Over the past decade, the real estate market in Colombia has caught fire. Following a devastating recession in the 1990’s Colombian real estate is now one of the most important growth sectors of the Colombian economy.
Foreign investors have taken notice. From the purchase of single condominiums to the purchase of substantial tracts of land by private equity firms as preparation for intensive farming ventures, foreigners have plunged into the Colombian real estate boom with gusto.
Given the intense interest in this topic we wanted to provide you with a summary of steps that you may need to take whenever you invest in real estate in Colombia. Note that the following applies in a typical real estate transaction; expect additional steps/requirements depending on the specifics of the transaction.
COLLECT KEY DOCUMENTATION
Prior to making a formal offer to purchase a property it is imperative that you gather all the relevant documentation on the property and the seller. Much of this can be obtained from the seller directly, though it is a good idea to obtain it from public sources to assure the impartiality of the information. Key documents including:
- •Property Certificate: this is the “certificado de tradición y libertad” and shows the current status of the property, ownership info and other data.
- •Property Deed: this can be provided by the seller directly.
- •Property Tax Bill: at a minimum, you should have the most recent bill.
- •Seller’s “Cedula”: this is the national ID card of the seller.
- •Miscellaneous: we usually counsel our clients to request “all relevant” documentation from the seller. Sometimes this yields unexpected information (mortgage documentation, property valuation data, etc…) that may be critical in making an informed investment decision.
CONDUCT LEGAL ANALYSIS
Once you gather the necessary documentation it is imperative that you hire an independent attorney to conduct a proper review of the proposed transaction. At a minimum, the attorney can conduct a thorough title search and determine if there are any liens and/or encumbrances on the property. We recommend that you avoid using the seller’s attorney or attorneys recommended by seller’s agent. We have actually received reports of fraudulent conveyances involving less than reputable attorneys/real estate agents. Bottom line, the focus at this stage is to identify any potential title defects and/or other transaction impediments.
If your attorney uncovers any title defects and/or any other issues you can then negotiate with the seller accordingly. This could involve payment on past due property taxes, delinquency on existing mortgages or even competing ownership claims on the subject property. Keep in mind that per Civil Code, art. 1893 et. seq., the seller is obligated to help buyer cure any potential imperfections in the title. It is also during this time that the buyer may consider applying for a mortgage to finance the purchase of the property.
NEGOTIATE INTENT TO PURCHASE CONTRACT
Once you understand the lay of the land and all purchase terms have been negotiated you should draft a “Promesa de Compraventa” contract. The purpose of this contract is to clarify all essential transaction terms prior to the actual transfer of the property. Per Civil Code, art. 1857 et. seq., you must clearly identify the property that is being acquired with its delineated area and boundaries, the purchase price, the method of payment (how, where and when the payment will be effectuated), the date of the delivery of the property, relevant transaction costs (taxes, notary fees and registration costs) and other important terms.
REGISTER PUBLIC DEED
You will need to register the Intent to Purchase Contract with the local notary where it is formally registered and approved, a process that could take approximately two weeks. Note that the seller must pay all property taxes while both parties are required to pay a notary fee. The following is a summary of fees and costs applicable to the purchase of a property valued at COP$1,000,000,000:
- •“Retencion en la fuente” (Seller): COP$10,000,000
- •Registration (Buyer): COP$5,000,000
- •Notary fees: COP$3,600,000
- •Revenue fees: COP$10,500,000
The date of “entrega” will be specified in your Intent to Purchase Contract. On that date, the property should be completely vacated and be ready for the intended use, as specified in the Contract. Buyer will be responsible for all expenses related to the property as of the date of delivery.
Once the public deed has been signed by the notary, it must be submitted to the Registration Office in order for the new owner to be registered as the formal owner in the Property Certificate. The parties must pay a registration fee and a government tax. The registration procedure takes approximately two weeks.
We hope this information is helpful to you. If you have additional questions regarding the subject matter in this post please access our Contact Form.
The information and materials on this blog are provided for general informational purposes only and are not intended to be legal advice. The law changes frequently and varies from jurisdiction to jurisdiction. Being general in nature, the information and materials provided may not apply to any specific factual and/or legal set of circumstances. We cannot guarantee that commentary posted by third parties is accurate. No attorney-client relationship is formed nor should any such relationship be implied. Nothing on this blog is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction. If you require legal advice, please consult with a competent attorney licensed to practice in your jurisdiction.