Buying Beach Property in Costa Rica

With one exception, foreigners can buy property in Costa Rica with the same rights and obligations as Costa Rican citizens. The exception is in the Maritime Zone.

Along the coasts and any portion of a river that is affected by tides, the first 200 meters of land is owned by the government and cannot be owned by anyone else. (There are a few small exceptions that were grandfathered in as titled land.)

The first 50 meters may not be developed. They are for public use. The next 150 meters are usually available for development if you get a long term use permit, or “concession.”

You get a new concession by hunting for a property that doesn’t already have one. Of course, such properties are hard to find now, but if you get lucky, you can apply for a concession at the appropriate municipality. This is best done by an attorney who specializes in such things because it can be tedious and complicated. In the process, you have to specify what you are going to do with it. Private residence? Hotel? Restaurant? Resort?

One very important difference between the Maritime Zone and titled land is that no foreigner can hold the controlling interest in any property in the Maritime Zone until that foreigner has had legal residency in Costa Rica for at least 5 years. Until then, at least 51% must be held by a Costa Rican citizen.

Obstacles to getting a concession would mainly be environmental. Any areas that are wetlands or have mangroves growing on them are automatically off-limits. Other areas might have forests or wildlife that can’t be cleared or disturbed. Some users might be rejected if they don’t fit with the municipalities’ zoning plans.

In response to your application, the municipality will either deny the concession or approve it. If they approve it, it will be valid for 20 years and they will attach a value to the proposed development of the property so they can levy an annual use tax, known as the “canon.” That would be in lieu of a property tax but can be quite a lot higher because it is a specialized property.

Once you have a concession, you have 2 years to do the development or lose the concession. If you do the development, pay your canon as required, and do not violate any of the laws or restrictions on the property, renewal should be straightforward as long as you do it on time.

Those are the basics for getting a new concession. Realistically, however, you would most likely be buying a concession that is already established, rather than starting from scratch. So how does that work?

Until you have been a legal resident for 5 years, assume you will be buying shares in a corporation in which you are not a majority shareholder. When you buy the concession, the appropriate number of shares will be transferred to you. That is something you need to check thoroughly so you are comfortable with the arrangement. A good lawyer can help you sort it out.

If you are buying undeveloped land, you need to know what use and value the concession permitted because a) you will need to build that and b) your canon will reflect that. If you don’t build on time, you can lose your concession.

If you are buying an existing business or home, you need to make sure all of the laws and restrictions have been followed. There have been cases of homes being bulldozed or businesses being shuttered because laws were broken or the concession’s requirements weren’t followed. For example, if a wall or pool infringes on the 50-meter restricted zone, you could be required at some point to remove it!

In summary, there are extra concerns to research when you buy concession property here. Do your homework. There are some great concession properties available for purchase, and there are some that will pretty much be a series of migraine headaches. Don’t ever let an agent fast-talk you into thinking “It will all work out.”

Do the Due Diligence and hire someone who specializes in concessions to protect you. If you do that, you could end up with one of the most desirable properties in the country. If you don’t do that, you could end up with nothing but regrets.

Posted in Costa Rica, News.