Costa Rica Blog

The difficulty of doing development in Costa Rica

Posted by Steve Linder on Wed, Nov, 22, 2017

Costa Rica is noted for ecotourism and a great place to see exotic birds, sloths, monkeys and amazing rain forests.  The government has gone to great lengths to protect the environment in Costa Rica.  Ensuring that real estate development is done with regards to the environment has helped to preserve the beauty and nature that everyone wants to come and see.  This piece is about the steps necessary to undertake development.  I've posted it to show the depth of work that it takes to do good development and why there are so few that have stayed in business.  We are proud of our 27 year history and glad there are protections in place to preserve this great country.  Many developers who thought it was easy have since gone out of business when bank financing was not sufficient to keep them in business long enough to get through this bureacracy to complete the developments they'd started.  The fact that we are debt free and don't rely on borrowed money is a great part of our success.  The time and expense to complete all of these steps is onerous. This piece helps understand how expensive it is to do fully permitted development, meeting all the environmental and municipal standards that are in place to insure that developers are not harming the environment nor building shoddy developments that will burden the municipality down the road.  See more about our developments and property tours at www.PacificLots.com 

ziplining in Costa RicaStarting the process

First Step

Land survey: If you’re doing even a small development, you should have done this step as part of due diligence. A property line survey – carried out by a topographer – is an extremely important step that will save you from many a headache. You don't want to find out that the property lines are unclear or there are any outstanding claims against the property.  

Uso de suelo: This is the land use permission you need to get from the municipality. A copy of it is required for several of the subsequent permitting steps. Like the property survey, it’s a good idea to get the uso de suelo before you even buy the property. To get this permission, you, your project manager, or your attorney will submit a letter to the municipality with the property’s ID and cadastre numbers and a short explanation of what you would like to do with the land (e.g. – farm, commercial construction, residential construction, etc.). The municipality will give you the uso de suelo permission within a few days. It’s easy – but unfortunately, it doesn’t mean much. The uso de suelo is based on the municipality’s zoning plan, and if the municipality doesn’t have a zoning plan – as most don’t – it must let you use the land for whatever you want. If the municipality does have a zoning plan, and you receive the uso de suelo for your project, it doesn’t mean you can build there, but rather that your plan is not prohibited by the municipality’s zoning plan. The zoning plans are not scientific, and later soil studies, environmental studies, and oversight by other agencies could very well prove your plan untenable.

Tax and utilities letter: The other thing you might want from the municipality is a letter stating that the property you are about to develop is current on its taxes and utilities payments. If you did your due diligence, you probably already have this letter in hand. If not, get it, and hope that the previous owner didn’t run up any hair-raising electricity bills.

phase map of typical real estate development in Costa Rica

Project plans: Since every step in the permitting process involves some sort of review of how your project will interact with the surrounding community, wildlife, traffic, water supply, landscape, etc., you need to have preliminary project plans to present. It’s a good idea to have your plans drawn up or at least reviewed with the oversight of whoever is going to do your permitting. This especially holds true if you are constructing in an environmentally sensitive area (in a jungle, near a river, on a slope, etc.), in which case the design should be done with the SETENA review in mind and the environmental consultant in the room.

Development Classification 

How fast your development moves depends on what category it falls into as far as the environmental impact it will have. Projects over 500m2 (which is most of them) need what’s known as a D-2 review. The D-2 form contains a comprehensive initial evaluation questionnaire that asks for data on everything from water and earth usage, to the amount of annual rainfall, to the noise the project will produce, to its density, earth movement, the amount of wastewater and exhaust it will emit – it’s rather comprehensive, and you will have to hire the environmental consultant to do it. Based on the score you get, your project will fall in to one of three categories:

B-2 – This is where you want to be. A category B-2 project only needs what’s known as a Declaración Jurada de Compromisos Ambientales or a Sworn Statement of Environmental Commitments. This is basically a letter, signed by the developer and the environmental consultant in the presence of a notary, swearing to take care of the environment. The projects that fall into the B-2 category are in an urban or otherwise developed area with good infrastructure; low density or low impact; and without much surrounding environment (jungle, rivers, endangered macaw populations) to protect. The time it takes to do a Declaracion Jurada de Compromisos Ambientales is negligible and depends for the most part on your notary’s schedule.

B-1 – More complicated. If your development falls into this category, you will need something known as a Pronostico-Plan de Gestion Ambiental, or Outlook-Plan for Environmental Management. This basically means that you will need to submit a plan to SETENA that lays out the risks that your project presents to the environment and how you plan to mitigate them. For this category of D-2, you will need to do a certain number of studies, depending on what SETENA requests. For example, in dry Guanacaste, SETENA will probably want a study on water impact. Likewise for your wastewater in most places. Even sizable projects can fall into the B-1 category if they are very well planned and in a reasonably developed area. As it requires a visit from a SETENA official, an Outlook-Plan for Environmental Management takes about two months for approval. As you can see, hiring good environmental consultants, having them present while drawing up the construction plans, and getting into a B-1 category can have a remarkable payoff in terms of timetable.

A – This is the doozy. Developments that fall into the “A” category need to do a comprehensive environmental impact study, which then must be approved by SETENA. A development gets an A-rating when it is large, dense, and located in an environmentally-fragile or undeveloped area. Note that both the impact of a development and the fragility of the environment are weighed, hence even the smallest shack could get an A-rating if it is to be built in fragile enough surroundings (virgin rain forest, steep slope above a water source, etc.). A comprehensive impact study takes about six months to do, and at least a year and a half for the SETENA review. A typical impact study is as thick as a Bible and contains many different studies, including, but not limited to, the development’s impact on:

  • Soil quality
  • Water resources
  • Biodiversity
  • The local community
  • Archaeological artifacts
  • Air quality
  • Traffic

... and anything else that SETENA decides to request.

Setena gives you two chances to get it right, so be careful. Given a lack of understanding of how SETENA works and what its council is looking for, this process will take years. The rules of thumb are to hire a consultant who knows what he’s doing, and maybe don’t do projects that will have a massive impact on the local environment (ie – no turning jungles into golf courses).

Finally, there are some tricky ways to get around SETENA. One that some developers have taken to is to file your big project as several smaller projects under 500m2, allowing them to slip into the D-1 category and avoiding doing an impact study for the whole enchilada. MINAET, however, has caught on to that trick, and it will get your project shut down. Certainly there are other tricks out there, but as MINAET enforcement improves, they will be less likely to save you time.

 PERMITTING A DEVELOPMENT

Chontales from the air.jpgPermitting for a development and a single-family home are substantially different. If you will be permitting the construction of a single home, keep in mind that your job will be a lot simpler that what’s presented in this section, though similar. There are two kinds of developments: those that need a Master Plan (plan maestro)and those that don’t. Whether you need a Master Plan is determined by density. Developments or subdivisions that exceed a certain maximum density (set by the zoning plan or, in absence of one, the national construction law) need a Master Plan that has to be approved by INVU. A Master Plan should describe everything from waste water disposal to green space to construction plans to parking to estimated increase in traffic density. This chapter refers exclusively to the kind of development that needs a Master Plan (which is the majority of them); the main part of permitting for such a project is getting the Master Plan approved by INVU.

As mentioned previously, there’s no single correct way to permit a development, and the rules are different in every municipality. Though there exist flow charts that supposedly show the official progression of the process, the reality is that everything depends on who you hire to do it for you. With the right connections, paperwork can be submitted half-done and then completed once some other concession or permission comes through from some other regulator. Often, everything’s done at once. The following, therefore, simply describes the things you need for CFIA, SETENA, INVU, and municipality approval of a development, not the order in which you get them.

 HIRING THE PROFESSIONALS

Permitting a development requires a lot of work and expertise. For medium or large developments, you’ll almost certainly need to hire a one-stop-shop consulting company that has all necessary professionals on staff and has years of experience with permitting and environmental impact studies. This might cost a bit more, but you get what you pay for, and the company’s experience and comprehensiveness might actually save you money in the long run. Consulting companies like this vary in their makeup. Some specialize exclusively in environmental impact studies, while others offer the full package: Architectural design, survey, site plans, due diligence, construction permitting, and even the construction contracting itself.

A short list of such companies can be found in the resources section of this book. But as with nearly everything else in real estate and development in Costa Rica, the only sure-fire way to find good people is to talk to other people in the industry to seek recommendations. This holds true whether you’re hiring a consulting company or just a single civil engineer. The more experience the better, and local experience is preferable. The rules are different in every canton in the country, and it’s good if the consultants you hire know both the physical and the political terrain where you’re building. Following is a short list of professionals you might need to hire either individually or through a consulting company, together with a description of what they do.

Architect: Your building plans must be officially drawn up and signed by either an architect or a civil engineer registered with the CFIA. While your project could be designed by a foreign architect, it would still have to be officially under the name of a local architect or civil engineer.

Civil engineer: A variety of tasks can fall to this multi-faceted professional. The civil engineer can do everything from review the structural soundness of a building, to draw up building plans, to manage a project.

Topographer: This is the professional you will need to do your land survey. All topographers are registered in the Colegio de Ingenieros Topógrafos (http://www.colegiotopografoscr.com/), a division of the CFIA.

Environmental consultant: This individual can actually be any kind of engineer. The important thing is that he or she be registered with SETENA as a consultant. Corporations can register as environmental consultants as well. You need a registered environmental consultant to sign off on environmental impact studies presented to SETENA.

Biologist: Registered with the Colegio de Biólogos de Costa Rica. You might need one of these to complete a comprehensive study of area wildlife for a full environmental impact study for SETENA.

Archaeologist: Also for the SETENA review. The archaeologist is to examine the plot of land for any old cemeteries or burial grounds, or anything else that might be of archaeological interest, like fossils. On large tracts of land, they almost always find something, but usually nothing major that would halt construction.

Sociologist: Needed in the same context as a biologist. A sociologist would do a comprehensive study of the impact a large project will have on the surrounding communities, to be included in a full SETENA impact study.

Geologist: Needed to do a study if the slope of the land is greater than 15%.

Electrical engineer: Your building’s electrical plan must be designed and signed by an electrician registered with the CFIA.

 SETENA

If you’ve asked around already about developing in Costa Rica, you’ve probably heard this dreaded word. SETENA is the environmental gatekeeper that supervises the environmental impact of any kind of development. The good side of it is that its regulations are incredibly comprehensive and it has the potential and mandate to protect Costa Rica’s greatest resource – its nature and wildlife – from its greatest threat – people scrambling to build in Costa Rica because of its nature and wildlife. Honest developers should appreciate this, at least in theory.

The bad side of SETENA is the snail’s pace at which it moves and the at-times arbitrary nature of its decisions. Large projects that require a full impact study take literally years to pass through SETENA, and other projects sometimes get stalled for suspiciously thin reasons. The government is constantly talking about reforming SETENA, and some progress has been made. For example, in 2008, SETENA switched to a digital file system. Before, the files for each development seeking approval sat piled on wrought-iron shelves in a back room. But despite the apparent will to get SETENA moving, don’t expect things to move much faster than they always have.

To do the review process, you have to hire a consultant approved by SETENA. There are thousands of individual environmental consultants and companies approved by SETENA to do environmental consulting (the list can be downloaded at www.setena.go.cr). It is highly recommended that you hire a company. You will certainly need studies from more than one professional to do this process, and a good consulting company will have those people on staff. It could be more expensive in the short term, but in the long term an experienced and comprehensive consulting company will likely save you a lot of trouble and money. Once again, the best way to find a good environmental consulting company is to ask around to other developers. Get several options and lots of references.

CFIA

You need your Master Plan approved (or visado) by the CFIA before most other regulators will look at them. The CFIA has actually been quite active in recent years in lobbying to speed up the permitting process, and it has headed up the creation of a Web site (www.tramitesconstruccion.go.cr) that tries (not always successfully) to provide a comprehensive rundown of the permitting process, as well as a portal to file some construction permits digitally. Getting your visado from the CFIA is therefore a relatively quick and painless process. The CFIA wants to know two things:

  1. That you have all the parts in place, which is to say, that your construction plans include plumbing, electricity, walls, etc. It does not check that everything is up to code, but rather that it is there.
  2. That professionals registered with the CFIA are in charge of the construction. There is a wide variety of studies and jobs that can be done, depending on a construction project, and the CFIA will want documentation that you have hired CFIA professionals to do each one. A list of professionals registered with the CFIA can be found atwww.cfia.or.cr. Click on Oficina virtualin the left-hand menu, then click on the icon labledListado de Profesionales y Empresas autorizados, or “List of Professionals and Authorized companies.”

The other thing the CFIA will do is assess the value of your project. That value will serve for tax purposes in the municipality. The CFIA will also charge you a small fee based on the assessed value. Once all the necessary paperwork is submitted, it only takes a month or two to get the CFIA visado on your Master Plan. The process requires you to submit – either digitally or physically – construction plans (four copies in the case of a condominium, five if it’s a subdivision) signed by a civil engineer or architect; a copy of the contract signed between the professional in charge of the construction (probably your architect or civil engineer), the property owner, and the legal representative of any consulting company you’ve hired; the contract with the construction company doing the building (if it’s not you), as well as the company’s registration data; the form requesting a visado for the project’s electric plan, signed by a registered professional; and the cadastre plan for the property.

The CFIA requires most of its professionals to charge minimum fees, figured as a percent of the assessed value of the project. The current fees can be download from the Colegio’s Web site at www.cifa.go.cr/descargas/horas_profesionales.pdf 

INVU

Other than SETENA, this is probably the most complicated part of permitting a project – the real heart of the matter. INVU (pronounced EEN-VOO) is the branch of the government in charge of regulating all urbanizacions, meaning subdivisions, condominium projects, etc. The following is a run-down of the different OKs you need from the many different arms of the Costa Rican bureaucracy to get the final go-ahead from INVU on your Master Plan. Strangely, though it appears that there is a flow to the process, there really isn’t. The professionals doing your permitting, if they’re good at what they do, will have contacts inside INVU and other agencies that allow them to have multiple processes going at once. It’s not illegal to do it this way – just flexible – and it makes things move a lot faster. The following, therefore, is just a list of the things required for the INVU visado, not in chronological order.

Construction plans: Five copies, submitted to INVU, with CFIA visado. INVU will distribute the copies to the regional Health Ministry office, the AyA, and the municipality for their respective review. The Health Ministry will review your wastewater plans and your water treatment plant.

Property information: The official document, obtained and stamped at the National Registry containing the property’s information (owners, location, size, etc.).

Cadastre copy: Property map from the National Cadastre, also stamped.

Authorization by property owner: Needed if you don’t own the property. This can come in the form of either a sales agreement or a letter of authorization from the owner. Either one must be stamped by a notary to be valid.

Soil studies: In the case of sloping land. If the slope is greater than 15 degrees, you need to get an authorization from the Instituto Nacional de Innovacion y Transferencia en Tecnologia Agropecuaria (INTA), for some odd reason. Typically, that’s the organization that approves/disapproves land for agricultural purposes. If the slope is greater than 30 degrees, you will also need to hire a geologist to do a soil stability study, to be presented with the Master Plan to INVU.

Uso de suelo: Obtained from the Municipality.

Water availability: Proof that your project has been granted water rights by the prevailing authorities. There are several different places you could go to get this, depending on where your property is located. In the Central Valley, it’s almost always AyA. Outside the Central Valley, it could also be either an ASADA or a Municipality that manages water access. Finally, you might need to drill a well. Since all water use requires a concession granted by MINAET, so does a well. Be sure to apply for the well concession early, as MINAET inspectors will only grant the concessions after carrying out an inspection during the dry season (December thru March).

Alineamientos: Documentation that your project will not interfere with or encroach upon, public roads or natural features of the landscape (rivers, creeks, river beds, gullies, lakes etc.). For public roads, it depends on the kind of road your property fronts. If it’s a municipal rode, you need to get the alineamiento (basically a letter stating your construction is no problem) from the municipality, by submitting your Master Plan to the appropriate department. For roads that are inter-cantonal or national, you need the OK from MOPT in their headquarters in Zapote. As for the natural features, the Ley Forestal 7575 (Forestry Law) places restrictions on construction near bodies of water. For example, nothing can be built within 100m of a permanent spring. If any such feature is found on your property, you submit your Master Plan to the local MINAET office to get the alineamiento.

Electricity: A letter from ICE (or from the local electricity supplier – there are several throughout the country) saying either that the property has an electrical hook-up, or that an electrical hook-up can be installed.

Wastewater: Two copies of the municipality’s letter giving you the go-ahead to connect your project to its storm drain system.

There are, of course, numerous exceptions and additions to this basic list of requirements, but this should get you started. Passing a project through INVU depends mostly on how long it takes you to line up all the other paperwork. 

Municipality

The final step you’ll take in the permitting process is to gather all your approvals and visados and alineamientos and planos and cadastre maps and head to the municipality to get your construction permits. Once again, all municipalities have different requirements, but even if they don’t request one of the above certifications for the granting of permits, you still need them. The time a municipality takes to grant construction permits is not significant once you have all your ducks in a row – a matter of months, perhaps.

Bureaucracy Glossary

It helps to be familiar with the alphabet soup of regulatory agencies you will be dealing with during the permitting process. Following, a brief list:

MINAET (www.minaet.go.cr): The Ministerio del Ambiente, Energía, y Telecomunicaciones, or Minstery of Environment, Energy, and Telecommunications. This is the big cheese when it comes to environmental regulation in Costa Rica. Permits to cut down trees, drill wells, and mine anything must pass through one of its many branches.

SETENA: The Secretaría Técnica Nacional Ambiental, or the National Technical Environmental Secretariat. A branch of MINAET. SETENA is the bugaboo of many a would-be developer, as this is the agency that reviews the environmental impact of developments and gives them the thumbs up or thumbs down. Its infamy comes from the incredibly slow process of the environmental review. For developments that have to do a full impact study, the entire processes takes about two years, often more.

ICE: The Instituto Costarricense de Electricidad, or Costa Rican Electricity Institute. The government monopoly that controls all electricity generation and distribution and, until recently, telecommunications.

AyA: The Instituto Costarricense de Acueductos y Alcantarillados. Basically the state water utility. AyA does not have national coverage, and in many parts of the country outside the Central Valley, developers have to get water permits elsewhere.

ASADA: Asociaciones Administradoras de Sistemas de Acueductos y Alcantarillados Sanitarios, or Administration Association of Sewer and Aqueduct Systems. In some parts of the country, these are the associations that manage the water supply. They are local, and whether you have to deal with one depends entirely on where your property is located.

INVU: The Instituto Nacional de Vivienda y Urbanismo, or the National Housing and Urbanism Institute. INVU is supposedly in charge of urban planning, meaning that all condominium and subdivision developments need its seal of approval.

ICT: The Instituto Costarricense de Turismo, or the Costa Rica Tourism Board. Anything that has to do with the Maritime Zone (i.e. – coastal land within 200 m. of high tide) happens through the ICT. Also, permits for hotel and restaurant operations.

Ministerio de Salud: The Health Ministry. Salud oversees everything having to do with public health, including wastewater disposal and water treatment, as well as health certifications for hotels and restaurants.

CFIA: Colegio Federado de Ingenieros y Arquitectos, or the Federated Association of Engineers and Architects. This government-sanctioned professional association must give the OK to all construction projects. The Association is primarily concerned with technical design issues.

 

 

Tags: Development in Costa Rica, permitting in Costa Rica, Costa Rica property