Implementation of Property Transfers and Registration

Once the purchase of a piece of real estate has been duly negotiated and there has been an understanding between the parties, and whether or not a sales purchase agreement or an option contract were signed, as previous steps to the actual transfer, it is crucial to know that in order for the sale of the land to be valid, effective and enforceable, seller and purchaser must formally sign what is called an “escritura de traspaso”, which in this case is a transfer document, signed before a Costa Rican Notary Public –different than the concept of Notary Public in countries such as the United States or Canada- directly into such Notary’s “Protocole Book”.

Although you may tend to believe that by hiring a professional to handle this transaction your interests would be fully protected, and that the document itself is pretty standard, as well as the steps to be taken after it is signed, very often this is not true, and many transactions end up incorrectly registered, missing substantial and important declarations by the parties, or never causing the land transfer to occur.

The knowledge of the most common statements and safeguards related to the “escritura de traspaso” is certainly very helpful to try to avoid many of these problems, and should include the following:

Choice Of Notary

The Notary is fundamental for the implementation of the transfer.  It is customary that, if the buyer is not getting financing for the purchase, he or she gets to choose the Notary for registration of the transfer and that if financing is involved, it is the seller’s choice. 

This principle, which can be negotiated differently by the parties, usually responds to the need of having control of the registration process for the land, assuming that if the seller has received the whole purchase amount, his interest in the transaction has basically ended and it is the buyer who keeps the motivation of making sure that what was purchased gets finally registered to his or her name.  There is also the assumption that when there is a balance due, the creditor continues to require to be involved in the registration process and to make sure that the protection of his debt is guaranteed and the corresponding mortgage gets duly recorded.

Filing, Payment Of Transfer Taxes And Legal Stamps

It is not sufficient for the parties to sign the “escritura de traspaso” in order for the transfer to be recorded.  After this closing stage, the Notary must file a particular notarized copy of the transfer document at the Public Register, which in turn must pay, in full, all transfer taxes and legal stamps calculated according to specific rules established by the government, prior to filing.

Failure to present the “escritura de traspaso” to the Public Register will maintain the property’s prior ownership status, and the land would be subject not only to possible fraudulent new sales by the previous owner but also to annotations and possible foreclosure by individuals claiming obligations from or establishing lawsuits against such previous owner.

Lack or incomplete payment of transfer taxes and/or legal stamps will not only put in jeopardy the proper registration of the land into the new owner’s name but will also eventually cause for the filing to be annulled and taken off the title.

These possibilities fully relate to the Notary and the professional chosen to act as such in the transaction, since the agility and speed with which such individual will undertake filing, and his or her honesty regarding the funds received from the parties for making the above mentioned payments will directly affect the final outcome of the transfer.

Registered Survey

No land transfer can take place if a registered survey (“plano catastrado”) is not quoted and associated to the property on the “escritura de traspaso”.  The lack of meeting this requirement will make the filing defective and after some time, if not rectified, will annul it from the title.

The survey does not only have to be registered, but it must also match the characteristics of the property, as stated on the transfer document itself, with the exception of properties from which segregations have been made, on which the Public Register currently allows for differences between the registered conditions and the survey.

In the case of transfers in which only a portion of the land is being sold –segregations- the survey must also be authorized or stamped (“visado”) by the Municipality of the County where the property is located.

Differences In Measure – Conditions Of The Land

It is important for the “escritura de traspaso” to include a statement that the sale comprises all land located within the boundaries stated on it, even though it might have a higher measurement in the future.  It is common to encounter substantial differences in size on surveys made at different times and by different surveyors, and this possibility must be foreseen on the document in order to allow for such differences to be included in the transfer and avoid future disputes.

Also, usually the “escritura de traspaso” will have a statement on the condition of the land and the title, but many times it is not as complete as it should be.  A good piece of advice would be for it to expressly state that the transfer is being made free of liens, encumbrances and annotations, as well as free from any leases, usufruct, temporary or permanent occupation rights and squatters and with all municipal, territorial and/or national taxes and charges paid up to the closing date.  If the land is part of a condominium, being up to date on the payment of maintenance fees should also be included.

Identification Of Buyer

A common mistake, especially with foreign names and last names, is for them to be misspelled.  This may cause complications on the ownership and on future sales, and special care must be taken to make sure that names are exactly as appearing on passports and that passport numbers are correctly indicated.

Additional Obligations

The negotiation of the land purchase may have also included certain obligations to be performed by the seller after closing has occurred, such as water connection, electricity, development, roads, etc.  The first choice to guarantee the performance of such would be to preview some type of holdback or escrow to be released upon their completion.  Even if such holdback or escrow are not agreed, these commitments by the seller should be included in the “escritura de traspaso” and although they will not be evident at the Public Register, they will be established in a very formal manner that would permit, in case of breach, more possibilities of action by the buyer.

I general terms, a good piece of advise is to be very aware of how your property acquisition is materialized and to make sure that all steps are met so the goal of having it registered to your name is achieved.  It is also a good idea to ask for proof of registration to the Notary in charge and to check the accuracy of that proof by accessing the data base of the Costa Rican Public Register, which at that point should show the name of the new owner.

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