Understanding Real Estate Closing Costs in Costa Rica: A Comprehensive Guide

When purchasing real estate in Costa Rica, it’s crucial to understand the various closing costs associated with the transaction. At our preliminary closing statementfirm, we prioritize transparency by providing our clients with a (a budget) outlining the costs involved. This statement includes both mandatory fees and optional services, ensuring there are no surprises along the way. Our goal is to give our clients a clear view of the total cost from the very beginning, making the process smooth and stress-free.

In this guide, we’ll break down the key components of closing costs to help you make informed decisions when buying property.

Key Components of Closing Costs

To fully understand the closing costs, it’s important to first grasp the role of notary publics and the two types of purchases: direct and indirect.

Notary Publics in Costa Rica

Notary publics in Costa Rica play a more significant role than in many other countries. They are licensed legal professionals who must also be practicing attorneys. Notaries are empowered to handle a wide range of legal tasks and have the authority over several types of legal matters, especially in real estate and property transactions. Acting as agents of the State, their fees and expenses are governed by a public decree that stipulates the charges for each service. Charging less than the stipulated amount is considered anti-competitive and could compromise the notary’s practice. However, it is legal to charge more than the decree specifies.

At Quatro Legal, we adhere to a policy of charging the exact amount outlined in the decree for closing fees, ensuring fairness and transparency for our clients.

Types of Real Estate Purchases in Costa Rica

1. Direct Purchase

A direct purchase means that the buyer acquires the property’s title directly from the seller. This is the most common form of real estate transaction in Costa Rica. In such transactions, a notary public is always involved in drafting, authorizing, and filing the closing deed before the Public Registry. This ensures the legal transfer of the property’s title from the seller to the buyer, and the title is officially recorded under the buyer’s name.

When conducting a direct purchase, you will need to account for the following mandatory costs:

A. Notary Fees

As mentioned, Notary fees are governed by a legal schedule issued by public decree. The applicable percentage ranges from 1% to 2% of the property’s value, depending on the amount being value.

B. Transfer Taxes and Registration Expenses

The transfer tax is 1.5% of the property value, and other registration fees (including stamps and government fees) amount to approximately 0.8%.

In total, the total cost of the transaction is around 3.7% of the property’s value for notary fees, transfer taxes, and registration expenses.

2. Indirect Purchase

An indirect purchase occurs when the buyer does not directly acquire the property’s title. Instead, they purchase the capital stock of the company that owns the property. This type of transaction is only possible if the seller holds the property under a corporation and if the corporation is in good standing. Unlike a direct purchase, this process doesn’t require a notary public, as the transaction is done through a private stock purchase agreement between the buyer and seller.

However, there are still costs involved in an indirect purchase:

A. Transfer Tax

Even in an indirect purchase, it is required to pay the 1.5% transfer tax on the property’s value. However, in this modality, there is no need to pay the stamps and registration fees required for a direct purchase.

B. Legal Fees for Stock Transfer

The legal fees for drafting and executing the stock purchase agreement will depend on the attorney and the complexity of the transaction. These fees are not governed by a public decree, giving attorneys flexibility in their pricing.

C. Corporate Updates and Bylaws

After purchasing a company, it’s necessary to update its corporate bylaws and appoint the buyer as the new owner and legal representative. At Quatro Legal, we charge a flat fee of $450 plus 13% VAT for of fees and an additional $150 for related expenses. Please consider that for more complex amendments due to corporate structuring, we may charge a higher fee.

Although indirect purchases may seem like a cheaper option, they involve taking over an existing corporation. While thorough due diligence can identify any potential risks, the safest route is often to set up a new corporation and proceed with a direct purchase, avoiding any contingencies tied to the existing entity.

Who pays the Real Estate Closing Costs?

According to Article 68 of Decree No. 41457, closing costs are by rule split between the parties. However, this is not mandatory and can be negotiated as an exception between the buyer and seller. Whether the market favors buyers or sellers can greatly influence what is customary regarding who pays for these costs.

Understanding real estate closing costs in Costa Rica is essential for a smooth transaction. Working with reputable professionals will ensure you’re well-prepared for every stage of the process. Whether you’re investing in a beach property, a mountain retreat, or a commercial venture, being informed and organized will allow you to focus on the exciting part—enjoying your new property in Costa Rica!

For more information visit our news section or reach out to Sonia Aragon at sam@quatro.legal

Disclaimer: The information provided in this blog post is for general informational purposes only and is not intended to constitute legal advice. While we strive to ensure the accuracy and timeliness of the content, laws and regulations are subject to change. For the most accurate and up-to-date information, please contact our office directly. Some images may be AI generated.