One of the most important parts of buying a car in Costa Rica is the sales contract. This article explains why you need a lawyer, and what is in the contract for a strictly cash purchase.
The National Registry of Costa Rica has particular requirements that they validate in every contract, so the wording for vehicle purchases is actually quite similar even though each one has unique information. The way they ensure that all title transfers are legitimate, is to require a notary public to authenticate the identity of the parties signing the contract.
Executive Summary
If you don’t want to get into all the nitty-gritty below, the most important thing for the buyer and seller is to review all the information that appears in the contract. Your own ID number, spelling of your name and that your civil status is correct. This will avoid a rejection at the registry, that might cause a delay of the registration of the title transfer.
This doesn’t mean that the sale doesn’t go through or the contract is invalid, it is actually valid from the moment it is signed by all parties and entered into the protocol by the lawyer. It just means that mistakes will cause an annotation to appear on the title and the paperwork must be corrected and resubmitted. This freezes the title in essence, making the seller and buyer both responsible for anything that happens to the vehicle or damage to 3rd parties caused by the vehicle.
#1 – The Protocol
Each lawyer has an official book where they write all of their contracts. The paper is secured by its features like a seal, the fibrous weight (like a US dollar bill), and the machine readable numeration at the top. Each line is numbered and the lawyers used to write all of the contracts in cursive. Later they used typewriters, and nowadays they use printers.
Very soon it could be a fully digital process, as more and more people have digital signatures, but for now each line of each sheet in the book must be filled. There can’t be blank space in the book between contracts, this includes the signatures though – so there’s a little room for mistakes.
#2 – The Lawyer / Notary
All sales contracts for vehicles with license plates must be witnessed by a notary and presented to the National Registry of Costa Rica by a lawyer (normally the same person). The first part of every contract is the name of the lawyer and their identification, along with their office address.
#3 – The Seller or Empowered Person
The next item is the seller’s information, hereafter referred to as the “first party” or “seller”. If it is an individual who is present at the signing, then that’s it.
If the actual owner is not present, they may have authorized a person to act on their behalf in selling the vehicle. In that case the information regarding the power of attorney appears. If the vehicle is owned by a corporate entity, then that information will appear as the seller, then the person signing on behalf of the company will also appear. This is usually the manager who holds a general empowerment to act on behalf of the company, or the legal representative.
#4 – The Buyer or their Representative
Next will be the information of the purchaser, usually that’s our client. It’s worth noting that a person could be empowered to represent a buyer as well, or the buyer could be a corporation.
#5 Conditions of the Sale / Contracted Goods and Purpose
This part notes that the first party is selling to the second party this vehicle free and clear of any conditions, liens or annotations. It also describes the vehicle completely: make, model, color, VIN or Chassis Number, motor number, type of vehicle, motor type and traction type.
The nominal value for the contract is stated in colones, this matches the fiscal value of the vehicle in the National Registry.
Note on Fiscal vs. Market Value: The National Registry charges the title transfer fee based on the higher of the fiscal value or the contract value. So no one puts the market value because the legal fees and transfer taxes will increase significantly. Putting the market value will increase the fiscal value automatically, so every year the annual property tax / obligatory insurance (marchamo) will also be that much higher.
#6 Accepting the sale
This says that you accept the vehicle described above and want the National Registry to transfer the title to your name.
#7 Guarantee (optional)
Sometimes they put the 30 day guarantee in writing in the contract, in this case it specifies 30 business days. They are responsible for damages and repairs not attributable to your use of the vehicle and the repairs must only be performed by their personnel or mechanics authorized by them and at their place of business and by appointment.
#8 Declaration of Origin of Funds
Because of anti-money laundering regulations the notaries must put in the contract a sworn statement by you of the source of the money used to pay for the vehicle. They put that is savings from your work, sometimes adding the form of payment and often the contract asks the National Registry to ignore this part.
# 9 Signed and Dated
The date and place of signing is the last line of the contract, then there are blank lines where the parties will sign.
Special Cases and other Notes
Loans
Tickets
Notes
Mistakes
Translation
We don’t deal with this too much with our clients, but if there is financing involved then obviously that will be in the contract and makes it much longer.
The lawyer must check for outstanding traffic fines in the National Registry and also on the COSEVI web site. That protects the buyer as it doesn’t freeze the transfer of title – but they become the responsibility of the new owner.
The vehicle may have annotations regarding past court cases that are registered. They may warrant further investigation as it is related to the history and condition of the vehicle.
If there is any mistake in the contract that is already printed out, that’s OK. It can be corrected by hand before the contract is signed by all parties. The lawyer will note the line number where the mistake appears and the correction.
Some attorneys will ask for a translator to appear in the contract. Some even want an official translator, but mostly it is just an additional clause explaining that someone translated the contract for the buyer that doesn’t speak Spanish.