Be Cautious of Concession Real Estate in Costa Rica
Real estate buyers in Costa Rica who are NOT citizens or have not yet established legal residency in Costa Rica should be extremely careful if / when considering the purchase of Concession Property in Costa Rica.
What is concession property? In general, concession property (also known as leasehold property in North America) is where the government of Costa Rica
Is all property in Costa Rica Concession Real Estate? NO. Most of the property in Costa Rica is titled fee simple (freehold), but most of the oceanfront real estate in Costa Rica is in fact concession property. In the 1970's the government of Costa Rica, in an effort to protect and maintain control of its shoreline on both the Pacific and Caribbean Coasts
Why is this important? Foreigners can not legally own more than a 49% share of Concession Land
What are the risks for purchasing concession property in Costa Rica? The most obvious risk is that if the government decides not to renew your concession you can lose the property. Unlike eminent domain in the USA, if a legal concession is not renewed, the owner is entitled to retributions. The amount of retribution is based on the government’s determination of the value of the improvements on the land - not the cost of the land itself! Other risks include purchasing concession land without improvements on the land and not being granted the concession to build on the property or not being granted permission to build what you want to build on the property. Another risk is that the previous owner built on the concession land without the proper concessions and building permits. The concession expires, you reapply and are told that your home has not been properly permitted. You could be required to demolish the home and reapply.
Isn't it true that all concession land will soon revert to titled (fee simple or freehold) real estate in Costa Rica? Although there are always rumors in the air, most are created by those wanting to maximize the sales potential of a certain property. In most cases concession real estate sells for a much lower price that real estate that is titled fee simple for obvious reasons. There is more evidence to show that the government is actually increasing enforcement of concession land and will most likely not be open to giving up control of the property to foreigners.
Are you advising against foreign ownership of concession property? Because there is plenty of titled property available in Costa Rica, I do in most cases advise against purchasing concession real estate. However, as in any real estate transaction in Costa Ricait is advisable to complete an exhaustive due diligence process prior to purchasing or closing on a property. I recommend getting two independent legal opinions by a firm that is at an arms length from the transaction. Some purchasers are more prone to risky purchases / investments while others are more conservative. If after doing proper due diligence and learning all of the facts a purchaser wants to accept the additional risks associated with purchasing concession real estate, then that is for the buyer to determine for themselves.
Remember, there is an ample supply of fee simple (free hold) properties with clean title in Costa Rica. Fee simple properties can be owned free and clear, 100% by foreigners without restrictions. It is usually a much cleaner purchase and transaction and in most cases a better, long-term investment. Costa Rica has a stable government and is known as the Switzerland of Cental America. Thousands of Americans and Canadians are purchasing real estate for investment, second home and / or retirement. Use a good real estate professional such as Oceanside Realty who will work on your behalf as a buyer's agent and always perform proper due diligence.
See you in Paradise!
Note - always obtain proper legal advice before purchasing concession real estate in Costa Rica.