How do I buy property in the Gulf of Papagayo?

by Quatro Legal Real Estate Team | Jan. 3, 2024 | Article, Real Estate

Yes, expat investors can buy property in the Gulf of Papagayo. However, it is important to know that most properties in the Gulf of Papagayo have a nature other than fee simple properties. Due to their location, these properties are governed by a regime called the Gulf of Papagayo Tourism Pole (PTGP for its acronym in Spanish). Given the nature of this legal regime, we hereby summarized the basic point property buyers must know if they are interested in securing real estate property in this area.

What is the PTGP?

The PTGP is the result of a study conducted in the 1970s by the Central American Bank for Economic Integration. This study analyzed the tourism potential of Central America in order to adopt a Regional Development Program to attract international holiday tourism.

As a result of the study, the Gulf of Papagayo in Costa Rica was identified as having unique characteristics giving it high tourism potential. It was determined that the Gulf was the prime area for resort tourism due to its location (close to Liberia and the international airport), weather, biodiversity and scenic beauty.

Given the above, in 1979, the Government of Costa Rica enacted Law 6370 declaring the PTGP a public interest project. In 1982 a special legal framework was created to regulate the development and execution of the Gulf of Papagayo’s tourism project.

To execute the PTGP, the Government expropriated all the land comprising the project, thereby incorporating the PTGP, and ownership passed from private to State.

How does the PTGP work?

The main idea is to lease, via concessions, large-scale development projects. These projects are always supervised by the Government through the Costa Rican Tourism Board (ICT for its acronym in Spanish).

The ICT directs and manages the PTGP and makes sure that all concessions are in full compliance with the applicable legal framework.

The ICT has developed a Master Plan of the Gulf, which clearly identifies the project’s authorized land uses. The ICT uses this Master Plan as the sole guide for approving all developments. The Master Plan establishes the technical aspects with which any development in the zone must comply.

For how long are the concessions granted in the PTGP?

For a maximum of 50 years. However, the term can be renewed with the approval of the ICT and only when the needs of the project justify an extension.

Can concessions in the PTGP be cancelled?

Concessions can be cancelled by the ICT when: a) the concessionaire fails to comply with the purposes of the project and the technical standards approved by the ICT; b) nonperformance of the legal and regulatory provisions; c) nonperformance of the concession agreement executed between the ICT and the concessionaire; d) nonperformance of the provisions and orders issued by the ICT; and e) a concession is mortgaged and/or transferred, in full or in part, without the approval of the ICT.

In the cases above, all facilities or buildings located on the concession will be owned by the ICT and the concessionaire will lose his/her right to compensation for any improvements or constructions made on the concession.

Can concessions in the PTGP be transferred?

Yes, with the approval of the ICT, concessions may be partially or totally transferred, mortgaged, subdivided, leased, etc.

The ICT will collect a tax each time a concession is transferred. This tax is calculated as US$3.22 per square meter of the total area of the concession being transferred. This amount is adjusted every five years, and the next adjustment is scheduled for 2022.

Can foreign nationals own concessions in the PTGP?

Absolutely. Unlike properties in the maritime land zone where there are specific restrictions on foreign ownership, concessions in the PTGP can be granted to foreign nationals or Costa Rican citizens or to Costa Rican companies regardless of the shareholder’s nationality.

Any potential concessionaire must submit a criminal record and the required documents to the ICT to demonstrate their financial capacity to develop, or to continue to develop, a project in the PTGP.

This requirement also applies when purchasing an already developed concession.

Is it safe to own a concession in the PTGP?

Yes, it is safe to own or acquire a concession in the PTGP as it has a solid legal framework behind it and the government endorses this special regime. As reference, the Four Seasons Hotel operates on a PTGP concession.

However, because of the special regime that applies to this area and the specifics regulated in the legal framework, Quatro Legal advises you to always have legal support when acquiring and managing a property in the PTGP.

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