What are the Considerations for Foreigners Building Their Own Home In Costa Rica?
As a foreigner, constructing your own home in Costa Rica will present some unique challenges. First and foremost, if you are coming from the United States or Canada and don’t speak fluent Spanish, the issue of language will be paramount. You won’t be able to bring your own English speaking contractor and construction crew from your home country, as they would not have the legal immigration status to be able to work in Costa Rica.
After purchasing a building lot, your initial challenge will be to select an architect and a building contractor with whom you can freely converse. You can be sure that the actual construction workers who build your home, will speak little, if any, English.
Selecting an architect and a building contractor
Most likely, you will want to select an architect and a building contractor who are familiar with North American designed homes. In short, homes that would be described as “open floor plan,” rather than traditional Costa Rica style homes, tend to employ more “boxy-style” construction, with individual rooms accessed by hallways. This Costa Rica style of construction is trending toward the North American style over time, but is still in a state of transition.
There are various ways of finding the correct architect and building contractor for you, including a Google search, or a referral from a realtor. However, references from satisfied customers are a must, as well as your own visual inspection of previously completed projects by each of these professionals.
The building permit process
To start the building process, you must at least employ the services of an architect who is a member of the Costa Rica College of Engineers and Architects. This is to certify the building plans that are submitted to the municipality, in order to obtain a building permit. The architect can, of course, draft the building plans, and can also be retained by the owner to undertake the supervision of the construction process.
The building plans must be in-keeping with the municipal land use permit (uso de suelo), which sets-out the zoning requirements to be met for the property to be built on. Additional documentation submitted for the building permit will include:
- Legal documentation supporting ownership
- A land survey of the property to be built on
- A water letter from the applicable water authority that will supply potable water to the property
- Such other information and documentation that the municipality may specify, given the particular circumstances of the building site.
Paying the architect and the building contractor
The question that must be answered is, how can the owner’s monies be protected in the payment to the architect/building contractor for a home yet to be built? The answer is, all purchase monies — including any deposit amount agreed to be paid by the owner to the architect/building contractor under the home construction contract — must first be placed in an escrow account of a government registered escrow company. This is pursuant to the provisions of an escrow agreement entered into by the owner, the architect, the building contractor and the escrow company.
This escrow agreement will govern the dispersal of construction monies to the architect and the building contractor as various construction milestones are completed in the project. Before any good faith deposit amount is released from escrow in favor of the architect and the building contractor, the owner must have conducted and be satisfied with the legal due diligence for the project in accordance with the terms of the home construction contract. Subsequent monies disbursed from escrow in favor of the architect and the building contractor will only be made when specific construction milestones — for example, laying the foundation or erecting the walls — have been certified by an independent engineer or architect. That means they have met in compliance with both the building plans and the quality of the materials agreed to be used in the construction process.
By proceeding in that manner, the owner will be protected for the construction value completed. The usual hold-back for the final payment of the construction monies to the architect and the building contractor is 10% of the home construction contract price. The hold-back applies to any irregularities found by the owner — specified on what is commonly referred to as a “punch-list” — pending correction within the agreed-upon time limits by the architect and the building contractor.
For foreign owners coming from the U.S. and Canada, in particular, significant differences exist in the social sense, for doing business in Costa Rica. Taking into account all aspects of the statement, my clear advice is that you be present in Costa Rica during the home construction process and regularly visit the construction site while the construction work is underway. This due diligence is, in my opinion, indispensable.
For more information and answers to your questions on diverse legal topics, visit Costa Rica Canada Law: www.costaricacanadalaw.com