It helps to be familiar with the alphabet soup of regulatory agencies you will be dealing with during the permitting process. Following, a brief list:

MINAET (www.minaet.go.cr): The Ministerio del Ambiente, Energía, y Telecomunicaciones, or Minstery of Environment, Energy, and Telecommunications. This is the big cheese when it comes to environmental regulation in Costa Rica. Permits to cut down trees, drill wells, and mine anything must pass through.

SETENA: The Secretaría Técnica Nacional Ambiental, or the National Technical Environmental Secretariat. A branch of MINAET. SETENA is the bugaboo of many a would-be developer, as this is the agency that reviews the environmental impact of developments and gives them the thumbs up or thumbs down. Its infamy comes from the incredibly slow process of the environmental review. For developments that have to do a full impact study, the entire processes takes about two years, often more.

ICE: The Instituto Costarricense de Electricidad, or Costa Rican Electricity Institute. The government monopoly that controls all electricity generation and distribution and, until recently, telecommunications.

AyA: The Instituto Costarricense de Acueductos y Alcantarillados. Basically the state water utility. AyA does not have national coverage, and in many parts of the country outside the Central Valley, developers have to get water permits elsewhere.

ASADA: Asociaciones Administradoras de Sistemas de Acueductos y Alcantarillados Sanitarios, or Administration Association of Sewer and Aqueduct Systems. In some parts of the country, these are the associations that manage the water supply. They are local, and whether you have to deal with one depends entirely on where your property is located.

INVU: The Instituto Nacional de Vivienda y Urbanismo, or the National Housing and Urbanism Institute. INVU is supposedly in charge of urban planning, meaning that all condominium and subdivision developments need its seal of approval.

ICT: The Instituto Costarricense de Turismo, or the Costa Rica Tourism Board. Anything that has to do with the Maritime Zone (i.e. – coastal land within 200 m. of high tide) happens through the ICT. Also, permits for hotel and restaurant operations.

Ministerio de Salud: The Health Ministry. Salud oversees everything having to do with public health, including wastewater disposal and water treatment, as well as health certifications for hotels and restaurants.

CFIA: Colegio Federado de Ingenieros y Arquitectos, or the Federated Association of Engineers and Architects. This government-sanctioned professional association must give the OK to all construction projects. The Association is primarily concerned with technical design issues.

There is no one, single way to do the permitting process, and there is no single entry point. How you do permitting will depend a lot on who you hire and how much you’re willing to spend. Many of the procedures can be carried out in parallel, either legally or extra-legally. Permitting any sizable construction project, however, is not a do-it-yourself experience, and for the most part you’ll start out by hiring the professionals you will need for the process.

After drawing up your construction plans, you’ll be doing permitting in an attempt to please basically four government entities. The Colegio Federado de Ingenieros y Arquitectos (CFIA) will want to know that your construction plans include all the basic elements that construction plans should. They will also want to know that for the project, you have hired professionals registered with the CFIA. The Secretaria Técnica Nacional Ambiental (SETENA) needs to be satisfied that your construction project will not significantly damage the environment or the local community. If you’re doing a development of a high-enough density, the Instituto Nacional de Vivienda y Urbanismo (INVU) has a whole list of different permits and go-aheads you’ll have to get from different government agencies before it will give your project the green light. And finally, the local municipality where you are building will want you to present the CFIA, SETENA, and INVU approvals (plus perhaps a few others) before it will grant you your construction permits.

An important point is that each municipality requires different documents for the granting of the final construction permits. But even if the municipality grants you a construction permit without one of the permits you need from some branch of the central government bureaucracy – say, the environmental certification – you still need that permit. This redundancy of authority is one of the curiosities (some would say absurdities) of the Costa Rican system: Just because a builder has construction permits from a municipality does not mean the construction is legal. The other permits for the construction must be obtained regardless of what the municipality says or you could be shut down at any moment by a central government regulator. Keep this in mind if you’re tempted to bribe a municipal official to get your permits. That ill-gotten permit won’t do you much good if the central government decides to bring down the hammer.

At the same time, however, the bitter irony (as long-time developers in Costa Rica will tell you) is that there are so many regulations and restrictions administered independently of one another by so many different branches of the Costa Rican bureaucracy that sometimes you don’t fully comply with the law even when you want to. Do your best.

A final important principle to keep in mind as you approach the permitting process is that land in Costa Rica is under the Napoleonic legal regime, not the common law regime found in the United States and Canada. In practice, that means that while you technically own the land, you don’t own any natural resource on top of it or below it. Trees, mineral deposits, well water, rivers, lakes, springs, wildlife, and all the rest are property of the State. The principle to follow, therefore, is that if you are going to remove, use, or modify any of these things on “your” property, there is probably a permit or concession you will have get from somewhere.

From 2006 to 2009 there was an incredible explosion in construction in Costa Rica. Don’t let that fool you: Costa Rica is still one of the most difficult countries in the world to build in. In addition to being expensive in terms of fees and materials, the main hang-up that developers and home-builders face is the enormous variety of permits that must be obtained before building. To develop a property larger than 500 m2, you need the OK from at least half a dozen separate entities, probably more. Developing a subdivision or a condominium adds another layer of oversight from another regulatory body, and when all is said and done you’ll probably need to have hired at least seven state-certified professionals, including an architect, a civil engineer, a topographer, an environmental engineer, an archaeologist, an anthropologist, and a biologist. All that, and you haven’t even started construction yet.

All told, the permitting process for a small development can take anywhere from a six months to several years and cost the developer some percent of the total value of the project. Construction of individual homes on properties covering less than a half a hectare must pass through a similar process, but with substantially less regulation.

This first part article seeks to guide the amateur developer or home builder through the thicket of permitting requirements and regulation. It would be impossible to spell out every detail of every permitting procedure. The regulations are constantly changing, they vary in each of the country’s 81 municipalities, and no matter how sure something seems, exceptions pile upon exceptions. This chapter, then, seeks to be only a detailed overview of construction permitting in Costa Rica, and is meant to compliment the expertise of a highly-recommended team of professionals that you should hire to handle the permitting process for you.

If all this sounds too complicated and expensive, and is tempting you to cut corners on permitting and environmental compliance of your development, you wouldn’t be the first. Government regulators have simply not kept pace with developers during the last decade, causing severe backlogs. That encouraged many developers – especially in Guanacaste and the Central Pacific – to throw up their hands and begin construction without all the necessary permits, muttering the mantra that it’s easier to ask forgiveness than permission. Other developers have turned to corruption, dolling out bribes to government officials to get things moving.

Both of these strategies have often worked. Today, however, cutting corners on permitting costs more than it saves, both in time and money. This is mainly because the government is finally improving enforcement, significantly increasing the chance that un-permitted construction will get shut down long before the developer has a chance to ask forgiveness. Indeed, the year 2008 saw a series of high-profile crackdowns on construction sites all over the country that got the developer community’s attention. Legally, the penalties can include everything from fines to even jail time. Along with the crackdowns, the government is also making a few key changes in the permitting process – particularly in the environmental review – that promise to make permitting move faster, meaning that bribes, in addition to being a crime, are no longer worth the risk.

Also, as with everything else in Costa Rica, if you think doing permitting the right way is onerous, wait and see what happens when you do it the wrong way. Without the meticulous attention to detail that the permitting process requires, you could end up unnecessarily delaying your product an extra year or two – a catastrophic development if your financing is time sensitive. Horror stories abound.

Finally, cutting corners on permitting hurts everyone in the long run. Improper waste water management, the illegal clearing of forest, and the interruption of biological corridors by private roads destroy the very reasons people want to live in Costa Rica in the first place – namely, jungle, wildlife, beautiful landscapes, and friendly local communities. Permitting in Costa Rica is complicated and frustrating, but it is intended to protect the goose laying the golden eggs. Even better, think of it as keeping your neighbor from building a monstrosity that would lower the value of your property.

Title insurance is a relatively new concept for Costa Rica. Until only recently, it was rather difficult to get title insurance in Costa Rica. It is not required to have title insurance when purchasing a property since the properties are usually purchase by foreigners in cash Now, there are some very good options for obtaining title insurance when buying real estate in Costa Rica. Title insurance is not required when purchasing property in Costa Rica, unless the buyer is obtaining a mortgage for the purchase. However, many North Americans feel a greater sense of security in having title insurance arranged during the purchasing process.

Title Insurance is insurance against defects in title to real property. It is meant to protect an owner’s financial interest in property against loss due to title defects, liens or other matters of public record. Before you purchase your property, the property may have gone through several ownership changes or there are documents lacking proof of the seller’s ownership. Someone along the way may have forged a signature in transferring title or there may be unpaid real estate taxes or other liens against the property. Title insurance covers the insured party for any claims and legal fees that arise out of such problems. Title insurance will defend against a lawsuit attacking the title, or reimburse the insured for the actual monetary loss incurred, up to the dollar amount of insurance provided by the policy. Title insurance guarantees that no one else can claim your property thus it also provides the peace of mind that you will not incur unexpected debts from your new property.

In short title insurance in Costa Rica protects against:

• Invalid documents executed under expired or non-existent power.
• False assumption of identity of the legitimate property owner.
• Falsification of documents, legal power, and other papers related to the transfer of property title.
• Liens or other financial burdens charged to the previous property owner.
• Hidden heirs of previous property owners.
• Documents executed by minors of age.
• Invalid documents delivered after death of previous owner.

However, before you commit to title insurance you should consider Costa Rica has an excellent public registry. A competent attorney can perform the initial title search and explain how to perform this verification and what to look for.

Furthermore your escrow agent can be a lawyer or law firm. All escrow agents must be registered with the Superintendence of Financial Entities (SUGEF), the government body in charge of supervision of financial entities and administration of third party funds. It is mandatory for administrators of third-party funds to be properly registered with this institution. If you escrow agent is registered with SUGEF your funds will be protected and the risk of anything happening greatly reduced.

Stewart Title Latin America is one of the title insurance companies currently operating in Costa Rica.

Stewart Title – Costa Rica
www.stewarttitlelatinamerica.com – Costa Rica
customerservice@stewartcr.com
Phone: (506) 2258-5600

Anyone who lives in Costa Rica knows that we have more rainy months than dry months. Generally speaking winter begins towards the end of April and ends around the beginning of November. Every year the cycle varies slightly.

The country’s copious rainfall take as toll on most homes. According to the Costa Rica’s professional school of architects or Colegio de Ingenieros y de Arquitectos (CFIA) around 50 percent of the homes here need some type of repair. I know first hand about house repair. I have to spend a few hundred dollars every dry season to make some minor repairs on my home. Fortunately, the labor rates for home repair are much less than they are in the U.S. or other countries. I have a handyman who has worked for me for over ten years. His rates are very reasonable and his work is excellent. Besides having a good lawyer every baby boomer retirees who owns a home in Costa Rica should have a good handyman.

Here is some advice on preventative home maintenance and what to look for.

1. Every six months examine your homes floors and make sure there are no cracks and fissures.
2. Experts also recommend that you inspect the inside and outside walls of your home every six months.
3. You roof should be check at least once a year and before winter starts. Wind and strong winds can really do a number on the sheets of corrugated metal which cover most roofs in Costa Rica. Most leaks can be fixed by using silicon however if the roof is really rusted the metal sheets should replaced. If you can take a screw driver and it will perforate the metal sheets then you should replace them.
4. A lot of roof damage can be avoided by keeping your rain gutters in good condition to keep water from damaging your roof and ceilings.

Deal with local bureaucracy when purchasing a home or building.

Retirees or anyone else who plans to live in Costa Rica and purchase a property has to jump through a lot of hoops when dealing with the local bureaucracy.

Property taxes, building permits, and zoning are all handled by local municipalities. The country is divided up into 81 municipalities, each one representing a cantón (like a county) with a seat, a mayor, a council, and all the attendant elements of bureaucracy. Some municipalities are easier to work with than others. The municipality in your canton of choice is where you’ll do part of your due diligence, and it’s also where you’ll eventually apply for your building permits if you plan to construct anything.

For the purposes of due diligence, the first thing retirees or anyone else needs to check is whether previous owners have paid all their taxes. The easy way to do this (other than checking the National Registry for tax liens) is obtaining property tax receipts from the owner for last few years of taxes. These receipts have the double benefit of helping to confirm ownership. Your attorney can also look up property tax records at the Municipality, though it shouldn’t be necessary.

The municipality is also the place where you or your attorney would go to get information on uso de suelo, or land-use restrictions. How the property is zoned according to the municipality’s plan maestro (often translated “master plan” but more properly meaning “zoning plan”) will determine what you can and can’t build on it, or if you can convert a house into a hotel. Property zoned forest can be built on only with difficulty, while property zoned agricultural has density restrictions (though there are often plenty of loopholes). Each zoning plan is different, so restrictions must be approached on a case-by-case basis.

Only a handful of municipalities have comprehensive zoning plans, though some of them maintain a patchwork system of do’s and dont’s. The lack of thorough zoning restrictions has caused quite a serious logjam in some parts of the country, as developers with bulging pocket books have swamped back-water municipalities with projects previously unimagined. The central government recently took action in Guanacaste, issuing a four-year decree to restrict the heights of new buildings within five kilometers of the coast. New zoning plans would replace that decree, and a few municipalities – like Santa Cruz, home of development-heavy Tamarindo – are creeping their way toward finalizing zoning plans.

All that to say, you probably won’t encounter many restrictions in the municipality on what you can build. That cuts both ways, since neither can you be sure that your next-door neighbor won’t be allowed to build a soccer stadium or a brothel, but for the moment there’s not much you can do. One of the few things you can do is have your attorney or some other well-connected acquaintance ask around at the municipality about what kind of permits your future neighbors have been granted. Be careful, however, to take rumored projects with a grain of salt: Everyone is planning to build 20-story condominium developments in Costa Rica, but very few people have the financing and political clout to follow through. Until permits are approved, it’s just a pipe dream.

Utilities

Especially if you’re buying a piece of land for construction, you’ll also need to do some due diligence on utilities: Their availability, their quality, and their cost. In most cases, documentation provided by the seller is sufficient. However, in the event it is not available, you or your attorney must do this locally as well, though not at the Municipality.

Electricity: Depends on the canton. You will need to stop by the local headquarters of either the Instituto Costarricense de Electricidad (Costa Rican Electricity Institute, ICE) or whatever local company or co-op provides power on behalf of ICE in that area. Be sure to bring the proper documentation for the property (number of the finca, copy of the cadastre registration, etc.). You’ll be looking to confirm that the property has a power hook-up available, and if not, how much it would cost to install one.

Telephone: This will be with ICE, which, in addition to electricity, holds a monopoly on landline service. Only check this if you’re building in remote area. In most of the rest of the country, you would set this up while building or after moving in.

Internet: There are three places you can check for Internet availability: The local ICE office; Radiografía Costarricense S.A. (RACSA), a wholly-owed ICE subsidiary of ICE that provides different kinds of Internet service depending on the part of the country; and your local cable provider (either Cabletica or Amnet), which distributes high-speed RACSA connections. Basically you’ll be checking to see if Internet service is available, and if so what kind. Connection speeds are always a quite a bit slower than what the Costa Rican ISPs say they’re selling, so if your work depends on Internet access, be cautions.

Water: Again, where you go will depend on where your property is located. Acuaductos y Alcanterillados (Water and Sewer, AyA) runs much of the country’s water supply, but in rural areas, local organizations called ASADAS take over. You’ll want to check with whoever’s in charge to see if the property you’re looking at has water access. If it doesn’t, you would need to drill a well, which requires a concession from the Ministerio de Energia, Ambiente, y Telecomunicaciones (Ministry of Energy, Environment, and Telecommunications, MINAET).

In my last couple of articles about the steps in purchasing property I explained how to use the Registro Público or our local equivalent of the hall of records. However, not all your due diligence can be carried out in the National Registry. If you’re still interested in the property after the title search, your next step is to hire some professionals to do a more detailed assessment of various aspects of the property. This article will discuss three things you’ll will discuss three things you’ll need to do.

Property size and alignment: This is something you’d be wise to measure regardless of the property or what you find in the National Registry. It doesn’t cost much and will give you peace of mind. Basically, you’ll have to hire a surveyor to measure the property lines and establish both the size and the alignment. While this is something you’ll want to do regardless of the property (condominiums and gated communities excepted), it’s especially important if you’re looking at a large piece of farmland or a property that borders the maritime zone or a national park. Your attorney might be able to recommend a surveyor, or you can find several companies that provide such services in the resources section of this book.

Property value: This is tricky with large pieces of raw land or lots, and to a certain extent you’ll be on your own. Your best bet is to talk to other buyers in the area to get price points. However, when looking at a finished building – or even a building that’s still under construction – you can contract the services of a perito. Perito is the Spanish word for “expert witness,” but a better translation would be property appraiser. Basically, these are people (usually engineers registered with the CFIA) whose job is to assess the value of finished buildings and estimate the future value of unfinished ones. They take into account the value of the materials, the labor, and the furnishings, plus market factors and profit for the developer (if there is one involved). There are a handful of companies that offer this service, and they are hired by banks to assess property value before the bank will give out housing loans. They cost a few hundred dollars and will be able to sit down with you and explain, in detail, the pluses and minuses of the home you’re looking at. Keep in mind, however, that the perito’s word is merely one expert’s opinion, and should be weighed against other pricing factors.

Environmental impact: Costa Rica has famously strict environmental laws, and before you buy, you should do whatever you can to make sure your plans for a piece of property will not be hindered by those laws. If you’re looking at a lot or home within a gated community, ask the developer to give evidence that the appropriate environmental authorities have approved his site plan. If you’re purchasing an individual lot or raw farmland, you should consider hiring an environmental engineer to review the property and your plans for potentially environmental hang-ups. This could mean doing everything from giving the property a quick once-over to doing an entire environmental impact study. When purchasing property, many developers first buy a long-term option and complete the environmental review process before they close on the land.

As one final piece of advice, if you’re planning a development or a large estate, having an experienced attorney, civil engineer, or other real estate development professional available for consulting is a must at this stage. The larger and denser the project, the more things can go wrong. Get a good team and follow its advice.

It has been a few weeks since I wrote the second part of this series on due diligence when purchasing a home. Here is Part 3:

To briefly review Part 2 , after you have done an Online Search for a property by finca number on the Registro Nacional’s (National registry or Hall of Records) Web site www.registronacional.go.cr and checked the following:

Naturaleza (This section simply describes the property and its use), Linderos (This section describes what the property borders), Mide or property measurements (given in square meters and written out in words rather than numerals), Antecedentes de la finca (This, in a nutshell, is the history of the property), Valor fiscal (The registered value of the property), Propietario (The name of the property owner), Anotaciones (Technically, annotations to alert the viewer to the existence of an ongoing process) and Gravámenes (Liens).

Then If everything goes well with the online search and you still want the property, your attorney’s next step will be to drop by the National Registry. Every property in the country is registered in two places in the National Registry: The registry, which is a written description of the property, its history, and its ownership; and the cadastre, which includes a map of the property, its limits, and how it fits together with neighboring properties.

In the registry, your attorney will be researching the property’s ownership history. He or she will be making sure that there are no unresolved claims or property line disputes. Possession claims are a problem that pops up quite a bit, especially in rural land that hasn’t been in great demand until recently. Essentially, this is land that is perhaps owned by someone by possession, but the person has never formally registered ownership. This is not uncommon, as lawyers are expensive for humble farmers, and until now it hasn’t really been necessary. This is just one reason why your lawyer will have to research the entire history of the property, not just recent ownership, and the recent owners may have acquired the land illegally, voiding their titles.

Your lawyer will also be looking up the background of any court cases associated with the property, as well as checking to see if the property has any history with special regimens, like IDA, the maritime zone, or the national park system.

In the cadastre, the first thing you attorney will do is check the size of the property as registered there with the size in the registry. Since the two systems have evolved independent of one another, some discrepancies are practically inevitable, but any large differences should raise a red flag. Your attorney will also check property lines and how they compare with the property lines of the properties registered around this one. Much of the land in Costa Rica that people today are buying for residential developments and home has in the past never been anything but farmland. Hence, it never needed precise property lines, and much of the property found in the National Registry overlaps substantially. Large overlaps discovered by your attorney could mean a lengthy court battle, while smaller overlaps can often be negotiated with neighbors.

The end goal of this part of the process is to figure out exactly what it is the seller is trying to sell you. How big is it in the registry? Will there be disputes with neighbors? Are there already disputes that have yet to be resolved? What are the chances that a lawsuit from 10 years ago comes back to haunt you? Take this part of due diligence seriously and it will make your life a lot easier in the future.
One final note: If the property is owned by a corporation, your lawyer will need to look into that corporation’s makeup and ownership at the National Registry. Specifically, he or she will be looking into whether the person you are negotiating with has the authority to sell the property. Try to avoid buying the property through buying shares of the corporation that owns it. Especially with older corporations, you have no way of guaranteeing that forgotten debts or obligations won’t come back to haunt you after the transfer.

The most basic – and essential – part of any property due diligence is the title search. The goals of a title search are to establish the seller’s legal right to sell the property; and to find out if the property has any legal entanglements, like mortgages or rights-of-way. Remember, however, that Costa Rica operates under a Napoleonic system of law, not a common law system. So whereas title searches in common law places like the United States and Canada can be complicated – involving banks, credit companies, local government, state government, and everything in between – all the information you’ll need for a title search in Costa Rica can be found in the Registro Nacional, or National Registry.

Even so, title searches are complicated, especially when dealing with farmland that hasn’t changed hands in decades. The title search starts online, on the National Registry’s Web site (www. registronacional.go.cr). Anyone can review the status of any property in the country simply by entering the finca, or property, number (as explained in the previous chapter). If there are no obvious deal breakers found in that initial search, your lawyer will then visit the National Registry to dig into the stacks and stacks of documents there that trace the property’s history back to the early part of the 20th century. If the property is held by a sociedad anónima, or corporation – which is fairly common – your lawyer will also need to get documents that establish the property seller’s ownership or authority to dispose of the corporation’s assets. All of these are, of course, areas in which your attorney should take the reins.

An overview of the process and what your attorney or you should be looking for will be published in the next article.

At least visiting a property before buying it should be the no-brainer first step. Unfortunately this isn’t always true in Costa Rica. There are people in the U.S. who buy Costa Rican property site-unseen. Often there are no problems; sometimes, there are big ones. The idea behind scouting a prospective property is to confirm the most basic characteristics of the land. If you’re looking at a finished home, check out the furnishings, knock on the walls, and examine the foundation. Look for mold, flood damage, cracks, and any other damage that you might need to pay for repairs on later. Before you buy, be sure to hire a professional to give the property a thorough appraisal (explained in another article). Costa Rica construction often cuts corners, so examining the details closely will be important.

If you’re not buying a house, but rather a piece of raw property, take a walk around the boundary lines. Imagine the position of the house you want to build and check the view. Look for the positions of creeks or rivers on the land, as these can flood during the rainy season, plus there are restrictions on what you can build near a body of water. Check out the trees on the property. If what you have in mind entails a lot of clear space, big trees – and obtaining the permits to cut them down – can present a big problem. Alternatively, if your construction plans are modest, big old trees can be a big plus, as they can add character and value to a property.

The other crucial thing you should check for on your preliminary visit to any property is residents. First of all, if you’re looking at a finished building, check for renters. Renters living on a property have a right to stay there for three years, and unless you’re planning to use the building as your permanent residence, change of ownership does not annul those rental rights. Even if you are planning to turn the home into your primary residence, talk to the renters and make sure they are, indeed, renters. A common real estate scam in Costa Rica is selling property that’s not for sale, and the people your seller calls “renters” may actually be the real owners. It sounds bizarre, but it happens.

In the same way, if you’re looking at purchasing a piece of property, make sure there are no squatters living there. Look for shacks or any kind of structure, as well as any recently-cultivated land. If you see something that looks amiss, don’t swallow the seller’s explanation: Either walk away, or get your lawyer to look into it.

Once you’ve given the property itself a thorough once-over, it’s time to turn to the surrounding area. Roads and transportation are not to be taken for granted in Costa Rica. Especially if the house or property is in a remote area, confirm that it is easily accessible, or at least be prepared for the sacrifices you will need to make. The two things most important to keep in mind on that count are weather and traffic. Heavy rains make some steep dirt roads impassible during the lengthy rainy season. Likewise, paved highways – especially in the Central Valley – can be paralyzed with traffic at strange times. A good policy, therefore, is to drive the roads near the property at various times of the day, week, and year to see what kinds of challenges you’ll have to deal with. Renting for a month or two in the area before buying is not a bad idea either. If none of that is possible, ask neighbors for their opinions.

Finally, if you didn’t do so during the process of selecting a property, do a quick check on the services that will be available to you in that location. Hospitals (important if you are an older retiree with health issues), airports, pharmacies, grocery stores, public transportation, and bars and restaurants are a few things worth checking for, and you will likely have a longer listing depending on your specific needs.

!Pura vida¡