Buy Property Abroad – Safely
When you look at buying property overseas, don’t think of your attorney as a high-ticket item you don’t need. Sure, hiring an attorney adds to your buying costs. But it can also save you tens of thousands of dollars.
A good attorney will walk you through the sale contract, explaining all the terms and conditions. He’ll help negotiate a better price or payment schedule for you. Most importantly, he will tell you exactly what type of property you’re buying.
When you’re buying overseas, I recommend that you only buy freehold titled property, also called fee simple. This is when the property is in your name (or that of a corporation you own), and it’s yours until you sell it, with no timeframes or restrictions on ownership.
Check the title chain carefully, though. If it includes a conﬁscation, communal or government land, your attorney should carry out additional checks to make sure those transfers were clean and don’t affect the freehold title. A lot of Latin countries don’t allow foreigners to own land within a certain distance of their borders or coast. Some countries don’t allow foreign ownership at all. Make sure your dream destination isn’t one of them.
You’ll come across other ways of holding property, too, most of which you should avoid. You don’t get title when you buy Rights of Possession (derecho posesorio or ROP) property. Instead, you get the right to live in it, use it, and possess it, unless someone with a better claim comes along. The name says it all.
In some cases, ROP is like squatter’s rights. In many countries, if you occupy property for a long period of time you gain rights to carry on occupying it. Another form of ROP occurs when a government grants property parcels to locals to encourage them to farm unused land. Sometimes this farm land is held communally.
A common condition for ROP government property is that you must use it. Now, in some areas you can title ROP land, but it’s a slow, complicated process. It’s often very costly. It’s not something I’d recommend trying yourself.
Remember, too, that you won’t normally get bank ﬁnancing on an ROP property. There is also what’s called “concession” land. Most Latin countries have a maritime zone where the government owns the land. In Costa Rica, the maritime zone is 200 meters. The ﬁrst 50 meters closest to the ocean is a “public zone,” allowing the general public access to the beach. The law prohibits private ownership of property in the public zone. The next 150 meters is a “restricted zone.” The Costa Rican government grants concessions (leases) in this zone. The concessions average ﬁve to 20 years.
A lot of concessions in Latin countries only allow tourist developments (hotels, cafés, or restaurants). But developers sometimes ignore this and build residential condos in Panama. I know of readers who have shelled out almost $500,000 for a luxury condo, not understanding that it was built on concession land, where you can’t build residential condos.
With concession property, you’re paying for a 20-, 25-or 40-year lease, with no idea if you can renew the lease, or at what cost. It’s not the same as buying leasehold property in the U.S. or U.K., with strict laws governing renewal and the cost of renewal.
When choosing an overseas attorney I recommend choosing a bilingual attorney. Buying overseas is not the same as buying back home. You need to understand what your attorney is telling you to do, and that he is carrying out your instructions correctly. And make sure he’s fully independent. He shouldn’t represent the seller, the developer, or anyone else in the transaction. In many countries it’s perfectly legal for attorneys to do this.
Also, check how long he’s practiced law. And ask for written references from previous clients. Check his support staff. If he’s overstretched the level of service he provides will suffer. Also ask how many other real estate transactions he’s handled.
Tens of thousands of people have already successfully bought property overseas and you can, too. Just ensure it’s a smooth process and avoid headaches by hiring a good local attorney who’s on your side, making sure everything stacks up before you commit to buying.
Editor’s Note: This article was taken from a past issue of International Living’s monthly magazine. To get full access to all past and future articles and to receive the magazine in the mail or online each month, simply click on the below button to subscribe to International Living magazine at the special introductory price of $49. You will get instant access to the current issue of the magazine as well 10 years of back issues. As an added bonus, we will also send you a FREE report – How to Retire in Paradise on $30 a Day. (You can cancel your subscription at any time.)