Part I: Due Diligence
At some point in our lives, we have experienced the uncertainty of new and unfamiliar situations, but we have also experienced the joy of knowing something new that is unexpectedly pleasant and having someone who is an expert in the aspects. So, when you decide that Costa Rica will be your new home, we want the happiness to be complete and NOMAD to be the reliable source for the aspects that are unknown to you and that cause you some degree of uncertainty. This way you can continue to enjoy the PURA VIDA philosophy that characterizes our little piece of paradise.
This is the first of several articles that we will be publishing where we will give a guide to how things are done in Costa Rica according to our current legal system. Things like buying a property or a vehicle, paying taxes, the annual compliance process for legal entities, or something like what are the labor laws that must be monitored to hire employees in our country. We want to be your TICO FRIEND in Costa Rica, we want to be your support and your partner in the adventure of living in the most beautiful country in the world.
We will start with the process of buying a property and the first step we must take: THE DUE DILIGENCE. Before making a real estate transaction in Costa Rica or anywhere in the world, it is essential for both parties, especially for the buyer, to carry out a Due Diligence process, obtain as much information as possible, and to know the potential risks involved in acquiring a real estate property, either for personal use or as an investment.
Due Diligence is a pre-contractual procedure that seeks to be the basis for a positive or negative assessment of future investment. It is usually carried out by the parties during the period between the signing of a reciprocal promise to purchase contract and the signing of the public deed of sale when the transaction is formalized. In the same reciprocal promise of the sale contract, the parties may agree that a condition to carry out the transfer is that the buyer is satisfied with the result obtained during the Due Diligence.
As mentioned above, the Due Diligence procedure is very important for the buyer because it will allow him to know about the possible contingencies and risks involved in the desired investment and at the same time be able to ask the seller for guarantees about them, or eventually decide that it is not worthwhile to continue. On the other hand, Due Diligence allows the seller to demonstrate that the buyer was previously and fully aware of the condition of the property, freeing him from certain responsibilities.
Due to the great variety of contractual objects, it is not possible to determine in a general way what type of information should be requested in Due Diligence. This will depend on each specific case. Therefore, the parties need to have a solid legal counsel with extensive experience in the area, who can cover all the general points that Due Diligence should have, and who can also identify the specific aspects of care for each case.
In that sense, the content of the Due Diligence reports will depend to a great extent on the nature of the transaction and the purposes pursued by the parties. However, there is information that will always be required regardless of the specific case. The following are the most important:
– Right of ownership of the real estate,
– Existence of real estate,
– Powers of the seller to transfer it,
– State of payment of municipal taxes,
– Actual condition of the real estate on-site,
– Environmental contingencies,
– Suitability of the property for the desired purpose,
– Provisions that may affect the use of the property, such as regulatory plans and zoning regulations,
– Existence of liens or encumbrances on the property,
– Existence or the possibility of installation of public services such as electricity and water, among others.
Therefore, due to the benefits obtained by both parties, we see that the Due Diligence process should always be a priority in any real estate transaction and should be applied by the parties responsibly and proactively before its formalization.
Because the most sought-after areas in Costa Rica are usually coastal or rural areas and these areas usually have special aspects or situations in terms of public services or limitations when it comes to the construction stage and the permitting that this entails, the process of DUE DILIGENCE should always be performed and is the best advice that NOMAD can give you in this area. The accompaniment of a serious and professional legal team becomes the best ally for your new adventure in Costa Rica to be successful and PURA VIDA.
Our sister company TACTIC ESTUDIO LEGAL can provide you with the best personalized and professional legal service. So do not hesitate to contact us and both companies will support you in every aspect you need. Don’t think twice, here is our contact information ….. Let’s start talking
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