Buying Beachfront Property in Costa Rica
BEACHFRONT PROPERTY / MARITIME ZONE
Understanding the difference between beachfront property and maritime zone property
To begin with, not all beach property is maritime zone property. You can purchase fully titled land in front of the beach or overlooking the beach or within walking distance to the beach and never have to worry about the Maritime Zone. However, if you want to purchase land ON the beach, it will not be titled (as a rule). As in nearly every country in the world, Costa Rica’s beaches are public property. So, if you would like build or buy a beach front home or business, you should familiarize yourself with the special rules regarding beach front property in Costa Rica.
The Maritime Zoning Law for beachfront property
The 1977 Maritime Zoning Law (Ley sobre la Zona Marítimo-Terrestre – Ley Numero 6043) regulates the ownership and usage of beach front property in Costa Rica. The law creates two zones along Costa Rica’s Pacific and Atlantic coasts. Islands are also subject to this law. The national government owns this “Maritime/Terrestrial” restricted zone and local governments (municipalities) administer it. You measure from the high tide mark inland. The two zones total a width of 200 meters along the beach front: 1. The Public Zone (Zone Publica): a 50 meter wide strip of beach between the high tide line and the outer line of the “Restricted Zone” (Zona Restringida).
This beach front zone is open to the public. Private possession or occupation of this area is strictly prohibited. However, no one may trespass private property or the restricted zone in order to reach the public zone. 2. The Restricted Zone (Zone Restringida): a 150 meter wide strip of beach from the limit of the Public Zone inland. The law allows the government to grant leases called concessions for the occupation and use of this beach front area for terms that range from 5 to 20 years. This is the land that homes or business along the beach front may use for personal or monetary gain. Certain buildings are allowed in this zone, but these will revert to the municipalities (local Governments) at the termination of the lease, unless the lease is extended.
How the Concessions work for maritime zone beach property
The National Geographic Institute (Instituto Geográfico Nacional) marks Costa Rica’s maritime zone. If the zone is not marked and a development plan has not been drafted and approved, the Costa Rican authorities are unable to grant building permits for development of beach front property in the area. The Instituto Costarricense de Turismo (ICT) authorizes leases on the Restricted Zone, but the local Municipal government grants and administers the government concession for possession of land in the maritime zone. The Registry of Concessions in the Public Registry in San José records all concessions.
Before a concession can be granted, the particular beach front where the property is located must have an approved Zoning Plan (Plan Regulador) in place. Only the actual Concession will clearly define the rights and terms of ownership that the occupant has to the property. These concessions or leases are granted for five to twenty year terms. Once the concession (lease) has been approved, it is registered in a special Concession Registry in the National Registry. A yearly fee must be paid to the municipality for the duration of the lease to keep it current. Failure to pay may terminate the lease and result in the loss of any buildings on it. The lessee applies for an extension of the lease concession at the Municipality. Extensions are normally granted with the previous approval of the ICT.
Precautions for Beachfront Homes and Property
Although local governments will collect a land use tax known as a canon from occupants of land located in the maritime zone it does not mean that a concession has been granted. As such, the payment of a canon is simply recognition of the right to possession. Here are other points of law you must abide by in order to safeguard your concession. Concessions for maritime zone beach property cannot be granted to:
- Foreigners who have not been residents for five years
- Companies with bearer shares
- Foreign companies based abroad
- A company set up in Costa Rica exclusively for foreigners
- A company with more than fifty percent foreign capital (ZM Art. 47)
Concessions on maritime zone beach property can be forfeited for the following reasons:
- Failure to apply for an extension of a concession in a timely manner
- The forfeiture of rights by the interested parties
- The death or legal absence of the concession holder with no heir
- Not abiding by the established obligations of Article 51
- Cancellation of the concession (ZM Art. 52)
The ICT can cancel a concession on maritime zone beach property for:
- Non-payment of the yearly canon or royalty
- Breach of contract (e.g. use of the land for purposes other than those expressly stated by ICT)
- Violation of the ordinances of the law that grants the concession
- Impediment of the use of the public right of way
- Other causes that this law establishes (ZM Art. 53)
All in all, an investment in beach front property regulated by the Maritime Zoning Law requires extra caution and thorough investigation. The reality is that ambiguities exist within the written law, so that as regulations are created and amended, rights to property may also change. There are no guarantees and there is no foolproof way around the law. Even if you get a concession, there are no guarantees that the concessions will be renewed or that the price of the concession or the yearly canon will be within reason. The fact remains that you are not purchasing beach front property, you are leasing it and you must be willing to accept that risk.
Also, see information about squatters in Costa Rica, because in certain cases a foreigner has made it through the concession process only to lose all or a portion of the property later to squatters. Make sure your attorney examines the Municipality Records, verifies the seller’s ownership status, and also verifies general tax and leasing records. Keep in mind that if you are opening a business on the beach, it may be worthwhile for you to have a concession. But if you are looking to purchase a beach home or recreational property, then you would probably be better advised to purchase titled land outside of the Maritime Zone.
Beachfront property restrictions
There are certain restrictions for concessions held by foreigners. If personally held, the foreigner must first have five years of legal residence in Costa Rica. For this reason, many foreigners purchase the rights to beach property by first forming a Costa Rican corporation, a simple process that takes about 30 days and can cost from $150 to $500. The cost depends upon your attorney and the characteristics of the corporation registered. Your Costa Rican corporation must have at least fifty percent of its shares held by a Costa Rican resident. Most people are not comfortable with this so at the time of closing the sale, the “token” Costa Rican shareholder, simply signs over their shares to the foreigner so that the foreigner is holding 100% of the shares. This is common practice, but consult your attorney on the specific details including risks associated with this practice.
Exceptions for beachfront property
The Maritime Zoning Law was not applied retroactively. Any beach front property previously titled can be freely transferred. Of course this titled property is very rare. These cases are those involving rights registered in colonial times, and certain urban property on the beach. In areas where the 150 meters of restricted zone does not have an approved zoning plan (plan regulador), you may find an “arriendo”. You may occupy and develop the zone after you purchase the rights from the legal occupant. These rights are registered at the corresponding local government or municipality. There is no time limit for arriendos. Not until the land is property zoned (which may never happen!). Many beach lands have an arriendo. The arriendo allows transfer of ownership and low impact development. Building a house or small tourist project is no problem but larger projects must go through a zoning approval with the government.
**Article from the archives of the American-European Real Estate Group**