Before marketing a property in Costa Rica, it is important to ensure that its legal, registry, and technical status is in proper order.
Access, water availability, protected areas, permits, taxes, existing structures, and property boundaries are just some of the issues that may arise during a buyer’s due diligence process.
A preventive review can help identify potential issues before they affect negotiations or delay the closing of the transaction.
In our latest newsletter, we share 6 essential questions every property owner should ask before listing a property for sale.
Discover in this edition how to protect and prepare your property before entering the due diligence process.
If you are considering selling real estate in Costa Rica, our team can advise you on the legal review that should be carried out before bringing the property to market.
Article prepared by Valeria Soto, Of Counsel – Pignataro Abogados.
Listing a property for sale involves more than setting a price and placing it on the market. Once an offer is accepted, the buyer will normally conduct a due diligence process to understand the property’s legal and technical condition before completing the purchase.
Access issues, insufficient documentation regarding the water source, discrepancies between the survey and the property’s physical condition, or restrictions affecting its development may result in delays, renegotiations or even jeopardize a transaction.
Therefore, before listing a property, we recommend that every owner be able to answer these six essential questions:
1. Is your property’s legal status in order?
The first step is to confirm that the registry and cadastral information corresponds to the property being sold. This includes reviewing title, the registered survey and any mortgages, easements, annotations or other encumbrances.
Any leases, rights of use or other agreements with third parties that may affect the property at the time of sale should also be identified in advance.
When the property is owned through a entity, the seller should also confirm that the entity is current with its obligations and that its representatives have the necessary authority to complete the transaction.
2. Does your property have legal access?
The existence of a road commonly used to enter a property does not necessarily mean that there is a legal right of access.
Owners should determine whether the property has direct access to a duly recognized public road. Otherwise, it is important to confirm whether a duly constituted and registered easement legally connects the property to a public road.
The location, width and conditions of the easement should also be reviewed, as well as whether the access physically being used corresponds to the legally established right.
Before selling, owners should therefore ask not only “How do I access my property?”, but also “Do I have the legal right to do so?”
3. Can you document your property’s water source?
In Costa Rica, water is in the public domain, and its supply and use are subject to different regulatory regimes. Before listing a property, it is essential to identify where its water comes from and what documentation supports its use.
The property may receive service directly from the Costa Rican Institute of Aqueducts and Sewers (AyA) or through an ASADA, which provides water services under delegation from AyA. In these cases, the available documentation regarding service and water availability for the property should be reviewed.
When a water letter has been issued, it is important to determine what type of certification was granted and whether it remains valid, particularly when the prospective buyer intends to build or develop the property.
In other cases, the property may rely on its own water source. If there is a well, its status, permits, registrations and corresponding concession before the MINAE Water Directorate should be reviewed.
The physical existence of water or a well does not, by itself, mean that its use has been properly regularized.
Therefore, before selling, it is not enough to state that a property “has water.” Owners should be able to answer: Where does it come from, which authority regulates it, and do I have the documentation required to support it?
4. Are there water bodies or protection areas affecting your property?
Water may also affect a property even when it is not its source of supply. Wells, springs, rivers, creeks, streams or other water bodies located within or near the property may create protection areas that restrict the use or development of certain portions of the land.
These restrictions may affect the location of buildings, swimming pools, wastewater treatment systems or septic tanks and other improvements.
When applicable, it is particularly important to obtain the fluvial alignment issued by the Housing Department (INVU), which determines the distance that must be respected in relation to protection areas associated with public waterways.
If there is uncertainty regarding the existence or classification of a water body, a technical determination from the MINAE Water Department may also be required.
Understanding these conditions before listing the property provides greater clarity regarding the areas that may be affected and reduces the risk of a restriction being discovered for the first time during the buyer’s due diligence.
5. Are your improvements, taxes and utilities in order?
Before listing a property, owners should review its status with the corresponding Municipality, including land use certicate, declared value and real estate taxes.
When applicable, the Luxury Home Tax should also be verified.
If the property includes a house, pool, additions or other improvements, it is advisable to locate the available permits in advance and confirm that the existing improvements are consistent with the property’s municipal and technical documentation.
Owners should also gather information regarding electricity, water and other utilities, as well as insurance policies, condominium documentation, leases and other obligations that may affect the property at the time of sale.
6. Does the physical condition of your property match its documentation?
A property may appear to be in good standing at the Public Registry while still presenting issues that can only be identified through a physical and technical review.
A survey may help identify discrepancies in areas or boundaries, neighboring encroachments and the location of improvements, access and easements in relation to the property’s boundaries.
Depending on the characteristics of the property, additional technical inspections may also be advisable before placing it on the market.
Identifying these matters in advance allows the owner to determine which issues may be corrected before the sale and which should be properly disclosed to a prospective buyer.
Is your property really ready?
Every property is different, and not every transaction requires the same documents or reviews. However, before listing a property, every owner should ask one important question:
If a buyer started due diligence today, would my property be ready?
A preventive review can identify missing documents, inconsistencies and pending matters before an offer is received and, whenever possible, allow the seller to address them without the pressure of a contractual deadline or closing date.
A well-prepared property facilitates the due diligence process and allows the seller to enter negotiations with greater clarity regarding the asset being offered.
Are you considering selling a property in Costa Rica? Contact Pignataro Abogados for a pre-sale legal review and prepare your property for a future due diligence process.