Transferring Real Estate Title

Transferring Title to Property

If a property appears free and clear of encumbrances, the lawyer can then
proceed. Your lawyer should then draft a transfer deed or escritura de
traspaso
to move the ownership from seller to buyer. The transfer deed
should include details about financing of the property. In Costa Rica the
buyer and the seller usually share the closing costs, which normally run about
four to five percent of the total purchase. A small real estate transfer tax,
or 1.5 percent of the actual value, is included, as well as a registration
fee, stamps and notary fees, which vary depending on the price of the
sale.

Title insurance is optional but advisable. It is common practice with
many lawyers in Costa Rica to lower the actual amount paid on a sale to
a much lower sum on paper to reduce land transfer tax. This can be risky
and problems may arise later on. Make sure you understand what you are
expected to pay.

In Costa Rica, the seller transfers land to the buyer by executing a transfer
deed (escritura) before a notary public.
Unlike common law countries,
such as the United States and Canada, in Costa Rica the notary public has
extensive powers. The notary public must be an attorney and may draft and
interpret legal documents, as well as authenticate or certify the authenticity
of documents. In order to close on the property, the buyer must select a
notary/attorney who will draft the transfer deed and register the sale in the
Public Registry (Registro Nacional).

If the purchase price is financed, there are 3 options for selecting the
notary/attorney:
1. If the seller is financing a large percentage of the purchase price and a
mortgage needs to be drafted to guarantee payment, then the seller may
request that her or his notary/attorney draft the transfer deed.
2. If a property is purchased with 50 percent cash and 50 percent financing,
it is common for the buyer’s attorney and seller’s attorney to jointly draft
the transfer deed and mortgage in a single document.
3. Finally, the buyer may insist that his or her notary/attorney draft the
transfer deed and let the seller’s notary/attorney draft a separate mortgage
instrument. In this case, because the mortgage is being drafted separately,
it carries a higher registration fee.

Property may be purchased individually, between several people or in
the name of a corporation (sociedad anónima). Buying and registering a
property in a corporation has many advantages, mainly, asset protection in
the event of a divorce or a lawsuit. When a corporation owns the property,
the sale or purchase of the company can be negotiated so you don’t have to
pay property taxes or stamp fees. All you have to do is change the board of
directors, the legal representatives of the corporation, and transfer the shares.

Do not hire the same lawyer used by the seller of the property.
In Costa Rica an attorney can legally represent both parties. Also, do not
forget to check that you are buying the land from its rightful owner. Some
owners have sold their land to several buyers. You can protect your real estate
investment further if you talk with neighbors about water shortages, safety
and burglaries in the area.

Remember, always see the property in person and never buy sight
unseen. Don’t forget to check if you need special permits to build. Be sure
to check the comparative land values in your area to see if you are getting a
good deal. If you are thinking of living in a remote area, check to be sure
that roads, electricity and telephone service are available.

Closing costs for a sale include a transfer land tax, a stamp tax, and legal
fees. Closing costs typically run 3 – 6% of the sales price and are usually paid
buy the buyer.
The transfer taxes (if not owned by a corporation) and land
taxes are assessed based on the declared value, while legal fees are charged
based on sales price of the property. If the property is held by a Costa Rican
corporation (often the case) a large portion of these costs can be avoided.

Stewart Title (Tel: 2258-5600, Fax:2 222-7936, see www.stewarttitle.
com) can assist you with title searches and full title guarantee. American
Title
also has a representative in Costa Rica.

Recently the Costa Rica Realtors’ Chamber opened the country’s first
out-of-court conflict resolution center specializing in property disputes. It
specializes in solving property disputes for both sellers and buyers within
six months. The same process in the courts can often take up to 10 years or
more to get to trial. Anyone in need of such services may contact them at
Tel:2 283-2891, Fax: 2283-0347, or E-mail: caccbr@racsa.co.cr.

Related Resources:

Cayman Real Estate & Vacation Rental Properties

Mexico real estate – Cancun, Playa del Carmen, Riviera Maya, Cancun

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