- What is the nature of the maritime zone regime in Costa Rica?
The maritime terrestrial area in Costa Rica is the first 200 meters measured horizontally from the high tide line. The maritime zone includes islands, pinnacles of rock, mangroves, estuaries, and any small natural formation that overcomes the level of the ocean. This zone consists of two sections: the public area, which is the first 50 measured horizontally from the high tide mark. and the restricted area, constituted by the 150 meters remaining, or by the other lands in case of islands.
The land and properties located in this area belong to the State of Costa Rica and are not subject to sale or disposal by individuals. The public area cannot be subject to occupation and must be dedicated to public use and to the free movement of people. In the restricted area the Municipality can grant concessions for its use and exploitation, in accordance with the zoning plans of the specific area.
Thus, properties located in the maritime zone are not subject to the normal regime of private property in the country. As such, these properties cannot be subject to commercial acts such as transfer, assignment, lease, or the establishment of encumbrances on the property. For this, the authorization of the respective Municipality and the Costa Rican Board of Tourism (ICT) is required.
- What are the relevant authorities involved in the decision-making process in the maritime regime and what powers do they exercise?
The Costa Rican Tourism Institute (ICT) is the entity supervising every matter related to the maritime- zone in the country. The respective Municipality is in charge of deciding about the management and use of this zone.
Both institutions play a crucial role in all the decision-making process regarding the projects to be developed by individuals in the maritime zone. They must approve the granting of concessions to natural or legal persons, as well as the projects that are proposed to be developed by the concessionaire on the property. Any act of assignment of rights over a concession, or modification of the characteristics of the proposed projects must also go through an approval process by both institutions.
The process of authorizing a concession or any modification on the concession contract by the ICT is different and independent of the process of obtaining the tourist declaration and the adoption of the tourist contract for tax purposes.
- How can a concession be acquired in the maritime zone?
Natural or legal persons can obtain a concession to exploit a property in the maritime zone. Foreigners who have not resided in the country for at least 5 years, corporations with bearer shares, companies domiciled abroad, entities incorporated in the country by foreigners, or entities whose shares, quotas or capital correspond in more than 50% to foreigners cannot have a concession in the country. No person together with their spouse and minor children may have more than one concession.
In each concession, a contract must be drawn up to be signed by the person or entity to which the concession was granted and the head of the respective Municipality. In the contract the rights and obligations of the concessionaire are indicated in relation to the property given in concession. A preliminary project should be submitted to the Municipality, containing its main characteristics and projected value. This contract must be subsequently authorized by the ICT, which will verify the legality of the concession and its clauses. Once this process is completed, the concession is registered in the General Registry of Concessions of the Public Registry.
The contracts establish provisions such as the term of the concession (not less than 5 and not more than 20 years), the term for starting or to executing the works of the project, the guarantee of compliance that must be adopted in favor of the Municipality (between 1% and 5% of the value of the project) and the amount of the fee that must be paid annually to the Municipality for the use of the property (for tourist or recreational hotel use up to 4%).
The contracts can be modified (by an addendum) in any of its clauses, and this must be approved by the respective Municipal Council and also by the ICT. Any contractual modification or addendum must also be registered with the General Registry of Concessions once signed and authorized.
- What are the legal vehicles that can be used for a hotel investment in a property in the maritime zone?
Costa Rican regulations do not allow third parties or companies outside the concession contract to use and exploit properties in the maritime zone. However, as long as the exploitation is carried out by the entity to which the concession has been granted, and the minimum percentage of shareholding of Costa Rican nationals (50%) has been fulfilled, neither the Municipality nor the ICT will question the shareholding of the company, or any assignment of the shares by their owners.
For this reason, the ideal legal vehicle to carry out a hotel investment in properties under maritime concession is through a legally constituted entity that has been granted with a concession. In this case, shareholders will not need an authorization of the ICT or the Municipality to assign their shares.
On some occasions, a shareholder’s agreement or the constitution of a Costa Rican trust have been used as a contractual tool to establish specific rules applicable to the governance and the benefits produced by the exploitation of property. At the shareholding level, as long as the Costa Rican participation limit is respected, this is a valid and practical.
- What practical considerations should be considered when developing a hotel project in a property in a maritime zone in Costa Rica?
- The concession on the property should be duly registered in the Public Registry of Concessions and its term should still be valid.
- The investor should determine if the term of the concession is convenient for the specific project. Although in practice it is normal for the term of the concession to be extended once the term has expired, the Municipality and the ICT must necessarily approve the extension.
- The conformation of the shareholding participation of the concessionaire company or legal entity should respect the percentage of at least 50% of Costa Ricans in its structure.
- The respective Municipality can establish the limitation that the partners of the entity cannot have shares in more than one company with rights over properties given in a maritime concession. If this is the case, the investor should confirm that none of the partners has a shareholding participation in more than one concession company.
- The characteristics of the proposed project should coincide with what is allowed by the Zoning Plan of the area, as well as with the object and purpose of the concession in accordance with the respective contract.
- There should be a formal confirmation by the relevant authorities that the property on which the project is proposed has sufficient access to the necessary public services, considering the magnitude of the project (availability of water, electricity, etc.).
- If the proposed hotel project undergoes modifications with respect to the one originally approved by the Municipality and the ICT, both entities must approve the project again, adapt the performance guarantee to the value of the new project and modify the concession contract with the prior authorization from the aforementioned institutions.
- The investor should verify the types of compliance guarantee accepted by the respective Municipality for its adaptation to the value of the specific hotel project (bank guarantee, bill of exchange, cash, etc.). The adoption or payment of this guarantee must be done before signing the respective contract or addendum, and before the latter is authorized by the ICT.
- The investor should verify if there are pending obligations before the Municipality (taxes, fees, payment of public services), as the corresponding permits and licenses required to develop the project can be denied for this reason.