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Buying Land & Building a Home in Costa Rica: A Foreigner’s Guide

Costa Rica has long been a top choice for foreign investors, retirees, and second-home buyers looking to enjoy a high quality of life in a tropical paradise. However, purchasing land and building a home in a foreign country comes with unique challenges. Understanding legal requirements, potential obstacles, and best practices can save time, money, and frustration. This guide covers everything foreign nationals need to know before, during, and after purchasing land and building a home in Costa Rica.

1. Legal Considerations Before Purchasing Land

A. Understanding Foreign Ownership Laws

One of the advantages of buying property in Costa Rica is that foreign nationals have the same ownership rights as locals. However, there is one key exception: the Maritime Zone Law. Properties within 200 meters of the high tide line are considered public land, and foreigners cannot fully own them without a Costa Rican partner holding at least 51% ownership.

Many buyers opt to purchase land through a Costa Rican corporation (Sociedad Anónima or Sociedad de Responsabilidad Limitada) to simplify the process, manage liabilities, and facilitate estate planning.

B. Due Diligence on the Property

Before purchasing land, conducting thorough due diligence is crucial to avoid legal complications. Key steps include:

  • Title verification: Check the National Registry (Registro Nacional) to confirm clear ownership and ensure there are no liens or encumbrances.

  • Zoning laws: Verify that the land is zoned for the intended use (residential, commercial, agricultural, etc.).

  • Environmental restrictions: Properties in protected areas or near wetlands may have restrictions on construction.

  • Right of possession properties: Be cautious of land that is not titled, as these transactions can be legally risky.

C. Access to Utilities and Infrastructure

Not all properties in Costa Rica have guaranteed access to essential utilities. Before purchasing, ensure:

  • Water access is legally registered through AyA (national water provider), ASADA (local water association), or a legally drilled well.

  • Electricity and internet services are available or can be installed.

  • Road access is legally registered, especially for remote properties.

D. Working with a Reliable Lawyer

Hiring a bilingual real estate attorney specializing in Costa Rican property transactions is essential. A lawyer will assist with title searches, contract preparation, escrow services, and closing procedures.

2. The Buying Process in Costa Rica

A. Making an Offer and Securing the Property

Real estate negotiations in Costa Rica are informal compared to North America. Many property sales are handled through direct negotiations rather than MLS listings. Once an offer is accepted:

  • A deposit (usually 10%) is placed in escrow.

  • A purchase agreement (Contrato de Opción de Compra-Venta) is signed.

  • The buyer and seller agree on a closing date, typically within 30 to 60 days.

B. Closing the Deal

Closing costs in Costa Rica generally include:

  • Transfer tax (1.5%) of the property value.

  • Legal fees (1-2%) for processing the transaction.

  • Notary fees and registry fees.

Payments should be made through a secure escrow service rather than direct transactions to prevent fraud.

3. Planning Your Home Build: What to Expect

A. Selecting the Right Builder and Architect

Many foreign buyers fall into the trap of hiring the cheapest contractor, which can lead to poor-quality work. It’s essential to:

  • Hire an experienced, reputable builder with knowledge of Costa Rican building codes and tropical construction.

  • Work with an architect registered with Colegio Federado de Ingenieros y Arquitectos (CFIA).

  • Request references and visit completed projects before making a decision.

B. Permits and Regulations

Construction in Costa Rica requires approval from multiple agencies:

  • Municipality: Construction permits.

  • INVU: Urban planning and zoning.

  • SETENA: Environmental impact assessments.

  • CFIA: Structural approval and licensing.

The process can take several months, so planning ahead is crucial.

C. Budgeting and Cost Considerations

Building costs in Costa Rica vary based on materials, labor, and location. On average:

  • Standard-quality homes range from $1,200 to $1,800 per square meter.

  • High-end or custom homes can exceed $2,500 per square meter.

Unexpected costs can include:

  • Import duties on materials not sourced locally.

  • Additional reinforcements for seismic and high-humidity conditions.

  • Land preparation costs for sloped properties.

D. Managing the Construction Process

Since many foreign buyers live abroad while their home is being built, hiring an on-site project manager is essential. This ensures:

  • Compliance with approved building plans.

  • Regular quality inspections to prevent structural issues.

  • Proper contractor payment schedules to avoid disputes.

4. After Purchase: Managing and Protecting Your Investment

A. Property Maintenance and Security

Costa Rica’s tropical climate requires regular property upkeep:

  • Preventative maintenance against mold, termites, and humidity damage.

  • Security measures such as gated communities, alarm systems, and local guards for remote homes.

B. Taxes and Legal Responsibilities

Property taxes in Costa Rica are low compared to North America:

  • Annual property tax: 0.25% of the registered value.

  • Luxury home tax: Applies to homes valued over $234,000 USD, with rates ranging from 0.25% to 0.55%.

C. Residency and Living in Costa Rica

If you plan to stay long-term, consider applying for residency:

  • Pensionado Visa: Requires proof of at least $1,000/month in retirement income.

  • Rentista Visa: Requires proof of at least $2,500/month in guaranteed income.

  • Investor Visa: Requires a $150,000 investment in real estate or business.

Foreigners can stay in Costa Rica for up to 90 days on a tourist visa but must exit the country to renew their stay.

Conclusion

Buying land and building a home in Costa Rica is an exciting opportunity but requires careful planning. Foreign buyers must navigate legal requirements, select trustworthy professionals, and stay involved in the construction process to ensure a smooth experience.

At Black Sheep Quality Homes, we provide expert guidance at every stage—from land acquisition to home construction and property management. Whether you’re looking for a retirement escape or an investment property, our team ensures your project meets the highest standards of quality and professionalism.

Ready to get started? Contact us today to make your Costa Rican dream home a reality!