What are the Rules that Apply to Owning Property on the Beachfront in Costa Rica?

WHAT ARE THE RULES THAT APPLY TO OWNING PROPERTY ON THE BEACHFRONT IN COSTA RICA? Posted by our agent Josie Green

Owning a beachfront property in Costa Rica can be a magical experience - living steps away from the white sand, with the hypnotic sound of the ocean and surrounded by the lush tropical forest that fringes the beach here. If that sounds inviting, you will need to make sure you understand the rules that apply to ownership on the beachfront.

Property that is located on the beachfront is governed by Maritime Zone Law of 1977 (La Ley Sobre la Zona Marítimo Terrestre No. 6043). We are providing you here with a very general outline of the rules that apply on the beachfront. It is of course important to consult with a good lawyer, if you do decide that the beachfront is for you.

Maritime Zone: Regulatory Plan:

The Maritime Zone is the first 200 meters from the average mid-tid line. The first 50 meters from the average mid tide line is called the Public Zone. The Public Zone is owned by the government, you cannot own land in the Public Zone, except in certain special cases. Also, you can’t develop it and you can’t block access to it. Everyone has the right to access it.

From the 50 meter mark another 150 meters in, is the Restricted Zone. In this area, the land is still owned by the government and it is administered by the local Municipality. In this zone the Muni grants a Concession to use the land for a period of 5 to 20 years, with 20 being the most common. This concession is governed by a regulatory zoning plan that details exactly what you can and cannot build. At the end of the 20 years you would need to apply to renew the Concession.

This will imply legal fees, but you do not have to pay the Municipality to renew the concession. As part of the renewal they will likely come to check the property to ensure that any construction has been done in line with the Regulatory Plan. If there is anything that does not comply, they will ask you to fix this before renewing the concession.

When you purchase on the beachfront, what you are actually purchasing are the concession rights on the property granted by the Municipal Government.

So the 20 years of concession rights do not restart when you purchase it… you are purchasing an existing concession with a fixed end date. In order to grant a concession the Municipality must have a Regulatory Plan (or Zoning Plan) in place for a determined geographical area. Each individual lot within the Maritime Zone will have a specific zoning - whether it is ZRR (Residential Recreative), ZH (hotel zoning), ZAT (tourist lodging), ZPQ (river protection), ZP (protection zone), ZPF (forest protection), ZRBD (residential low density), ZT (touristic), ZC (cooperative zone), ZSB (basic services), and the list goes on.

The Regulatory Plan will set out in detail what you can and cannot do on a lot within the Maritime Zone. It will provide height restrictions, maximum construction coverage, number of units per hectare, etc. It will also detail permitted uses, conditional uses and uses that are specifically prohibited.

It is important to make sure the property you are considering has a zoning that allows you to do what you want to do. You must follow the rules set out by the Regulatory Plan, otherwise the Municipality can remove your concession rights. For example if the Regulatory Plan says that there is a maximum height restriction of 5 meters and you build two stories that reach 7 meters - they can require you to remove the second story. There are some specific “grandfather” exceptions to these rules, that are property specific.

Building Process:

The building process in the Maritime Zone will be slower than for titled property. This is because your building plans will need to be approved by a number of different

governmental agencies, as well as the local Municipality. It can take anywhere from 6 to 12 months to get your building permits and can be up to 2 years for large scale development in the Maritime Zone, depending on the size of your project. Single family residential homes go through a faster permitting process, and large commercial projects take more time. It is very important to use professionals who have a track record of getting things done in the Maritime Zone. The less errors that are made during an application process, the quicker the process will be.

Annual Property Taxes:

On the beachfront there are two fees to be paid annually. First the annual canon tax is up to to 4% of the assessed land value. The Municipality can assign different tax values to different sections of the property. For example, on forest land they may assess 1-2%, and on buildable land up to 4%. Then, when you go to build, a 0.25% property tax is assessed on the value of the construction you build. Both taxes are billed separately. The assessment of value is done by the local Municipality. They can reassess values when renewing a concession, with the transfer of a concession, or every 5 years. Residential lots generally pay a lower canon tax than hotel or other commercially zoned properties. We have seen canon taxes range from as low as $1,500 per year up to $25,000 per year.

On titled land the annual property tax is 0.25% of the registered value. The registered value will be what you paid for the property. You are then required by law to reassess the value every five years.

Risk versus Reward:

The dream of having a beachfront home or hotel is shared by many, and the options to do so are very limited, anywhere in the world. There are always risks in not having full property rights often associated with titled land outside of the maritime zone. At the same time, there are great rewards that go along with enjoying beachfront living. Costa Rica does allow for this type of beneficial ownership, by going through their concession process, and abiding by all National Laws. If you are considering beachfront, it is vital to choose a realtor and a lawyer who understand the Maritime Zone Law and who have extensive prior experience in Maritime Zone transactions. Contact us to learn more about the beachfront properties.