Tag: invest in Nicaragua
Anyone looking for real estate in Nicaragua who actually visits the country discovers there’s a glaring difference between online shopping and being here looking for a buying opportunity. It’s an understatement to say that it is confusing compared to the nice, tidy websites with posted prices.
The first shock most people have to deal with is that there’s no “listing agent”. Every property in Nicaragua is offered for sale by the owner… no matter what prospective buyers may believe or have been told. True, some sellers don’t want to bother with the selling process so may use the services of a go between. However, that go between can be anyone… a property manager, a lawyer, a relative or friend, or a “merchant” specializing in real estate. I say “merchant” because there is no such thing as a “real estate brokerage” in Nicaragua. At least not as a North American or European would understand the term to represent. Anyone can sell real estate, no matter if they have any prior experience or training of any kind.
Nica Investments only deals with the owners of property seeking to sell or lease. The mandate the company operates under is to advise clients seeking to purchase real estate as to the true value of a property, the potential for equity gain and/or income from a property, what renovations may be required and the cost, and if there are any grounds for concern surrounding a specific property. We’ll then walk clients through the purchase process and assure the property is transferred without incident.
Nica Investments does not add on an amount over and above what the seller wishes to receive as a commission. This is the norm in Nicaragua. A seller will offer a property to “selling agents” at what the seller wants, net. The agent must then add on an amount over and above that sum. Nica Investment clients retain our services on a per diem basis, and task Nica Investments with negotiating the best terms and purchase price possible directly from the seller.
Nica Investments also negotiates leases, which in Nicaragua is often a more advantageous approach to securing a property for business use. See Which Is Better – To Rent Or Buy for more information about leasing over purchasing property in Nicaragua.
Nica Investments does not maintain a list of properties for sale or rent, “listings” as a prospective renter or purchaser from North America or Europe would expect to see. There is no point. We do inform clients of outstanding properties through our newsletter or on our website, under Investment Opportunities. However, these properties are being offer for sale by owners. Nica Investments deems these properties we highlight to be exceptional because of price, location, size, view or a combination of these reasons.
If a property is priced well it sells quickly. Too quickly to make advertising it practical. Such properties Nica Investments will inform clients of directly via email and open negotiations on behalf of a client who retains us to do so.
If a property is overpriced or has issues prohibiting its being sold, it will last long enough to make advertising it worthwhile. However, it’s unlikely to sell quickly so it’s a waste of time and energy in most cases. Besides, in Nicaragua virtually every property in private hands is for sale. There are rare exceptions, but well over 90% of homes, raw land and commercial properties throughout Nicaragua can be purchased from the owner whether or not it is being overtly offered for sale.
What Nica Investments does is source properties that meet the client’s parameters. These parameters are type of property, price range, location, land use, size, and so on. We then approach the owners of properties that meet our clients’ criteria directly and attempt to negotiate an equitable agreement to purchase or lease.
If you’re planning to invest in real estate in Nicaragua it is important to use common sense. There is an old saying, “If it seems too good to be true, it probably is.” Caveat Emptor, “buyer beware”, applies in all real estate purchases the world over, but is especially applicable when buying property in Nicaragua.
Do your due diligence…
Nicaragua employs a civil law system. This differs from the common law system of the United States, Canada and European nations. Civil law is based solely on statutes, so there’s no facility to reach a compromise resolution should problems arise.
The official language for all real estate transactions in Nicaragua is Spanish. However, it is possible for an English contract to be legally binding. The English language contract is only legally binding though if it is presented to the court. The contract will have to be translated into Spanish, after which a judge will interpret the contract, and verify the signatures. The judge’s interpretation of the contract will be binding, even if that interpretation is not exactly how the buyer and/or seller understood the transaction it to be.
Court proceeding in Nicaragua take time… months, sometimes years. So you do not want to have to depend on judicial arbitration to resolve any issues that arise while purchasing a property. Therefore it’s imperative to have all the i’s dotted and the t’s crossed. Half of the clients Nica Investments serves are purchasers who seek assistance in sorting out a real estate purchase that has gone bad.
Following are some tips to help with a purchaser’s due diligence and to avoid problems:
- Hire An Attorney – Have your own attorney capable of speaking your language. Your lawyer will look out for your interests. Do not depend on an attorney hired by the seller or the seller’s agent.
- Conduct A Thorough Title Search – Be sure to carefully review the chain of title to the land being purchased. The chain of title to be reviewed must trace back at least 30 years. If the property being purchased is located on any body of water, even a river, the full chain of title dating back to before 1917 is required.
- Agreement To Purchase Terms – Be sure the agreement states the purchaser will receive a free and clear title without any encumbrances, including mortgages. There must also be a clause stating that the purchaser will be released from any purchase obligation if there is a serious issue with the title, and that any deposit will be returned.
- Make Sure the Property is Properly Surveyed – Assure that the survey marks all the corners of the lot. Also, be sure the survey is an approved, official (cadastral) survey, which will bear the official stamp and a signature.
- Escrow and Closing Process – In January 2011, the Nicaraguan National Assembly approved a new Trust Law. Unfortunately the regulations have not been issued yet. Local companies are already offering escrow services but it isn’t wise to use them until the regulations to the Trust Law are approved. If you do you may find you have lost your money. Nica Investments prefers to deal with US banks and take advantage of their escrow services. On rare occasions this insistence has resulted in a seller refusing to cooperate, but most legitimate sellers are happy to work with US banks provided the purchaser is covering any escrow fees and transfer costs.
Securing Your Interest In Nicaragua Real Estate…
It is recommended that all real estate transactions be registered in the Public Registry. This include a purchase, lease, mortgage, possession right or any other transactions. Nicaraguan law isn’t clear as to whether the Public Registry serves as a means to establish property rights or serves merely as a means of publishing an existing right, but it is advisable that any claim to a property be registered. That said, the Nicaraguan legal system does recognize the registration of a title as establishment of property rights, so title must be properly registered with the court.
Different government agencies involved in the registration process in Nicaragua constantly change, while existing agencies add new requirements. These changes to the registration process make the registration of a property title challenging, so it is recommended that purchasers employ the services of a competent lawyer or real estate acquisition consultant like Nica Investments.
Important Differences In Real Estate Transactions…
Worth noting is the fact that “real estate agents” in Nicaragua are not the same as their counterparts in the USA, Canada or Europe. There are no “real estate brokerages” in Nicaragua as foreigners would understand them to be. Nor are there trained, licensed and monitored “real estate agents”. In fact, there is no Nicaragua equivalent to “real estate boards”, nor is there anything like a “Multiple Listing Service” (MLS) that monitors and tracks real estate transactions. To find comparable property values one has to search titles. Unfortunately this can be a futile effort because often the selling price is reduced so the buyer will pay less transfer tax, or the price is inflated to secure more financing from an institutional lender.
Only owners of a property sell their real estate. Anyone presenting themselves as the seller’s agent is generally a middle man, with the exception of estate lawyers. In most cases the seller has demanded a net amount they want and these middle men will add on a profit margin for themselves. The additional amount is often significant, far more than the few percent USA, Canadian and European realtors could hope to receive. This is in part due to the need to have a negotiating cushion, but of course greed is a factor too.
There are rare occasions when an agent for the seller is granted an exclusive right to sell a property on behalf of the owner. If you’re told such an agreement exists, demand to see it. I’ve yet to be shown anything granting exclusivity other than by lawyers in possession of a Power of Attorney. However, I’m not saying that there may not be exclusive agreements a seller and an agent entered into… just that I have never seen one. If no exclusivity exists it’s possible the same property will be advertised by other agents for more or less money, so research is recommended.
All real estate transactions must be carried out through a Public Deed (known as an Escritura Pública), to be legally binding in Nicaragua. The Public Deed must be written in Spanish and it is the responsibility of the purchaser to retain a translator if he or she does not understand the language.
When purchasing a property the buyer must make sure that the public deed transfers possession and ownership, that the size of the property is verified with a surveyor’s map, and bounds are detailed in the title document, and it’s approved by the Cadastral Office. The purchaser must physically inspect the property to ensure that it’s in accordance with the topographers’ map and the property description on the Public Deed.
The purchaser is advised to insist on vacant tenancy. If anyone is living on land, domiciled inside a main or out building, or a tenant in a residential or commercial property, insist that the seller have them vacate. It can be a lengthy and costly undertaking to remove both legal tenants and squatters. No matter what relationship the seller says the occupant has, insist that the seller will provide vacant tenancy, and that includes the seller if it’s the seller’s home being offered for sale. I personally know of two cases where the seller was paid the full amount of the purchase then refused to vacate the property. These were not transactions I was involved in, but I know of the buyers’ trials and tribulations.
Special Laws, Rules And Regulations…
Depending on the type or origin of property being purchased or leased, special regulations may affect properties rights.
The 2009 Coastal Law applies to property bordering beaches, rivers, lagoons or lakes, or any other body of water. The Coastal Law regulates private and public domain, coastal access, as well as the use and development of properties located in these areas.
According to the law, the open area between low and hide tide, plus 50 meters from the high tide mark is open to public use. Regulations established in this act may also affect ownership, use, construction, lease, and possession rights beyond the 50 meter boundary with such properties. Real estate transactions involving waterfront properties require a thorough due diligence that traces back the title to before 1917, or to when the title originated.
No Objection Letter (Carta de No Objeción)
The Attorney General’s Office requires a No Objection Letter to register real estate that historically belonged to the Nicaraguan state, or are coastal properties, properties previously owned by cooperatives, titles that are based on a Supplementary Title, and properties whose titles were obtained through Laws 85, 86 and 88.
Registration of titles of properties that fall under one of these categories is not possible without a No Objection Letter. Once you initiate the registration process of one of these properties, the Cadastral Office will request this letter. Once registration goes through the Cadastral Office, the Public Registry will also request the No Objection Letter.
The process to obtain a No Objection Letter can vary from time to time. It is recommended a purchaser visit the Attorney General’s webpage at www.pgr.gob.ni for the latest requirements. It is also recommended that the services of an attorney or competent real estate acquisition consultant be retained. Failure to obtain a No Objection Letter will result in a denial of the registration of a title. The best approach is to insist that the seller of a property falling under a category requiring a No Objection Letter provides it, or an official document stating a No Objection Letter is not required.
The 2010 Border Law prohibits foreign ownership of some properties located along the border. It is necessary to confirm the status of any property within close proximity of any of Nicaragua’s land borders. A good rule of thumb is to assume all properties within ten (10) kilometers of a border fall within the 2010 Border Law restrictions.
Indigenous Community Properties
Properties that belong to indigenous communities fall under special regulations and ownership is not transferable. This is important to know because there are people actively trying to sell land belonging to indigenous communities. It is possible to acquire concessions or lease rights, but it is not recommended to do so because any disputes over rights that may arise are difficult to settle. Environmental use and development laws also apply to a vast majority of properties owned by indigenous communities. Many of these properties cannot be used to build on. Nica Investments policy is to avoid properties belonging to indigenous communities.
What has been shared here is current as far as the rules, regulations and laws pertaining to real estate purchases in Nicaragua as of January 1, 2017. The one constant in Nicaragua real estate investing though is that nothing is constant. Rules and regulations change, and occasionally new laws are passed or existing laws modified. It is strongly advised that anyone looking to invest in Nicaragua real estate engage Nica Investments as their acquisition consultant and/or retain the services of a reputable and competent Nicaraguan attorney. Doing so will assure your property buying experience goes smoothly and disappointment is avoided.
Tourism in Nicaragua has grown to become the country’s second largest industry. Tourism is expected to continue its almost 10% annual growth as well, because President Daniel Ortega has stated his intention is to use tourism to help alleviate the nation’s poverty. To this end, Law 360 was decreed. The law offers foreign investors in tourism the best investment incentives in all of the Americas.
Adding to its popularity as a vacation destination, Nicaragua has the lowest crime rate in Latin America according to Interpol, with only 12 crimes for every 100,000 citizens.
Nicaragua only has one international airport, Managua’s Augusto C. Sandino International Airport, which efficiently welcomes more than 1.3 million tourists annually (2016). Two-thirds of these tourists were from other Central American countries, 290,000+ were from North America and 80,000+ from Europe. Of those that come for recreation, their principal activities include surfing, hiking volcanoes and enjoying the country’s unique, natural beauty.
According to the INTUR, the Ministry of Tourism of Nicaragua, the colonial city of Granada is the preferred destination for tourists. The city’s central park hosts many vendors of traditional foods, as well as arts and crafts. Line up along the west side of the part are horse drawn carriages for visitors to take an affordable tour of the city. If your understanding of Spanish is limited, be sure to select a carriage driven by a guide who speaks your language because their knowledge of the city and its historical sites is both interesting and informative.
Just outside the Granada city limits visitors are able to take boat tours of the Granada Islets, or visit Mombacho Volcano, a popular day trip for anyone interesting in doing a little hiking up into a cloud forest. Laguna de Apoyo is another popular destination for tourists visiting Granada.
The cities of León, Masaya, Rivas, and San Juan del Sur are also popular tourist destinations. Cruise ships have been docking in San Juan del Sur since January 2000, bringing with them an average of 50,000 tourists annually.
The Corn Islands, located about 70 km east off the Caribbean coast of Nicaragua, near Bluefields, is another popular tourist destination.
Rural and community based tourism
CECOCAFEN is an organization of coffee cooperatives in Northern Nicaragua that manage a rural and community based tourism project. The project was developed with support from Lutheran World Relief. Tourism provides farmers with new opportunities in alternative markets and diversify their income. CECOCAFEN offers visitors the opportunity to visit a coffee farm, learn about coffee craftsmanship, stay overnight on a coffee farm and explore the area with a community guide.
Home to 78 protected areas covering over 20% of its landmass, Nicaragua is home to 7% of the world’s biodiversity. This is more than Costa Rica. With so much biodiversity, the country’s tourism industry has develop a popular eco-tourism sub sector.
Ecological tourism aims to be ecologically and socially conscious. It focuses on local culture, wilderness, and adventure. Nicaragua’s eco-tourism grows every year, with three principle eco-regions, Pacific, Central and Atlantic, which contain volcanoes, tropical rain forests and agricultural land.
Nicaragua is home to the largest lake in Central America, about 700 species of birds, and an abundance of unspoiled natural beauty. Despite all this, it is still the least visited country in the region. However, the lower number of tourists keep prices low and add an “off-the-beaten-track” appeal to the country.
Nicaragua is also home to Bosawas, located in Northern Nicaragua, which is the largest rainforest north of the Amazon in Brazil. It also holds the largest lake in Central America, Lake Cocibolca, also known as Lake Nicaragua. Lake Cocibolca attracts a great many tourists annually, most of whom visit Ometepe, a large volcanic island formed by two volcanoes, where they explore the flora and fauna found in the Charco Verde Nature Reserve.
Nicaragua’s rich biodiversity also attracts many tourists to protected areas such as the Indio Maíz Biological Reserve, which holds a higher number in species of trees, birds, and insects than all of Europe combined.
Visa regulations (2016)
Tourists from Afghanistan, Albania, Angola, Armenia, Bosnia and Herzegovina, China, Cuba, Ecuador, Ghana, Haiti, Iraq, Jordan, Lebanon, Liberia, Mali, Mozambique, Nepal, Nigeria, North Korea, Pakistan, the Palestinian National Authority, Romania, Sierra Leone, Somalia, Sri Lanka, Sudan, Syria, Vietnam and Yemen require a visa to enter Nicaragua.
Other tourists can obtain a Tourist Card for US$10 valid for up to 90 days upon arrival, provided the visitor is in possession of a valid passport with at least six months left before expiry. There is also a US$32 departure tax that is usually included in a round-trip airline or cruise ship ticket. However the departure tax is not usually included in the price of a bus ticket, and of course must be paid by visitors who arrived by car or private boat.
I generally take care of the following steps for my clients, whether they’re buyers or sellers. However, I thought I’d share the steps that must be gone through so my clients can appreciate a few of the many formalities I attend to on their behalf. Also I want to be sure anyone wanting to go it alone is properly informed as to the steps required and which party to a transaction is expected to handle which aspects.
These steps are based on the assumption the property is already registered and that there will be no change of use involved. In the case of a property being purchased that is to be subdivided from a larger parcel of land, and a new title created, or the current use of the land is to be changed, additional steps are required.
1. Obtain a Libertad de gravamen (non-encumbrance certificate) from the Registro Público de la Propiedad Inmueble y Mercantil (Land Registry)
The non-encumbrance certificate, or libertad de gravamen, is an official document that shows all the encumbrances that are currently on the property. It also lists all of the owners of the property since its first annotation. The certificate must be obtained by the seller before starting the transaction formally.
A certificado a manera de titulo (Title) is required to apply for the non-encumbrance certificate. A replacement title can be obtained from the registry if the original title has been lost. The cost is NIO 100.
A certificado de historia registral (certificate of historical registration), is a document related to the non-encumbrance certificate. It is a list of all previous transactions related to the property. This document will list transfers and re-registration of the title. This document can obtained at a cost of NIO 100. An additional fee of NIO 50 is required for every additional past transaction listed.
2. Obtain a Solvencia Municipal (tax clearance certificate) from the Municipality. A tax clearance certificate must be obtained by the seller from the municipality. Provided the seller is up to date with tax payments it should take only one day to receive the tax clearance certificate. The fee is NIO 20 to receive the document immediately, or if it is possible to wait until the next business day it is free of charge.
3. Next, a notary must prepare and sign the public deed. A notary public prepares and notarizes the public deed of purchase and sell between seller and buyer. The preparation of the deed is an exclusive act of the notary. The notary will review all past transactions from the record book at the Land Registry using the documents obtained above, and verify the ownership of the property.
Notaries generally estimate their fees for this service based on a percent, which varies between 1.5 and 2% of the property value according to agreement between the parties and notary. Allow 2 days for this phase of the process.
4. Obtain the Cadastre certificate at INETER (National cadastre). INETER is the national cadastre and is in charge of surveying the land and keeping a database on the plots and boundaries. This certificate is necessary to obtain the cadastre valuation at the DGI. This step requires 2 weeks and the fee is NIO 300.
5. Obtain Cadastre valuation at the DGI. Parties to a real estate transaction must obtain the Cadastre Certificate and request a valuation from an inspector. In practice, the Cadastre requires a special power be granted to notaries or any other person when the interested parties cannot themselves manage this procedure. The closest similarity to North American or European proceedures would be the issuing of a limited power of attorney. If the parties can go to the Cadastre themselves, they do not need to grant anyone a special power to act on their behalf. The Cadastre will require the original property title (that of the Seller).
This step in the process requires about 21 days and costs NIO 50 and is paid using Tax Stamps. In cases in which a special power must be granted, the costs rises of course. It will cost about C$ 2,000 in fees for the person who will go to the Cadastre, and C$ 1,000 for the notary who will previously authorize and issue the special power.
6. After the cadastral certificate is obtained, an inspector from the Catastro fiscal – Direccion General de Ingresos will visits property to assess value. Generally it is required to pick up the inspector and drive he or she to the property. It will take the inspector about one week to write the report on the value. The cost is 20 Cordobas and it usually takes from 2 to 3 days for the inspector to have time to inspect the property.
7. Payment of Income/Transfer Tax at the Administracion de Rentas – Direccion General de Ingresos, or Tax Administration Office. This is an agency of the Treasury Ministry. The percent to be paid is established depending on the Cadastre Value. The Cadastre value usually not the same as the market price. For the payment of the transfer taxes, the fiscal authority takes as a base of calculation the highest value between the sale price in the public deed of purchase and Cadastral value. Fees of NIO 4 + 2 stamps of NIO 10 need to be paid to make the payment.
The transfer tax rate of 1% was established by an injunction (“amparo”) declaring the increase of the 2003 Ley de Queda Fiscal unconstitutional. An amendment to the Nicaraguan fiscal law entered into force on January 1st, 2010 (Law 712 published in the official Gazette No. 241 of December 21st 2009), changing the tax according to the following sliding scale, from 1% of the value of the property to the following percentages: 1% for properties with a value between US$1.00 and US$50,000.00, 2% for values between US$50,000.01 and US$100,000.00 and 3% for values above US$100,000.01. According to Article 87 of the new Tax, the property the transfer tax is calculated and paid as follows: 1% for properties with a value between USD1.00 and USD 50,000.00, 2% for values between USD 50,000.01 and USD 100,000.00 and 3% for values between USD 100,000.01 and USD 200,000.00 and 4% for values above USD 200,001. Fees of NIO 4 + 2 stamps of NIO 10 need to be paid to make the payment.
8. Apply for registration of the public deed at the Registro Público de la Propiedad Inmueble y Mercantil. In English Land Registry or Real Estate Registry. Parties file the public deed at the Land Registry for its proper registration. The amount is calculated based on 1% of the cadastral value, with a maximum fee of NIO 30,000. This payment is made directly at the branch of a commercial bank that is located inside the Land Registry Office. The notary applying for registration will charge C$500 as fees. At submission, the request for transfer is recorded, signaling priority rights over the property. The registration of property transfers is very slow and can take longer than 90 days. When finalized, the Land registry will write in the original deed, the book and page where the transfer was recorded. This document is then returned to the notary with all the other certificates provided. The Land registry operates with paper documents. However, the sale deeds are scanned and almost all past records are digitized in Managua. In the rest of the departments in the country, records are not always accessible digitally. Newer transactions (less than 1 year) are not always digitized. Any person can access past deeds with computers at the Land registry at no cost. It is possible to track the status of the deed registration online through the website: www.registropublico.gob.ni/servicios/consultatramite.aspx.
15 days is an expedited procedure. 1% of cadastral value is the registration fee and NIO 500 notary’s fees + 20% of the registration fee for the expedited Procedure.
9. Apply for name change at the Municipal cadastre. The new owner needs to update the records at the municipal cadastre in order to be able to pay the real estate taxes. It should taken only 1 day and there is no cost.
As always, if you have any questions about purchasing, renting or selling real estate in Nicaragua, contact us.