After selecting a property, either for leisure or business, it is important to take certain steps to assure that you will be able to take possession of the property, and that you will not be facing any legal challenges in the future.
The seller or your real estate agent will usually present a document named “libertad de gravámenes”, which is a statement issued by the Property Registry which shows that the property is free from any incumbrances. Even though this is a useful document as a starting point, a proper due diligence should be carried out.
As a first step, the property registration record should be checked at the Property Registry. It should include inspecting the registration records in order to assure that the property is free from any incumbrances, such as liens or mortgages. It should also include obtaining a report on the registration history. By reviewing the registration history, the attorney can make sure that there are no issues with the property. The report on the registration history shows the origin of the property title, which may be an issue in Nicaragua, as we discuss it below.
In addition to checking the property records, the due diligence should include contacting City Hall to make sure that property taxes are paid for, checking with the cadastral office that the property map has been approved, and checking court records if the investigation at the Property Registry shows that the property has been involved in any litigation. For certain properties, such as properties on coastal areas or near the borders, it may also be necessary to obtain a certificate from the Attorney General Office.
As mentioned before, the origin of the title is important, as in the 1980’s Nicaragua underwent several phases of agrarian reform, and in 1990 many urban properties that at the time were in the hands of the government were transferred to the person or persons that at the time were occupying the property (Laws 85 and 86 of 1990). If the property title comes from agrarian reform, or from Laws 85 or 86, some extra steps must be taken to determine if the title is clear, as otherwise, the buyer may face legal issues in the future.
Another aspect to consider is obtaining a land use certificate, which is particularly important for vacant lots intended for development. The land use certificate allows the investor to determine if the property can be used for the intended purpose.
Finally, at the time of signing the Purchase Agreement It is important to make sure that the property has been vacated; as otherwise you would have to undergo a legal process in order to evict any persons occupying the property and unwilling to vacate.
Please contact us for additional information.
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