What Foreign Buyers Misunderstand About Costa Rica Escrow
A buyer may wire a substantial deposit to an escrow arrangement and assume the difficult part of the transaction is finished. In Costa Rica, that assumption can create problems. What foreign buyers misunderstand about Costa Rica escrow is that escrow protects funds only within the written instructions governing those funds. It does not replace title verification, a properly authorized deed, corporate review, tax and closing calculations, or registration of the transfer.
Escrow is an important closing tool. Used correctly, it can reduce the risk of either party releasing money or control of documents too early. But it is one part of a coordinated legal transaction, not a substitute for one.
Escrow Is Not the Same as Legal Due Diligence
Many buyers from the United States and Canada are accustomed to a closing system in which the title company, escrow holder, lender, and closing agent may perform closely connected roles. Costa Rican transactions do not always follow that model. The parties must understand exactly who is doing each job and what that person or company has agreed to do.
An escrow provider holds and disburses funds under agreed instructions. Those instructions should identify the parties, the property or corporate interest being purchased, the deposit amount, the conditions for release, permitted fees, and what happens if a closing condition is not met. The escrow arrangement should be reviewed before funds are sent, not after a wire has been initiated.
However, an escrow holder does not automatically investigate whether the seller owns the property free of recorded liens, whether the boundaries match the buyer’s expectations, whether a corporation is properly represented, or whether the property can be used as intended. Those questions belong to legal due diligence and, where appropriate, technical review.
Before closing, the buyer’s Costa Rican attorney and Notary Public should independently review the relevant National Registry information, the legal status of the property, recorded encumbrances, ownership authority, and the documents required for the proposed transfer. Depending on the transaction, the review may also need to address the cadastral plan, municipal matters, concessions, zoning or land-use considerations, corporate records, and outstanding obligations.
The correct question is not, “Is the money in escrow?” It is, “Have the conditions for releasing the money been clearly defined, and has the legal work supporting those conditions been completed?”
What Foreign Buyers Misunderstand About Costa Rica Escrow Release
A second common misunderstanding is that funds should automatically be released at the moment the deed is signed. Sometimes the parties may agree to that structure. In other transactions, the release should depend on additional events, such as delivery of specified documents, cancellation of a lien, confirmation of a corporate authorization, or presentation of the transfer deed for registration.
There is no single release sequence that is appropriate for every property purchase. The right sequence depends on the condition of title, whether the seller has financing to discharge, whether a corporation is involved, the documents being delivered, and the parties’ negotiated agreement.
For example, if a property has a recorded mortgage that must be paid from sale proceeds, the closing documents and escrow instructions should state how that payoff will occur and what evidence of discharge is required. If the seller is a corporation, the buyer should not treat a signature as sufficient without confirming that the individual signing has proper authority under the company’s records and the applicable registry information.
Vague instructions invite disagreement. A phrase such as “release upon closing” may sound clear until the parties disagree about whether closing means signing the deed, payment of taxes and fees, delivery of possession, submission to the National Registry, or successful registration. The agreement should define the event rather than rely on a label.
A Notary Public Is Not Merely a Witness
International clients also sometimes assume that the notary’s role is limited to witnessing signatures, as is often the case in the United States. In Costa Rica, a Notary Public is an attorney with specialized public authority. In a real estate transfer, the Costa Rican Notary Public prepares and authorizes the public deed, verifies legally relevant elements of the act, and handles the formal legal instrument through which the transfer is documented for registration.
That role is substantial, but it should not be confused with escrow custody. The notary may coordinate the closing process and the documentation connected to it, while the actual holding and disbursement of funds must be handled through the agreed escrow arrangement. Clients should know who holds the money, under what authority, in which account, and according to which written instructions.
The notary’s deed and registry work are central because a private purchase agreement, a receipt, or an escrow confirmation does not itself place the buyer in the National Registry as owner. The transfer must be properly formalized and submitted for the applicable registry process. Registration issues can arise from deficiencies in documents, inconsistencies in property information, unpaid items, or other matters requiring correction. Escrow cannot cure a defective deed or eliminate the need for accurate registry filings.
The Account Name and Wire Instructions Matter
Foreign buyers should be particularly careful with wire instructions. A professional-looking email is not proof that instructions are legitimate or current. Before sending money, independently verify the receiving party’s legal name, the authority of the person giving instructions, the account information, and the procedure for confirming any change in instructions.
Do not rely only on a reply to an emailed message. Use a previously verified telephone number or other independent communication channel to confirm critical payment details. If instructions change shortly before closing, pause and verify the change directly. This is a practical precaution in any cross-border transaction.
The escrow documentation should also make clear whose funds are being held and how interest, bank charges, currency conversion, and disbursement fees, if any, are treated. A buyer should understand whether the deposit is refundable, nonrefundable under specified circumstances, or subject to a negotiated dispute procedure. These are contractual questions that should be resolved in writing before the funds are committed.
Escrow Does Not Guarantee Possession, Boundaries, or Permits
The word “escrow” can create a false sense that every risk has been professionally checked. It has not. A buyer can complete an escrow-funded closing and still face a dispute about physical access, an unexpected occupancy issue, a boundary question, an unrecorded practical arrangement, or a limitation affecting future construction or development.
This is why the legal review should be matched to the property and the buyer’s plans. A residential buyer may focus on title, liens, boundaries, utilities, access, condominium documentation, and possession terms. A buyer planning construction, rental activity, farming, or commercial use may need a broader review of zoning, permits, water considerations, environmental constraints, concession status where applicable, and municipal requirements.
The same principle applies when property is owned through a Costa Rican corporation. Buying shares may have different documentation and due diligence requirements than purchasing the real estate directly. Escrow instructions alone do not establish whether a share transfer has been properly authorized, documented, recorded in the corporate books, or coordinated with the parties’ overall transaction documents.
Registration Is a Separate and Essential Step
Signing the deed is a critical milestone, but it is not the last legal step. The deed must be presented for registration, and the transaction should be followed through until the registry result is confirmed. Buyers should retain their executed documents, closing statement, escrow records, payment evidence, and registry information in an organized file.
A careful closing also identifies responsibility for costs, taxes, municipal charges, condominium obligations where relevant, utilities, keys, possession, and original documents. These details may seem administrative, yet they often determine whether the period after signing is orderly or contentious.
For a foreign buyer, the safest approach is to treat escrow as one controlled part of a larger process: independent due diligence before release conditions are satisfied, precise closing documents, secure verification of payment instructions, proper deed formalization, and follow-through on registration.
If you are buying, selling, or transferring Costa Rican property, request a review of the escrow instructions and closing documents before money is sent. CostaRicaNotary.com can coordinate notarial, registry, due diligence, and transaction documentation so you understand what is being signed, what must occur before funds are released, and what remains to be completed after closing.