In Costa Rica, there is a set of rules that regulate all property rental and lease contracts, contained in Law No. 7527, "General Law of Urban and Suburban Leases". This law governs all verbal or written leases of real estate for a myriad of purposes, including housing, commercial, industrial, technical, professional, cultural, craft or recreational activities and public services. Excluded from law 7527 are hotels, hostels, bed and breakfasts and holiday homes where stays can last from one day to 30 days. Nor does the law regulate the parking lots or the company housing for employees.

Rents: Can landlord and tenant agree rents in Costa Rica freely?

Both parties can freely negotiate the rent initially. To increase the rent, landlord and tenant should agree upon the annual rent increase in the agreement. If such agreement does not exist, the landlord can file a claim to increase the rent on an annual basis.

For housing, the annual increase cannot exceed a 15% of the fixed rent. For an increase higher than 15%, Costa Rica's inflation must be higher than 15%, and the rent increase must be based on a certification of the inflation issued by the State.

Note that a rent increase is allowed only when the agreements are in Colones, the Costa Rican currency. If the rent for housing is agreed in US dollars or other foreign currency, no yearly increase is allowed.

Security deposit

A security deposit will be negotiated between the landlord and tenant, but typically it is the equivalent of one month's rent. There is no legal maximum for a security deposit, but if a landlord is asking for advance payment, this is limited to one month rent. Often you may be required to pay the first and last month's rent, in addition to the security deposit at move in.

If you have any pets, the tenant often will be asked to make an additional pet security deposit. This deposit is meant to cover any damages caused by the renter's pet as well as to ensure the completion of the term of the agreement. The deposit will usually be returned 30 days after the tenant has delivered the premises, once the utility bills and inventory can be checked.

If you terminate the rental agreement before the lease term is completed, you will lose your security deposit.

Short-term rental

Many short-term and vacation rentals may require a smaller a security deposit – make sure to double check this when agreeing your stay with the landlord.

Short-term or full service monthly rentals are a great way to explore Costa Rica and getting the feel of its various locations and landscapes before choosing the ultimate location to settle in or a home for a while for nomads. In case you have found a vacation lease that you are fond of but are looking to stay a longer term, you might be able to negotiate a cheaper rental rate to stay longer as a full service monthly rental.

Take a look at short-term rentals on Premier Casa rental section or on the vacation rental segment.

Long-term rental

Article 70, Law 7527 indicates that the lease term of a lease agreement cannot be less than three years, which is what is known as a long-term rental. It is a common practice, however, to stipulate a different term in the lease agreement. Most lease agreements in Costa Rica will indicate: "The term of the present contract is for one year, which is renewable for an additional two years and will be in automatically extended unless the agreement is cancelled"

It is customary that the tenant will not be reimbursed for the security deposit if he/she leaves before the first year is up. Most agreements stipulate that the security deposit will be returned only if the first year's contract has been completed and at least 30 days' notice is given to the landlord. Some landlords will request 60 days' notice. Alternatively, the landlord and tenant can negotiate a fixed penalty for leaving the property within the contracted 3 years.

The Contract language

The legal language of a lease agreement in Costa Rica is Spanish, the country's official language. To fully comprehend what you are signing, consult with your real estate agent to supply a copy in English or find an attorney to check the agreement for you. Do not sign any contract that you do not understand.

Fortunately, at Premier Casa, we are very well experienced in this aspect as we have worked with dozens of international clients from around the world.

What about duration of contract and eviction?

The minimum term of a lease agreement in Costa Rica is three years. If the tenant wants to walk before the lease expires, he/she must inform the landlord by providing a three-month prior notice, unless the parties agree anything different.

If the term of the contract expires, it is automatically renewed for three years more, unless the landlord provides a 3 months' notice that he/she will not renew the contract.

Indefinite terms of rental contracts are not allowed unless you go to the full service vacation or monthly rentals which are a different category.

Final note

When selecting a location for a rental property, it is of high importance that you consider the local amenities that are available to you, such as supermarkets, nightlife, or hospitals. Some rural areas in Costa Rica can be located in isolation and a long way from basic amenities.

Finally, it is advisable to rent a full service property maybe on a monthly bases for your initial entry into the country and then make an ultimate decision to whether you opt for something more permanent, such as buying Costa Rica property.

Contact us for all your Costa Rica property needs.