7 COSTA RICA REAL ESTATE MAGAZINE Key Restriction for Foreigners Under Articles 47 and 48 of Law 6043: • Foreign individuals may not hold a concession directly unless they have been legal residents for at least five years. • Foreigners may not own more than 49% of the shares of a company holding a concession. Critical Insight for U.S. Buyers: Many beachfront properties are not owned but held under concession. Treating a concession as fee-simple ownership is one of the most expensive legal errors foreign investors make in Costa Rica. B. Environmental and Water Protection Restrictions Even outside the Maritime Zone, ownership does not guarantee development rights. Several statutes impose mandatory protection areas, including: • Forestry Law No. 7575 Limits land use where forest cover exists and restricts deforestation. • Water Law (Ley de Aguas) and related regulations establish mandatory protection buffers around: > Rivers > Springs > Wells > Aquifers • SETENA Regulations (Environmental Viability Authority). Certain projects require prior environmental approval (Viabilidad Ambiental). A foreign investor may legally own land that is partially or entirely unbuildable. The “Water Letter” Critical Check Understanding the Water Law is theoretical; the “Water Availability Letter” (Carta de Agua) is practical. Generally, in Costa Rica, you cannot obtain a building permit without a valid letter from the local water provider (AyA or ASADA) certifying that the specific plot has access to potable water. Critical warning: A pipe running in front of the property does not guarantee legal water availability. Due diligence must verify that the provider has the capacity to add a new connection. Without this document, a “development lot” is legally just agricultural land. The Well Exception: In some cases, it is possible to obtain construction permits using a registered well (pozo) or with an hand-dug well. However, do not assume that simply having a well on the property is enough. The well must be legally registered with the Directorate of Water (Dirección de Aguas) and have a valid concession. Verifying that a specific well is compliant and eligible to support a building permit is a vital step that must be confirmed during your due diligence period 4. Buying in a Personal Name vs. Through a Costa Rican Entity Foreigners may acquire property in Costa Rica either: In Their Personal Name • Simpler structure • Common for retirement homes and single-owner properties • Less flexibility for estate planning Through a Costa Rican Corporation Typically: • Sociedad Anónima (S.A.) • Sociedad de Responsabilidad Limitada (S.R.L.) Common reasons include: • Estate planning efficiency • Asset protection • Shared ownership among family members • Privacy • Avoiding local probate proceedings Important: Using a corporation does not bypass legal restrictions, particularly those related to: • Maritime Zone concessions • Environmental regulations • Zoning and land-use rules Common Myths Among U.S. Investors Myth #1: “I need a Costa Rican partner to buy property” False. This applies only to Maritime Zone concessions, not to private titled property. Myth #2: “If it’s for sale, I can build on it” False. Ownership does not imply: • Zoning approval • Environmental clearance • Construction permits Myth #3: “The notary handles all legal risk” Incorrect. Notaries formalize the transaction but do not replace full legal due diligence, including zoning, environmental, and title risk analysis. Myth #4: “If it’s registered, it’s risk-free” False. Registered properties may still face: • Survey overlaps • Undisclosed easements • Administrative encumbrances • Prior legal defects Myth #5: “Costa Rica works like the U.S.” Dangerously false. Costa Rica operates under a civil-law system, with: • Mandatory notarial intervention • Different title principles • No U.S.-style title insurance culture Myth #6: ““I can just wire the money to the seller or the notary” Risky” Legal Protection Available to Foreign Owners Foreign owners in Costa Rica have the right to: • Access Costa Rican courts • Sell, lease, mortgage, or transfer property • Enforce contractual rights • Pass property by inheritance or sale However, actual protection depends on: • Quality of title • Proper due diligence • Correct legal structuring • Understanding statutory limitations A Note on Possession and Security Costa Rican law protects “possession rights.” This means that if a property is left abandoned and someone moves in, evicting them can become a lengthy legal battle. For absentee owners— those who plan to visit occasionally —physical security is part of legal security. * Fence the property: Clearly define boundaries to avoid neighbor encroachment. • Hire a property manager: Having someone check the property regularly establishes active possession. • Pay taxes on time: This reinforces your standing as the active owner. The Investor’s Roadmap: How to Buy Safely For sophisticated investors, success lies in following a structured process rather than relying on handshake deals. 1. Offer & Negotiation: Sign a formal Sale & Purchase Agreement detailing all conditions. 2. Escrow: Deposit funds into a registered Escrow account, not personal accounts. 3. Deep Due Diligence: Go beyond the registry title search. Verify Water Letters, Municipal “Uso de Suelo” (Zoning), and physical boundaries with a Topographer. 4. Closing: The Public Deed (Escritura) is signed before a Notary Public. 5. Registration: The Notary presents the deed to the National Registry. Strategic Conclusion Yes, foreigners can own real estate in Costa Rica, and the market is welcoming. However, the difference between a high-yield asset and a liability is often found in the quality of the pre-purchase verification. Treat Costa Rica with the same rigorous scrutiny you would apply to any international investment. *This article is for informational purposes only and does not constitute legal advice. Investors should consult qualified legal counsel before making investment decisions. Costa Rican laws are subject to change and may be interpreted differently depending on specific circumstances. Real estate investments involve risk and past performance is not indicative of future results.
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