Real Estate in Nicaragua

The following has been edited from a document written by the Law Firm of Barrios & Asociados, Managua, Nicaragua.

BUYING PROPERTY IN NICARAGUA

Much has changed in Nicaragua in the last ten years and the purchase of real estate is no exception. Anyone can buy real estate property in Nicaragua. There is free access to the real estate and credit markets. However, the lack of clear title on some properties, both urban and rural, should be a major consideration for investors.

Here is some information on how to buy and sell property in Nicaragua. This information is provided so you can understand how things have changed in this country. You should always consult a reputable attorney before buying and selling real property. To both foreign and local investors, this is a process that requires sound professional advice.

From 1979 to 1990, Nicaragua had a command economy wherein a large part of the production of goods from factories and agriculture was controlled by the Sandinista government. One part of the new system was agrarian reform. Some houses and real property were confiscated from the original owners without just cause. In addition, between the months of January and April of 1990, the outgoing government, through executive decree, gave government-controlled property to individuals.

In 1990 a new democratic government was elected and some of the original owners have attempted to legally recover property that was formerly theirs. Unresolved property disputes still exist. For this reason an investor in real property must secure the services of a competent attorney to be sure that their investment has clear title. Failure to do so could result in a future legal dispute.

In Nicaragua today the construction, real estate and tourist industries are among the fastest growing sectors of the economy. Land prices are still low by US standards and good investments opportunities exist throughout the country. There is no need to be deterred from investing in Nicaragua as long as you secure the services of competent professionals.

The Documentation You Need:

• Property Deed
• Property History (Abstract of Title) for the last 25 years. This is obtained from the Public Registry
• Property Map or Survey
• History of Property Tax Payments Year to Date
• Municipal Tax Payment History

Try To Avoid Properties That Have:

• Agrarian Reform Titles
• Supplemental Titles Issued by Court Order

Legal Considerations

• Check to be sure the property was not formerly purchase through "Law 85". This law distributed luxury homes and properties larger than 100 square meters.
• Check to be sure the property was not formerly purchased through "Law 86". This law distributed smaller homes in popular neighborhoods.
• Check to be sure the property was not formerly purchased through "Law 88". This law distributed land to poor people through agrarian reform.
• Check to be sure the property was not formerly purchased through "Law 209". This law was part of modifications to agrarian reform.
• Check that the Title and Deed meet all legal requirements.
• Check to see that the Title is properly registered in the real estate section of the of the Property Registry Office in the city where the property is located.
• Study the details and history of the property for the last 25 years in the Real Estate Property Office.
• Find out from neighbors if there are or have been any problems with neighboring properties.
• Verify that the owner is in full possession of the property.

Exceptions: The only secure way to buy property that has been affected by Laws 85, 86, 88 and 209 is to have a Settlement Statement issued by the Territorial Ordinance Office, referred to as OOT, which is under the supervision of the Ministry of Finance, and verify that the ordinance is registered in the Real Estate Property Registry.

Steps to Buying and Registering Property:

• Use the services of a real estate professional to find property that meets your needs and desires.
• Get all the property documentation
• Hire a competent real estate attorney to review the documentation and give you a legal opinion.
• Once verified that the property has no liens or encumbrances, have a notary prepare a sales agreement.
• After closing, have the attorney register the property in the Public Registry. To be considered the legal owner of property you should possess the property title which has been properly annotated by the registrar.

Title Insurance

Title Insurance is readily available on any property which meets the above requirements. First American Title Insurance Company's Caribbean and Central American Division, http://www.facm.com/title-caribbean/1000.html will generally insure title to properties with the above qualifications. The Title Company relies on the legal opinion of the attorney handling the transaction, and has a list of attorneys whose opinions they will accept; so the attorney you select to issue the opinion must be on their approved list. The cost of a title policy is generally about $500 U.S. for every $100,000 insured.

Transfer Tax

The real estate transfer tax is 4% of the value of the property and is paid only once at the time of purchase. The seller pays this tax.

Recording Fee

The recording fee is ½% of the value of the property. This is paid only once by the buyer at the time the deed is recorded.

Annual Real Estate Tax

Real estate taxes are 1% of the value of the property and are paid to the Municipal Government. This tax is paid each year.

Legal Fees

Legal fees on real estate transactions are 1%.

Other Documents

In addition to the documents list above, the seller should provide the following:

• Sellers Tax ID Number (RUC)
• Land Registry Certificate
• Land Registry Survey
• Power of Attorney (if not the property owner)
• 1% Withholding Tax
• Verification that all taxes have been paid to date

The buyer should provide either a RUC number if Nicaraguan or a Passport number.

Homeowner's Insurance

Insurance policies covering fire, earthquake, other accidental damage, and theft are readily available from reputable insurance companies within Nicaragua. The cost of these policies is roughly the same as you would expect to pay in the United States.

The real estate professionals at Metro Asociados and the attorneys at Barrios & Asociados are ready to assist you in purchasing real estate property in the wonderful country of Nicaragua.