BUYING PROPERTY IN NICARAGUA

U.S. Embassy Managua

Background:

Nicaragua has made impressive progress in recent years in consolidating democratic institutions and fostering economic growth. The country. s GDP grew by 5 percent in 1997, its best performance since 1981. For 1998, the goal of 6 percent GDP appears within reach. Construction, real estate and tourism are among the fastest growing sectors, but land prices are still low by U.S. standards and good investment opportunities still exist. However, due to still-unresolved cases stemming from confiscations of private property under the Sandinista regime in the 1980s, buying land in Nicaragua must be done with care. This guide is intended to help you bypass some of these problems.

WARNING: Because many properties were confiscated illegally in the 1980. s, title to many properties is unclear. Buyers should exercise great care when purchasing real property in Nicaragua, especially lands formerly subject to agrarian reform. Even comprehensive title searches sometimes fail to reveal ownership uncertainties.

Steps To Buying and Registering Land:

1. To buy a property in Nicaragua, you can either do most of the work yourself or hire local specialists to do much of the legwork. When hiring local specialists, it is important to agree at the outset on a fixed fee for their services
2. Identify the property of your choice, usually by the recommendation of a friend or a local real estate agent (who earns a negotiable commission, usually between 5 and 10 percent). Be wary of property whose ownership changed hands during the 1980s.
3. At this point, you may either hire a local attorney or proceed on your own to ask the seller for a copy of the property. s title (escritura de propiedad), evidence that it has no liens on it (libertad de gravamen), and its "certificado registral." Often, owners are hesitant to provide copies of titles. In such cases, you may ask the seller for the information shown on the title (property number, volume number, page number, entry number) or for a copy of the property. s registration (certificado registral) showing the last three owners (los últimos tres asientos) and the absence of liens.
4. Next, have a lawyer revise the documentation (escritura de propiedad, certificado registral, and libertad de gravamen) to verify that the property. s seller has clear title.
5. After you have verified the land has no liens, a notary can prepare a sales agreement.
6. After the transaction, you or your attorney may then register the property in the Registro Público de la Propiedad Inmueble. To be considered the legal owner of the property, you should possess the property title properly annotated by the registrar.

Real Estate

Real estate taxes are 1% of value of the property and are paid to the Municipal Government. Farmland of up to 30 manzanas (42.6 hectares) is exempted from real estate taxes.

Insurance

Local firms offer coverage for fire, earthquake and floods but not acts of war.

Special Considerations For Tourism Projects:

Chapter IX of the May 1997 Tax Reform Law authorizes special benefits for tourism projects for those who invest 200,000 córdobas in the Departments of Carazo, Granada or Rivas, or 300,000.00 cordobas on the Atlantic Coast. Those benefits are import tax exemption and luxury tax exemption (for construction materials, etc.). However, if the business fails or is converted to another business you must pay luxury taxes.

Special Considerations For Foreign Investors

Foreign Investors may, but are not required, to register investments and negotiate a foreign investment agreement with the Ministry of Economy and Development. This guarantees the investor the following privileges under Foreign Investment Law.

Repatriation of foreign capital, less any losses incurred, 3 years after the capital to be repatriated entered the country.

Remittance abroad of the net profits generated by the capital registered.

Prompt, adequate and effective compensation in the case of expropriation for reasons of public utility and social interest.

In addition to the benefits listed above, other tax benefits may be individually negotiated depending on the type of business incorporated. Investors who do not register their capital may still make remittances through the parallel market, although law does not guarantee these transactions. Embassy is aware of no investor who has encountered remittance difficulties since inception of the Foreign Investment Law