Steps to Purchasing a property

1. Real Estate Legal Documents

These are the real estate documents used in Nicaragua, that must be shown by Sellers before starting the purchase process for due diligence purposes:

1. Public deed of Sale (Escritura Legal de Título de Dominio del Bien Inmueble). This document states whom the property currently belongs, location and other information related to the property.
2. Valid ID of the owner (Documento de Identificación vigente del o los Propietarios).
3. Recent official free of liens certificate of property (Certificado oficial libre de gravámenes de la propiedad). A certificate from the Registry office stating that the property is free and clear of any liens.
4. Land Registry Record (Historial Registral). A certificate from the Registry office that details who has owned the land and property.
5. Proof of being current with Property’s Tax (Solvencia Municipal). Proof of being up to date with property taxes.
6. Recent approved Cadastral survey (Plano Catastral aprobado de la propiedad).  A government approved plot map that clearly defines the property, metes, bounds and its boundaries, and outlines the person or entity that owns the property.

  At the beginning of the process, these documents can be presented without being updated, only for legal review by the Buyer and his/her lawyer. However, if both Parties proceed with the sale of the Property, the Seller must manage the updating of the documents, so it is important that they are updated to be valid. In the case of the Cadastral survey, upon closing this map needs to show the transfer of ownership from the Seller to the Buyer, that is, the new document must show the persons/entities that is selling and the person or entity that is purchasing.

1. Power of Attorney

This is an important step of the acquisition process, because without your presence or complete knowledge of all the legal process, a power of attorney is required; otherwise, it won’t be possible to complete the acquisition of your property. The Power of Attorney can either be given to a person you select who lives in Nicaragua or the chosen Attorney. You will need your passport in order to create a power of attorney and it usually costs between US$50.00 and up to $75.00.

1. Purchase process

1. An Option to Purchase Agreement will be completed with a non-refundable deposit of US$500.00 and up to $5,000.00 (depending on the purchase price of the property) will be left with our office. The security deposit is non-refundable unless PROPERTY has title issues, liens, or embargoes that cloud the title of the PROPERTY in the ATTORNEY’s opinion. If the due diligence is positive and the BUYERS decide not to go ahead with the purchase, the deposit is non-refundable.

On the other hand, if the results of the review are positive, the Deed of Promise of Sale or the Public Deed of Sale is drawn up directly and the deposit amount is applied to the total amount traded.

1. Promise of Sale (Promesa de Venta) – This legal document clearly defines the Parties involved in the process (Seller or his Agent or Legal Representative and Buyer or his Agent or Legal Representative). It includes the legal elements of both Parties, of the Property and also the elements negotiated and agreed between both Parties, such as payment breakdown and dates, closing date and acceptance by both Parties.

This legal document is similar to a “Registered Contract for Deed” in U.S. real estate and is usually signed upon receipt of a deposit and is similar to an Escrow agreement, providing both parties with the maximum protection. A Nicaraguan attorney must create this document and it can be registered or private. Should the Promise of Sale be registered, this must be done by an Attorney and it lasts between 48 to 72 hrs to register with a cost of 1% of the amount traded up to a maximum of $820 USD.

1. Public Deed of Sale – The final legal document of the purchase process, which includes all the elements included and agreed upon in the Promise of Sale. The Public Deed of Sale is the legal document that certifies the final agreement between both Parties, who must be present and sign the document in the presence of the Lawyer and Notary appointed for said act.

This document remains in the lawyer’s protocol, which is stored in the Supreme Court at the end of each year, neither buyer nor seller has this document in their possession. A testimony of this document is provided to both Buyer and Seller and is proof of ownership.

1. Registration of the property. The lawyer uses the original testimony to then register property in the name of the new owner. The registration process takes 3-9 months and involves approval of the plot map, tax authority appraisal, payment of transfer taxes, municipal appraisal, and registration fees.

1. Estimated costs

1. Transfer taxes based on government appraisal and according to the following tax brackets:

1. Power of Attorney $60.00.
2. Legal and Due Diligence Expenses for one Property ($200 up to $500).
3. Attorney’s fee (usually 1% of purchase price or negotiated with the chosen Attorney).
4. Registration Fees (1% of appraised value with a cap of $1,000 USD).
5. Municipal Tax (1% of municipal appraisal).

 

1. Nicaragua Property Taxes

As owner of your new property, you will be responsible for annual property taxes (the IBI – Impuestos de Bienes Inmuebles-). This is paid to the local municipality (City Hall) and the amount is 1% of the 80% of the assessed value, as follows:   CS6/es_ES/OfficeImageTemp/clip_image004.png»>

Assessed values tend to be less than market value and is set each year and will be amended following any improvements made to the property.

Taxes are paid in arrears each year by March 31. If paid before March 31, a 10% discount will apply.