Tenancy Law in Costa Rica.

I) Generals

Costa Rica regulates all matters related to tenancy in a particular law, which has the unforgiving name of “Ley General de Arrendamientos Urbanos y Suburbanos“, meaning: “General Law for Urban and Suburban Tenancy”.

This law was enacted in August 1995, after a much needed reform of the previous law of 1939.

This law regulates all leases relating to houses, condominium units and businesses; it excludes hotel rooms, parking spaces and the like.

As per the law, no lease agreement can be shorter than 3 years, if the tenant so desires, notwithstanding any prior arrangements made by the parties. At the end of the three years the Landlord can request the finishing of the contract, by sending a note to the Tenant, with at least 3 months notice.

II) Contracts can be either verbal or written.

If the contract is verbal, the reality of the relationship, as it develops will become evidence of the contract itself.

The obvious choice is the written contract that should include, at least the following information: Names and ID numbers of the parties; number or “Matricula” of the property, as per public records, and its precise location; detailed description of the premises leased; use that will be given to the building; price, method and place of payment; time frame of the contract; parties’ domicile; date of the contract.

If not written in Spanish, an official translation will be needed in case of litigation.

III) Taxes and stamps.

Every contract as per Costa Rican Law must pay “timbre fiscal” or revenue stamps, which is simply a very old fashion way to charge taxes.

Lease agreements must also pay such taxes in a rate of 5 colones per every 1000 of the value of the contract, which as per the law is equal to six months of rent. Both parties should pay 50% of the tax each.

However lease agreements for houses are exempt, thus only business leases have to pay the tax.

What if you do not pay the taxes? Two things: a) nothing, if you never have to go to court and b) another two things if you have to go to court and need to use the contract as evidence: b1) you will have to pay the taxes all by yourself or b2) if you file the contract without the stamps and get caught, you will have to pay 10 times the amount of taxes left unpaid.

IV) Rights and Obligation of the parties.

The Landlord:

Should give the premises in adequate functioning order and the tenant must keep it in good conditions.

Cannot cut water, power or sewerage services; block or restrict the light or ventilation to the rented premises; or undertake any activities that could trouble the tenant’s right to full use of the unit.

Must make the necessary repairs to keep the unit in operative conditions, failure to do so within 10 days of tenant’s notice, will allow the tenant to produce the repairs and reduce the cost of them from the rent.

The Tenant:

Should pay the rent on the agreed date; use the premises, only for the intended purpose and keep it in good conditions. Failure to do so or change of the use will give the Landlord the right to terminate the contract, for example if somebody rents a house, and then transforms it into a repair shop and offices, will incur in this fault. However it will not be considered a fault if the tenant practices a liberal profession out of the house or sets up a small industry there, provided he and his family live in the house, and his activities does not constitute a violation of zoning ordinances regarding noises, contamination etc.

Using the premise in an abusive manner, causing noises, or producing dangerous, risky or illicit activities will constitute an abusive use of the asset and allow the Landlord to terminate the contract.

Repair all those damages caused by him to the premises through the life term of the agreement.

Tenant also has to give back the house at the end of the rent agreement to the Landlord.

v) Visits and Inspections.

The Landlord has the right to visit the rented premises once every month to carry on an inspection of his property during day hours. The Tennant the obligation to allow it.

The inspection should be communicated in advance to the tenant. If he refuses to allow the inspections twice, he can be evicted.

For the inspection, the owner can bring with him an Engineer or Architect to evaluate the building. During the inspections plans or drawings could be made and pictures could be taken.

VI) Payments.

Payments could be agreed in colones or dollars. If the last choice is picked, the rent could be paid by the tenant in colones at the current sale rate of exchange of the Central Bank.

The rent should be paid every month, except the parties agree otherwise, and payment should occur on the agreed date or in the following seven days. Payments made after such period allow the Landlord to evict the Tennant.

With regards to public services, the parties can agree whatever they want, and in lieu of provisions, the Tennant is under the obligation to pay all bills except the basic water bill.

VII) Rent increases.

Increases are treated differently if a house or a business.

If the rented premise is a house, the rent can only be increased at the end of every year. If the price is set up in colones, the increment could be somewhere between 15% and the annual rate of inflation, depending on certain circumstances. Most of the contract stipulate just 15% and avoid the problems of calculating inflation rates etc.

If the price is stipulated in dollars, the rent cannot be increased throughout the life term of the contract.

If the rent if for other uses the increases could be made as per the parties agreement, or as well at the end of every year, disregarding if the price is set up in colones or dollars.

In the next delivery we will develop the termination of the agreement and the eviction process.

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Andrew Makarik

to@welovecostarica.com

Andrew Makarik is the main editor of WeLoveCostaRica, a fan of this sunny country. He is also a loving husband and a has a lovely daughter. By being a devoted family man and the biggest Costa Rica fan, he wants to make more people feel at home there. WeLoveCostaRica unites people and helps them find new home or a new travel destination. This website is a friendly community where everyone can find not only information, but also new friends and travel pals. Andrew is also passionate about IT and programming, so he himself maintains a friendly atmosphere in this cozy environment of WeLoveCostaRica.com.