Costa Rica Rental Laws: Pro-landlord, Neutral or Pro-tenant?

Costa Rican landlord and tenant laws are judged by the Global Property Guide to be Pro-Tenant between landlord and tenant. In practice, while landlords can set initial rental terms freely, once the lease is signed, the law leans more toward protecting tenants' rights to a stable, fair housing.

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

The rents can initially be freely negotiated between the landlord and the tenant. To increase the rent, the parties should agree upon the annual rent increase in the agreement.  Although landlords in Costa Rica are free to set the initial rental price for their properties, the law imposes limits on how much rent can be increased over time. The rules vary depending on the currency used in the lease agreement.

For leases denominated in a foreign currency, such as U.S. dollars, the rental price must remain fixed for the duration of the contract, with no increases allowed. In contrast, if the rent is set in Costa Rican colones, landlords may apply an annual increase based on the accumulated inflation over the previous 12 months.

When inflation is 10% or lower, the landlord may raise the rent by a percentage equivalent to the inflation rate, using data from the National Institute of Statistics and Census (INEC). If inflation exceeds 10%, the Ministry of Housing and Urban Settlements (MIVAH) sets the permissible increase, ensuring it falls between 10% and the actual inflation rate for that year.

Deposits

Article 59 of the Tenancy Law states that security deposits linked to a lease serve as a guarantee for rent payments and other contractual or legal obligations, unless otherwise specifically agreed. There are no legal limits on the amount of the deposit, so the landlord and tenant are free to agree on the figure. In practice, it is usually equivalent to one month's rent.

It is important for both parties to clearly specify in the lease agreement the purpose of the security deposit and the conditions for its return.

What rights do landlords and tenants have in Costa Rica, especially as to duration of contract and eviction?

The minimum term of a lease agreement in Costa Rica is three years. If the tenant wants to terminate the lease before this time expires, he must send the landlord a three-month prior notice, unless the parties agree otherwise. The Parties may agree on a penalty for early termination by the tenant.

If the term of the agreement expires, it is automatically renewed for three more years, unless the landlord gives the tenant a three-month period prior notice, stating he will not renew the agreement.

Disputes over deposit refunds are common, with many tenants complaining that landlords withhold their deposits without justification. To avoid misunderstandings, the lease should set out detailed terms on how and when the deposit will be returned.

No indefinite term of lease is allowed.

How effective is the Costa Rican legal system?

For lease agreements governed by the Ley General de Arrendamientos Urbanos y Suburbanos or other applicable laws, eviction is a judicial process in Costa Rica. Article 104 of the Civil Procedural Code outlines the relevant procedures.
Currently, this framework applies to all types of rental agreements, including those for residential and commercial use.

The Proceso Sumario de Desahucio (Summary Eviction Process) is the standard method for eviction.

Key elements include:

• Eligibility for Eviction:
  Eviction may be sought following the expiration of the lease, documented violations of lease terms, or the need to end landlord tolerance of a tenant’s occupation.
• Filing Requirements: 
  The landlord must clearly specify the grounds for eviction, state the current rent, provide the property address, and submit proof of both ownership and the existence of a lease.
• Court Proceedings: 
  The court reviews the claim and considers any defenses raised by the tenant. Judgments may allow a grace period for the tenant to vacate the premises.
• Right of Retention:
  Landlords may claim unpaid rent and retain the tenant’s property left on the premises as collateral until debts are fully paid.

Legislation

Landlord and Tenant relations are regulated in Costa Rica by Law 7527, called "Ley General de Arrendamientos Urbanos y Suburbanos". This law covers all lease or renting agreements related to houses and other constructions as commercial establishments. Law 7527 does not cover or regulate hotel rooms or bungalows, car parking, or company housing for employees. The Civil Code regulates farms and tourism leases.

Brief history: Recent changes in Costa Rican landlord and tenant law

Law 7527 has been effective and enforceable since August 17, 1995. Before then, there was another law that did not fully cover many of the issues that arise in a tenant-landlord relationship. Case law helped to regulate many of the aspects and issues not covered by such legislation. No change is expected in the near future.