Purchasing Real Estate in Costa Rica can present many pitfalls to the prospective expat purchaser. As a practicing Real Estate Attorney in Costa Rica, I have seen many of these pitfalls, often presented to me for resolution by expats after the damage is done. One of the main items for consideration in avoiding these pitfalls is to choose a competent Real Estate Agent and Real Estate Attorney at the outset.
Regulation of the Real Estate Industry
The Real Estate industry is not regulated in Costa Rica, as it is in most foreign jurisdictions such as the U.S. and Canada, nor is there any required professional certification process for Realtors. No legislated Professional Oversight Body exists to oversee Realtors. Two voluntary membership Real Estate ethics oversight organizations exist, but except for the power to expel a Member from the membership of the organization, neither of these organizations has the authority to discipline, suspend, or disenfranchise Real Estate Agents for unprofessional or dishonest behaviour from their respective Real Estate practice. Very little formal training is offered to the Members of these organizations. Although several informal entities exist offering a compilation of real estate listings, there is no organized and comprehensive MLS System to assist with locating suitable properties for sale in an area in which the purchaser may be interested, in the same manner as exists in the U.S. and Canada. Some Real Estate Agencies have cooperation agreements with other Agencies, to provide a limited country-wide property base for a prospective purchaser to consult. Accordingly, it is important to select a Real Estate Agent who has local knowledge of the properties available for sale in the area of the Country that the purchaser is interested in. This property search can be accomplished in-part by Real Estate web site searches on the internet. Prospective property purchasers are very much on their own in conducting the necessary due diligence to select a Real Estate Agent.
Regardless of the lack of regulation and training, I have worked with many Realtors who have prior experience in the Real Estate Industry in countries such as Canada, or the U.S., who have imported that knowledge and skill into Costa Rica. This, of course, is a beneficial asset when selecting a Realtor in Costa Rica. It is very important to undertake some extensive due diligence when selecting a Real Estate Agent as to their background and their experience, with the obtaining of references and making inquiries into their established reputation. If utilizing the services of a foreign Realtor, it is important to know that they hold the correct Immigration status in Costa Rica to be practicing as a Realtor.
Selecting a Realtor
Selecting a Real Estate Attorney
When selecting a Real Estate Attorney, it is important that you select an Attorney who is a specialist in Real Estate Law and is acting for your interests only, independently from the interests of any of the other parties involved in the real estate transaction. Of course, it is most important as a purchaser, not to use the same Attorney as the Seller of the property, for the obvious conflict of interest issues that arise. In Costa Rica, all Attorneys are regulated and subject to disciplinary measures, including suspension from practice, for unprofessional conduct. Lawyers must hold a Costa Rica Law Degree, and must be incorporated and in good standing as Members of the College of Lawyers, in order to practice law. The Real Estate Attorney will conduct all of the legal due diligence that is necessary with respect to a property, such as conducting a Property Title Search and a Property Survey Plan review, determining legal access, land use permits, etc.
The Legal System
Costa Rica, being a Civil Law Jurisdiction, rather than an English Common Law Jurisdiction, which comprises the majority of the U.S. and Canada, it is the Notary Public that is empowered to transfer title to a property in the National Registry. Normally, the Notary Public, who also must be an Attorney, may also conduct the legal due diligence that is necessary with respect to a property, such as conducting a Property Title Search and a Property Survey Plan review, determining legal access, land use permits, etc. If a Notary is acting as the Closing Notary, they will prepare and attend on the signing of the Property Transfer Deed at Closing by the Seller and the Purchaser. A Notary Public must be inscribed in and is regulated by the National Direction of Notaries. Notaries are likewise subject to disciplinary measures, including suspension from practice, for unprofessional conduct.
Title Insurance Companies do not exist in Costa Rica and Title Insurance is not available. The Government of Costa Rica guarantees the property title to be as it is registered in the National Registry, except in the case of fraud.
My Opinion
It is important that all of the matters of legal due diligence are conducted and found to be satisfactory by a purchaser during the due diligence period provided for in the interim Property Purchase Agreement and with the appropriate safe-guards in place, such as escrow, for the return of any deposit monies to the purchaser, should the due diligence indicate that proceeding with the property purchase would not be advisable. Government and Professional Body oversight does not rise to the same level in Costa Rica that most foreigners have become accustomed to in their Home Countries. Accordingly, the onus falls to the foreign prospective property purchaser to ensure that proper inquiry is made. In selecting a Real Estate Agent, my suggestion is that a prospective property purchaser first select a competent Real Estate Attorney, who can then refer the purchaser to a competent and knowledgeable Real Estate Agent for the area of the Country where the property to purchase is being sought.
