Renting in Costa Rica: short-term vs. long-term

September 5, 2016
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You are surfing around on the web, looking for a rental in Costa Rica, but you have no idea what the rules are, how the system works and how to avoid getting in trouble.

What would be the legal term of the lease agreement? What is the difference between a short-term rental and a long-term rental? Do you have to put down a security deposit? How many months’ rent do you have to pay? What happens if you leave before the lease term is completed?

Ivo Banner American-European

In Costa Rica, property for rent is governed by law No. 7527, “Ley General de Arrendamientos Urbanos y Suburbanos,” or the “General Law of Urban and Suburban Renting.” This law applies to all contracts, verbal or written leases of real property intended for housing, commercial, cultural, industrial, craft, professional, technical or recreational activities and public services.

Short-term rental

Excluded from law 7527 are hotels, bed & breakfasts, hostels and vacation homes where stays may range from one day up to 30 days, such as what you will find advertised as a short-term rental on real estate, vacation rental, VRBO and “For Rent by Owner” websites.

If you book a short-term rental in a hotel or B&B, their administration will generally require your credit card to make a reservation. For a vacation rental or For Rent by Owner, a security deposit might be required that will not be returned if you don’t show or if you damage the property.

Snowbirds

A snowbird is someone who moves from the higher latitudes and colder climates of the United States and Canada and migrates southward in winter to warmer locales. In Costa Rica, there are many snowbirds who rent in areas like Atenas or Grecia when it’s winter in the U.S. For that reason, many will rent anywhere between one month and six months, which is seen as a short-term rental; any stay of less than a year is a short-term rental.

Long-term rental

Law 7527 indicates in article 70 that the rental term of a lease agreement cannot be less than three years, which is what we call a long-term rental. Nonetheless, it is common practice to stipulate a different term in the agreement. Most rental agreements in Costa Rica will state: “The term of the present contract is for one year, renewable for another two years and will be in force starting.…”

It is customary that you will not get your security deposit returned if you leave before the first year is up, which should be clearly written in the lease agreement. Most agreements state that the security deposit will be returned only if the first year’s lease has been completed and at least 30 days’ notice is given to the landlord. Some landlords will request 60 days’ notice.

Commission

Real estate commissions will always be covered by the landlord if you use an agent for your rental. Real estate agents usually do not get involved in lower budget (under $800/month) long-term or short-term rentals unless the agent also does property management. The best place to look for short-term rentals is in The Tico Times classified rental section  or on vacation rental websites.

The language

The legal language of a lease agreement in Costa Rica is of course Spanish, but to fully understand what you are signing, you can ask your real estate agent to supply a copy in English or find an attorney to check the agreement for you. Do NOT sign any agreement that you do not understand.

The security deposit

The security deposit  for a long-term rental is usually one month’s rent. If you have any pets, you might have to make a second security deposit. This deposit is meant to cover any damages caused by the tenant as well as the completion of the term of the agreement. Landlords will usually return the security deposit 30 days after the tenant has left, so utility bills and inventory can be checked.

If you walk before the lease term is completed, usually you only lose your security deposit, unless your lease agreement states anything different.

Unfortunately, there are always unscrupulous landlords who refuse to refund the security deposit. In that case, I recommend you find a bilingual attorney who might be able to help you further, though you might be facing extensive litigation.

Ivo Henfling founded the American-European Real Estate Group in 1999 — the first functioning MLS in Costa Rica with affiliate agents from coast to coast. You can read other articles like this on his blog. Contact Ivo at (506) 2289-5125 / 8834-4515 or at ivo@american-european.net.

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