A Guide to Buying and Owning a property in Nicaragua

Once sited as the “next big thing” Nicaragua has attracted a lot of interest from foreign property investors. Nicaragua remains however one the slowest economies in Latin America despite the boom in property which followed in the footsteps of its neighbour Costa Rica.

Most property in foreign ownership can be found along the coast line around the city of Granada and the town of San Juan del Sur. Granada with it’s strong Moorish and Spanish influences has long been a center of  Nicaragua’s commerce, including timber, gold and silver. Granada's economy continues to grow as it is becoming the national tourism hub. Though Granada remains Nicaragua's fourth largest city, it is widely known for preserving some the finest colonial-era architecture in the country.

To the Northwest, near the historic colonial city and university center of Leon and the commercial center of Chinandega (see map) the beaches are great and prices very substantially lower. The coffee-rich and perfect year-round spring climates of the Northern highlands or Northern-Central regions of Matagalpa and Jinotega provide compelling alternatives to Panama's Boquete. To the East, interest is growing in the clear, blue and turquoise waters of the Corn Islands and other parts of the country's English-speaking Atlantic Coast.

In the past 5 years property in Nicaragua has risen in price consistently with early investors now seeing 500% returns. This trend looks set to continue as Nicaragua plays catch up with its neighbours.

The Nicaraguan property market is still very new, when compared with Costa Rica and Panama but this does not mean that buying and owning property in Nicaragua is fraught with difficulties. Some due diligence should be done if buying on the islands were some civil unrest can still be found

To encourage foreign investments, the government passed Law 306 that gives a 10-year tax exemption from income and real estate taxes. There are about 6,000 American expatriates and retirees living in Nicaragua, and the number is rising.
Nicaragua’s retiree incentive program draws thousands of expatriates to reside in the country. To qualify for the program, one has to be over 45 and has a monthly income of at least US$400. Foreign retirees are entitled to these benefits:

• Pay no taxes on any out-of-country earnings

• Can bring into Nicaragua up to US$10,000 of household goods for their own home, duty free

Buying a property in Nicaragua
Foreign Investment Law 344 protects foreign investors’ rights to own property and to establish business as they wish. This Law means foreigners are allowed 100% ownership with equal rights under the law.

Most foreign buyers of property in Nicaragua are from the United States and Canada and are mainly cash transactions, the agreement to price is most commonly as result of negotiation between the buyer and the seller.

The most important aspect to take care over is the lack of clear title on some properties, both urban and rural. Buyers should exercise due care when purchasing as many properties were confiscated illegally in the 1980s which means the title may be unclear. Properties that have agrarian reform titles, or supplemental titles issued by court order, should be avoided.

Determining who exactly is the owner of a property can be very difficult. Even comprehensive title searches sometimes fail to reveal ownership uncertainties.

The property purchase process starts with the offer being verbally accepted by the buyer. If a promise of sale is made, there is a non-refundable deposit of 5-15% paid to the seller, and a closing timetable is set.

The whole process of registering a property can take around 65 days. The legal process begins with a number of checks made by the lawyer.

1. The lawyer requests the Libertad de Gravaman (Free of Lien) document from the Public Registry Office. It should show any impediment to the sale (such as previous promises of sale, mortgages, pending legal cases, etc.), and the name of the real owner.

2.    Once the lawyer has checked this paper:

•    A new Escritura (or Title Deed) will be drawn up showing the buyer as the new owner.
•    The seller of the property and the buyer of the property will sign this new document and it will be witnessed by the lawyer.

The seller should provide his Tax ID Number, Land Registry Certificate, Land Registry Survey, Power of Attorney (if not the property owner, 1% Withholding tax and Verification that all taxes have been paid to date).

At the same time the money for the purchase of the property should be transferred from the buyer to the seller.

3.    Following this, the lawyer will take the necessary steps to have the property registered in the buyer’s name:
•    The Cadastral Office will evaluate the property.
•    The buyer will then pay 4% of this assessed value to the Revenue Office. Payment of this Transfer Tax results in the transfer of the property to the buyer’s name.
•    In addition, the buyer will pay 0.5% of the assessed value to the Public Registry. Payment of this Registration Fee ensures that the property is registered in the buyer’s name.
Once the property has been registered in the buyer’s name, he is the legal owner.

Transaction Costs for the Buyer
Recording Fee 0.50%
Legal Fee 1.00%
Agent's Fee 5.00% - 10.00%
Transfer Tax 4.00%
Costs paid by buyer 6.50% - 11.50%
Costs paid by seller 4.00%
Title insurance is available from First American Title Insurance Company, costing about US$ 500 for every US$100,000 insured.

View property for sale in Nicaragua

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