hot and Costa Rica has many perfect properties for jatropha, algae, and palm oil development.
Real Estate Services include- Locating the perfect property and Negotiating the best Deal for you!
After your purchase, we then can help you obtain the best support services to achieve your goals, including recommending the experts for all aspects for your due diligence and D-1 requirements.
ATTENTION DEVELOPERS: BUY NOW AND SUBMIT YOUR PLANS PRIOR TO THE COMING MUNICIPAL REGULATION PLAN!!!
The following is from www.costaricalaw.com who we endorse as reputable:
All architects and engineers in Costa Rica must be licensed by the Costa Rican Association of Engineers and Architects (olegio Federado de Ingenieros y Ingenieros y Arquitectos-CFIA). This governing body establishes the fee schedule that can be charged by its members. Most fees are based upon a percentage of the value of the construction project. HOWEVER ALL FEES ARE NEGOTIABLE!!!
According to the regulations of the CFIA (Reglamento para la Contratación de Servicios de Consultoría en Ingeniería y Arquitectura), the involvement of a licensed architect/engineer in a construction project is separated into two phases. Phase 1 is construction plans and permits and Phase 2 is control and execution.
Phase 1. Construction plans and permits. This phase is further subdivided into several distinct professional services that can be provided to the client by the architect/engineer. The percentages cited below are those that the CFIA has established as minimum chargeable fees.
Preliminary studies (estudios preliminaries): 0.5 percent. These studies may or may not be required, depending on the scope of the project.
Preproject design (anteproyecto): 1.0 to 1.5 percent. Generally, during this stage, the architect/engineer will meet with the client in order to discuss the client's construction requirements. With this information, the architect/engineer will prepare drafts of the proposed construction project for review by the client. These drafts should include site planning and preliminary work drawings. When you contract for this service be sure you agree with your architect/engineer before hand on what he or she is going to provide for you.
Construction plans and technical specifications (planos de construcción y especificaciones técnicas): 4.0 percent. This is one of the most important steps in the overall construction project since execution of the project will depend upon the quality and accuracy of your construction plans. Once you and your architect/engineer have agreed on the layout and design of the project, she or he will begin drafting the plans. In Costa Rica, a complete set of plans should include a site plan, distribution plan, elevation and transversal and longitude perspectives, roof design and drainage, design of footings and support beams, structural plans, electrical design, mechanical and sanitary system design, as well as a plan that details all of the interior finishings of the construction.
Budgeting (presupuesto): 0.5 percent for global budgeting; 1.0 percent for itemized budgeting. Here the architect/engineer prepares a materials list based upon your construction plans and prepares a construction budget for you.
Phase 2. Control and execution. This stage involves the actual construction and project supervision. The regulations authorize three kinds of supervisory tasks, each of which requires a larger time investment from the architect/engineer. Inspection (Inspección): 3 percent of total construction value. Here your architect/engineer will visit the construction site at least once a week and will inspect it to ensure that the plan specifications are being followed by the general contractor. They will also verify the quality of the materials being used and review invoices being presented by the general contractor.
Supervision (Dirección técnica): 5 percent. This requires more direct involvement by the architect/engineer in the day-to-day operation of the project.
Administration (Administración): 12 percent. Here, the architect/engineer takes complete responsibility for the execution and completion of the project.
The option you choose will depend upon the type of project involved, the reliability of your builder/general contractor, and the amount of time you are willing to dedicate to the construction project. All told, phases 1 and 2 can range from 9 percent to 18 percent of the estimated value of the construction project, depending on the amount of services required.
As such, it is common practice to negotiate fees with the Architect AND engineer.
Most, of course, will be eager for your business and, depending on the scope of the project will be willing to work out an agreement tailored to your particular needs. Otherwise, have your Attorney do the negotiating for you to ensure that you will get the best agreement possible.
Before you sign any contract, be sure that you understand the fee structure and know exactly what is and is not included in the fee and clearly define the responsibilities that your architect/engineer are going to assume. Do the same thing with your general contractor and any subcontractors. ALL FEES ARE NEGOTIABLE!!!
Before you purchase a lot with the intent of building on it, you should conduct some preliminary studies on the property to ensure that there won't be a problem obtaining a building permit.
Due diligence studies include:
1. Determine if the lot has basic services such as water, electricity, telephone, and drainage.
2. Determine there are no restrictions placed on the lot that could result in the denial of a construction permit. It will not be enough to check the Public Registry. You should also check the Ministry of Public Works (Ministerio de Obras Públicas y Transporte) for future road construction projects; the Ministry of Health (Ministerio de Salud); the National Institute of Housing and Urban Development (Instituto Nacional de Vivienda y Urbanismo) and the municipality where the property is located (municipalidad).
3. Investigate if there are any environmental regulation that may effect your construction project, such as national wildlife refuges and areas deemed protected by the forestry Law. (see MINAE and SETENA below).
Requests for construction permits are filed with the Permit Reception Office (Oficina Receptora de Permisos de Construcción), which is a centralized office that houses government representatives from MOPT (Ministerio de Obras Públicas y Transportes-roads), INVU (Instituto Nacional de Vivienda y Urbanismo- housing), ICE (Instituto Costarricense de Electricidad-telephone), AYA (Instituto Costarricense de Acueductos y Alcantarillados-water), SNE (Servicio Nacional de Electricidad-electricity), CFIA (Colegio Federado de Ingenieros y Arquitectos), and the Ministry of Health (Ministerio de Salud).
For a single family home that measures more than 70 m2 (735.2 ft.2), the applicant must provide the following documentation: four copies of the construction plans, four copies of the property cadastre plot plan (Plano catastrado), four copies of the permit checklist (hoja de comisión), two copies of your property deed (escritura), one copy of the consulting contract with your architect/engineer (contrato de consultoria), an approval from the water company (AYA) regarding availability of water, and one copy of your electrical design plan approved by SNE. Condominium projects, commercial construction, and urbanization projects all carry additional requirements for obtaining construction permits.
In addition to these requirements, you will need to request a building permit from the municipality in which the property is located. By law it is the municipality that is delegated the responsibility to ensure that all constructions comply with building regulations (Article 1, Construction Law). You can, therefore, expect periodic visits to your construction site by the municipal building inspector, who must certify that the construction is proceeding according to code.
We don't mean to scare you with the above information, but to be well informed will eliminate future problems. We are experiencing a building boom currently, so it is possible to follow procedures and get things done right.
Ownership of real estate in Costa Rica by foreigners is fully guaranteed by the constitution. In addition, foreigners enjoy the same ownership rights as Costa Rican citizens, regardless of whether the property is placed in the name of a corporation or in the name of an individual. The only exception to this is in regards to concession lands, which will be discussed later.
What Legal Documents Can I See Prior To Making A Deposit?
Having selected your ideal property in Costa Rica, you will want to be absolutely certain of all the legalities, and particularly your rights in a foreign country. This is where CR Beach will ensure that you have expert legal assistance and will guide you through each step of the buying process.
First, we will need to see an official Costa Rican Registry report, (informe registral) which will provide detailed information on the property, including the name of the title holder, boundary lines, tax appraisal, liens, mortgages, recorded easements, and other recorded instruments that would affect title. Since Costa Rica follows the doctrine of first in time, first in right, ALL recorded instruments regarding property for sale presented to the Public Registry are given priority according to the date and time in which they are recorded. Since the certificate of title issued by the Public Registry is prima facie evidence of the condition of title on the date issued, any instrument not recorded at the time the certificate is issued is invalid. This eliminates the need for title insurance MOST OF THE TIME.
The second document, the "catastro" or "cadastral" will show all boundaries and markers, neighboring properties with owner's/corporation names, and whether there are any local or national ordinances affecting that particular piece. Your attorney will advise you on the legality of the presented documents, and may request that any deposit be held by him or title company until all paper work is satisfactory. In addition, all obligations (water, electricity, road access, all taxes on the property paid up to date, etc) promised by the owner need to be clearly stated in the written agreement. If the promised time for completion of these obligations is considerable, again request that an amount of the purchase funds to be withheld by the attorney until the obligations have been met.
All properties have a titled registration number known as the Folio Real, and the records database can be searched with this number or by name index. Anyone may do research through the official web site of the National Registry www.registronacional.go.cr
Step By Step Through The Purchase Process:
These are the basics that a purchaser follows when buying a property in Costa Rica.
* Sign a Letter of Intent or an Option to Purchase.
* Deposit 5-10% of the purchase price with a “real” Escrow Company like Chicago Title, or an approved attorney's escrow account.
Please remember that wire transfers from the States typically take 2-5 business days.
* Title research performed by an approved Notary Public-Lawyer and/or title company attorneys. In Costa Rica, all notaries must be attorneys, and are registered with the Bar Association, (Colegio de Abogados).
* Closing with final transfer of funds, execution of transfer deed, endorsement of shares and/or mortgage deed.
* Register new owner with Public Registry (Registro Nacional).
In about 6 weeks, receive official title and guaranty (if purchased).
* CR Beach will ensure that you are protected, every step of the way.
How Is Title Transferred?
When buying property in Costa Rica, property is transferred from seller to buyer by executing a transfer deed ( escritura ) before a public notary. Unlike common law countries, such as the United States and Canada, where the role of the notary is limited to authenticating signatures, in Costa Rica the public notary has extensive power to act on behalf of the state. The public notary must be an attorney and draft and interpret legal documents, as well as authenticate and certify the authenticity of documents.
Once a transfer deed is accepted for registration, the Public Registry will return the original document with all the documentary stamps affixed to it and properly sealed. Assuming no defects in the transfer deed, it should be registered by the Public Registry within 45 to 60 days after presentation.
How Much Are The Closing Costs?
The old custom was for the Buyer and Seller to share equally in the closing costs. HOWEVER these days most properties are in a recently formed corporation and therefore when the Seller has provided a 100% approved clean corporation, they have provided a method for all to save money. In these cases the Buyer becomes responsible for paying all the closing-transfer costs, generally 1% of the selling price. Of course every deal is different, but these are the current accepted ways of doing things.
Closing costs containing the legal fees are based on the real sales price, and now, as declared by the Colegio de Abogados, 1.5%. This fee sometimes often negotiable, depending upon the relationship that CR Beach Investment Real Estate has with that particular attorney.
We demand that you don't pay more than 1% for transferring shares of corporations. If the property is not in a corporation, or you desire a new corporation, additional costs are the transfer land tax, legal fees, and miscellaneous fees which are about 2.6% of the declared value of the property. For the purpose of lowering the property transfer land tax, it is a common practice to lower the gross amount paid by declaring a much lower sum than the actual sales price, (although be aware that acting in this manner could cause problems in the future.)
We at CR Beach will help you choose a highly competent, extremely intelligent, honest attorney before buying property in Costa Rica.
How Much Are The Yearly Property Taxes?
Property taxes (Municipal Taxes) are only ¼ of 1% of the declared value. Thus for every $100,000, the property tax is only $250 ANNUALLY. Coincidentally this percentage is about the same to purchase home-owners insurance. Be aware that a new luxury tax was approved, and levied
at the same one fourth of one percent, yet, this doesn’t seem to be enforced in every municipality.
The municipal tax is administered at the municipal level and varies throughout the country. Paid quarterly, the type of property, location and other factors contribute to the calculation of this tax and MUST be shown to be fully paid immediately prior to transferring title. \
What About Capital Gains Taxes?
A nice incentive for foreign investment is that there is no personal capital gain tax. The Costa Rican government will not tax you on the profit from the future sale of your property as long as this is not undertaken as a means of business. You would be obligated to pay taxes on any "declared" earnings being brought back to your country of citizenship, You can claim an exemption from U.S. Income tax of up to $85,700 for 2007 (and lesser amounts for earlier years) in earnings from employment or self employment while residing outside of the U.S. for a full calendar year, or for any fiscal 12 month period providing you are not in the U.S. for more than 35 days during that fiscal year. Both you and your working spouse can each separately claim this exemption for up to $164,800 in U.S. tax free income for 2006. Please contact a tax advisor with experience for foreign filing!
Who Pays The Sales Commission?
The most common way is that the Seller pays the commission to the realtor or broker at closing. The buyer or purchaser does not have to pay any commission when buying property in Costa Rica, unless you have chosen this method with your Broker, and he acts 100% as a “buyers agent”.
Can I Have The Title Of Property In My Own Name?
The decision to have the property that you are buying in Costa Rica in your own personal name or in the name of a corporation is strictly up to the investor. To put it in the name of a corporation is very common; it can offer benefits of asset protection, anonymity for the actual owner, and makes title transfer easier and cheaper . A valid passport for four representatives (president, vice president, secretary, and treasurer-all can be foreigners) is the only requirement for a foreigner to form a corporation in Costa Rica; the cost ranges from $300-$600 in most cases. More corporation info will be found on this website.
How Can I Ensure That I Have Clear Title To The Property?
It is important that you or your attorney take the necessary steps in order to properly register the property, and more importantly, be assured that the property in question is free of all liens and encumbrances before buying property in Costa Rica.
Of particular interest to North Americans is t he additional security offered by Chicago Title, Stewart Title and First American Title. These relatively new concepts to Costa Rican real estate transactions can further ensure that your purchase could be more fully secured, although EVERY COSTA RICAN ATTORNEY RELIES ON THE IDENTICAL INFORMATION PROVIDED BY THE NATIONAL REGISTRY. Thus most of our transactions are handled without a Title Guaranty, particularly in new condo projects, or lots within a gated community, (however we will strongly recommend Title Guarantees in the case of purchasing farms or probate properties).
READ THE FINE PRINT ON ANY CONTRACT
The Registro Nacional (Property Registry) is located in San Jose - Zapote, where all property documents are recorded, thus a title search at the Registry would confirm good title and proper ownership.
In the event that adjustments were made to any given title, these alterations must be recorded at the Registry. The Public Registry report (informe registral) provides detailed information on the property, including the name of the title holder, boundary lines, tax appraisal, liens, mortgages, recorded easements, and other recorded instruments that would affect title.
Do I Need To Have Residency To Purchase Property?
No, it is not necessary to have residency to buy property in Costa Rica. You can buy with your tourist status. Living here is another matter, as a foreigner and tourist you have to leave the country for 72 hours once every 3 months in order to renew your legal status in Costa Rica. Some of the foreigners without residency enjoy traveling and visiting Nicaragua or Panama for a couple of days, or go back home for a short trip, or discover more of Central America in order to renew their visa.
There are many forms of residency available, we can help you to contact an attorney who can assist you in determining what residency status would work for you. If you plan on living here year round, you will find it easier if you have legal residency.
How Can I Get Residency In Costa Rica?
There are several ways to get a residency here, with different types, such as Pensionado, Rentista or Inversionista. It depends on your individual situation; we recommend consulting a lawyer regarding residency. There are websites that explain the process, such as: www.residencyincostarica.com or www.arcr.net .
What Are The Regulations Regarding "Concession" Beach Front Properties?
When buying property located on or very close to Costa Rica's beaches, you should be aware of the following:
In ALL OF COSTA RICA, the first 50 meters from the mean tide mark CANNOT LEGALLY be built on by anybody, anywhere in the country, as it is considered public beach.
An estimated 95% of Costa Rican beaches falls under a category known as the Maritime Zone Law, which affects the 150 meters adjoining the first 50 meters of land measured from the median tide line. This 150 meters is subject to the Maritime Zone Law (Concession), (unless the property was registered prior to 1973, in which case it has full title and can be transferred as such and called "titled to the 50 meter line"). Concession property operates as a leasehold agreement with the Costa Rican ICT, and local Municipality and and we strongly urge caution when purchasing this type of property. Many people say that concession properties have never been confiscated, but we advise to seek other property if given an alternative.
Here Are Some Official Regulations Regarding Concessions: (Thanks to CCCBR)
Concessions for maritime zone beach property cannot be granted to:
* Foreigners who have not been residents for five years
* Companies with bearer shares
* Foreign companies based abroad
* A company set up in Costa Rica exclusively for foreigners.
* A company with more than fifty percent foreign capital (ZM Art. 47)
Concessions on maritime zone beach property can be forfeited for the following reasons:
* Failure to apply for an extension of a concession in a timely manner
* The forfeiture of rights by the interested parties
* The death or legal absence of the concession holder with no heir
* Not abiding by the established obligations of Article 51
* Cancellation of the concession (ZM Art. 52)
The ICT can cancel a concession on maritime zone beach property for:
* Non payment of the yearly canon or royalty
* Breach of contract (e.g. use of the land for purposes other than those expressly stated by ICT)
* Violation of the ordinances of the law that grants the concession
* Impediment of the use of the public right of way
* Other causes that this law establishes (ZM Art. 53)
All in all, an investment in shoreline property regulated by the Maritime Zoning Law requires extra caution and thorough investigation. The reality is that ambiguities exist within the written law, so that as regulations are created and amended, rights to property may also change. There are no guarantees and there is no foolproof way around the law. Even if you get a concession, there are no guarantees that the concessions will be renewed or that the price of the concession or the yearly canon will be within reason.
The fact remains that you are not purchasing property, you are leasing it and you must be willing to accept that risk. ONE LAST THING: MOST OF THE MAJOR HOTEL-CONDO PROJECTS ALL READY BUILT OR CURRENTLY IN CONSTRUCTION ARE ON CONCESSION PROPERTIES!!!
CR Beach Investment Real Estate is proud to participate with Jacobeach.cr to enlighten you regarding conducting real estate transactions in Costa Rica.
Please contact us regarding any questions on developing property in Costa Rica by visiting our website at www.CRbeach.com, calling us on our toll free number 1-888-782-1119, in Costa Rica call us at 26-43-43-34, or stop in our beautiful Jaco central office, above the TCBY, next to Tsunami Sushi and Banco BAC. Thank-you. Jeff Fisher-Owner/Broker CR Beach.Beach Real Estate Costa Rica
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