Anyone looking to move to Costa Rica or invest in property here will almost certainly have heard of “Ley No. 6043 sobre la Zona Marítima Terrestre,” known as the Maritime Zone Law. But what does the law say, and how does it affect real estate in the country?
Passed in 1977, the law states that land fewer than 200 meters from the sea, as measured from the high-tide mark, falls within the Maritime Zone (ZMT) and, as such, is considered part of Costa Rica’s national heritage and belongs to the state. It is illegal to exploit, develop or build anything within the ZMT without authorization.
Do not despair, however; it is still possible to have that idyllic tropical beach house in Costa Rica. It’s just not as simple as buying titled property.
The Maritime Zone is subdivided into two sections: the first 50 meters from the hightide mark, known as the “public zone,” and any land that lies more than 50 but fewer than 200 meters from the high-tide mark, which is known as the “restricted zone.”
No one can claim any right to land within the public zone, and, with very few exceptions, it cannot be built upon or occupied. It is “dedicated to public use and especially the free transit of people.” In essence, this means you will never be able to live right on the beach, but at least you will always be able to access it.
The restricted zone is different. If your heart is set on beach property in Costa Rica, it is set on restricted-zone property. Here’s how it works.
Most, but not all, land in the ZMT belongs to the state. If a restricted-zone property was bought and correctly registered with the National Registry before the law was passed, then it can be bought and sold freely as titled property. Hence the reason why towns such as Jacó, on the central Pacific coast, are built right on the beach – they pre-date the law.
If the land was not legally registered, then the local municipality, in conjunction with the Costa Rican Tourism Institute (ICT) and other relevant authorities, still has the power to grant a concession for it, allowing you to live there. The concession will last from five to 20 years, depending on the agreement reached with the local authority, and is almost always easy to renew as long as the concessionaire has abided by the terms of the contract.
Besides administrative costs, there is no “price” to pay for a new concession; instead, the municipality will charge an annual canon, best understood as a rental payment, at a rate that is typically 4% of the value of the property.
This system has, however, recently proved contentious, as concessionaires and municipalities have disputed property assessments (TT, Dec. 21, 2007).
There is a catch, though: If you are a foreigner with fewer than five years of residency in Costa Rica, you cannot own the concession.
According to the law, concession rights can only be granted to Costa Ricans or to companies that are majority Tico-owned.
Therefore, foreigners looking to buy their own slice of paradise are normally advised to form a company, known as a sociedad anónima (S.A.), to allow them to split rights to the concession, thereby complying with the law while at the same time maintaining part ownership of it.
Here comes the sticky part, the question that “every foreigner keeps asking and rightly so,” according to Les Nunez, a real estate agent with 13 years experience in the country who is works out of Playa Hermosa, on the northern Pacific coast: Who owns the other 50% of your dream home?
There are essentially three options. The simple option is to have a Costa Rican hold that precious half on word of trust. Understandably, few foreigners are enamored with this idea.
The second way is to allow your law firm or lawyer to own it on your behalf. It should be noted, however, that by accepting any ownership of your concession, the lawyer is knowingly entering into a conflict of interest; he would essentially be advising you to buy a concession and then let him own it.
The practice does happen and is perfectly legal – it just requires a certain ethical flexibility on the part of the attorney.
Finally, the most common practice is for law firms to create a trust company to hold that 50% under agreement with the client. This system allows investors to retain control of the entirety of their concession, but is essentially an attempt to contract around the law. Clearly, with all options, two key requirements are a certain amount of faith and a good lawyer.
The reality is that most foreigners do not experience difficulties when acquiring a concession, but the fact remains that it is not a risk-free process. Roger Petersen, a real estate lawyer with 13 years of experience in Costa Rica, acknowledges as much, but notes: “If you are a nonresident and want maritime property, you don’t have a choice.”
Beach or Bust
However, as the saying goes, buying property is all about three things: location, location, location. Because of this, and in spite of the risks, many buyers remain attracted to concession property, so the next problem is how to get hold of a concession.
This is actually fairly simple.With the rush of development in recent years, a sizeable proportion of coastal land, particularly in popular areas such as Jacó and the northern Pacific beach community of Tamarindo, is already under concession, meaning prospective buyers are likely to be buying concessions that have already been granted, rather than having to apply for a new one. Furthermore, provided the appropriate authorities are duly notified, rights to concession property can be freely traded (see sidebar).
Buyers should still exercise caution, bearing in mind that there is a big difference between buying a concession to a property and purchasing the property itself. In addition, as there is no mandatory licensing of real estate agents in Costa Rica, this may not always be made clear, so it is important to use a reputable company. Even so, both Nunez and Petersen agree that, when it comes to Maritime Zone property, buyers need to tread carefully as “there are no guarantees.”
The allure of beach property is clear.Who wouldn’t want to live on an expanse of white sand facing the endless blue of the ocean? Many people do choose to live the dream in Costa Rica, and most do not regret it. Just be careful that you are not one of the few who do.
Maritime Zone Law Reform Proposed
In recent months, there have been rumblings that a possible reform to the Maritime Zone Law may be in the pipeline. National Liberation Party legislator Maureen Ballesteros has promoted changing the law to allow
municipalities to profit when concession properties are bought and sold.
Currently, the canon is the only form of income that municipalities receive from concessions; they cannot claim any money when existing concession rights are traded. This means that local authorities have not benefited from the booming market for coastal properties and so have struggled to finance improvements in infrastructure to match the huge investments that have been made in maritime regions.
So, will the law be reformed in favor of cashstrapped regional governments? Real estate lawyer Roger Petersen, for one, does not think so.
“I would be surprised if they can get enough public sentiment,” he said. “I cannot see that it will happen.”
It’s hard to disagree with him, given the current political landscape. With the Legislative Assembly battling to pass the bills necessary to implement the Central American Free-Trade Agreement with the United States (CAFTA), as well as looking to be seen to respond to the increase in crime, reform of the Maritime Zone Law isn’t at the top of the priority list.
In addition, there is likely to be strong opposition to any such moves from foreign investors, especially without a guarantee that any proposed new system would be transparent and provide real improvements in services.