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Mortgages
Real Estate Financing in Mexico,
Latin America and the Caribbean
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Buying Real Estate in Colombia
Legalities and OwnershipExisting law in Colombia has given full legal
rights to foreign citizens who want to invest in Colombian real estate. Anyone
can buy and own a real estate in Colombia. The new law (Decree 241) has made the
procurement procedures much simpler, firstly, by permitting foreign investment
in real estate without limitation; and secondly, by repealing a constitutional
provision that empowered the Colombian government to confiscate foreign-owned
property without providing any compensation.
In order to purchase real
estate in Colombia, the buyer and the seller have to enter into a purchase/sale
contract that is to be contained in a public deed and registered in the real
estate records office in Colombia, which is called the departamento de bienes
raíces in Spanish. The contract must include the name of the buyer and the
seller, their respective I.D. numbers, the property’s boundaries, the sale
price, method of payment, and all other general information such as property’s
real estate number and commission plan, if a broker is used.
The buyer
can sign either directly or through a third party representative. In the case of
the former, the purchase/sale contract is realized through a preliminary public
deed (minuta) that is later finalized by the notary for registration. In the
later case, the buyer must provide a special power of attorney to his or her
notary, who must have a proof of certifiable Colombian identification to sign
the contract on the buyer’s behalf. The power of attorney needs to be signed by
the buyer before a public notary unless made abroad in which case the Colombian
Consul in the country where the document is made must legalize the signature. A
power of attorney that is signed abroad is considered valid if legalized by the
Ministry of Foreign Affairs.
Before purchasing property, it is essential
to verify that the property offered for sale actually belongs to the person
selling it and that it is not subject to any liens or other financial
attachments. This can be accomplished by requiring the seller provide the
property’s ownership history and a no-lien certificate (certificado de tradición
y libertad), which should date back not more than one month. Requests for the
ownership history and no-lien certificate of the property can be made at the
local public instrument records office (Catastro in Spanish) in the area where
the property is located. Included with the request should be the property’s real
estate registration number, the owner’s address or I.D., and evidence that the
certificate issuance has been paid.
The clearances of all the taxes can
be ensured by obtaining an account statement of the property from the treasury
office (known as oficina de información fiscal in Spanish) of the city or
district where the property is located.
The purchase/sale public deed
requires the following documentation:
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Power of attorney issued by the buyer, if applicable. |
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Value-gain payment certificate evidence of payment of the value-gain taxes;
generally levied by all municipalities. |
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Property tax payment certificate or photocopy of the latest tax return
statement, with evidence of payment. |
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If the property is subject to a condominium regime (in the case of condos or
houses in a residential complex) a payment certificate certifying that all
maintenance and other fees are up to date. Alternatively, the seller may submit
a notarized copy of the public deed that contains the condominium or association
rules governing the property. |
Financial MattersThe Colombian government requires foreigners to use
“clean, non-laundered money”. Investors must deposit funds into the seller’s
account by completing the Central Bank’s Form No. 4. This cash transfer is not
subject to any taxes since it is a foreign investment. However, the buyer within
60 days must register (using Form 11) the foreign investment with the Central
Bank and attach the property’s ownership history and no-lien certificate. This
registration is mandatory if the buyer wants to exercise his foreign exchange
rights, such as remitting the money abroad when he or she resells the property.
The payment of the agreed sale price has to be made to the seller in
full. If the property has liens, then an initial down payment of 20 to 30
percent of the sale price is made to commit the seller to clearing the liens and
other encumbrances such as unpaid taxes and unpaid municipal
utilities.
The prevailing interest rates in Colombia vary between 20 and
25 percent annually for real estate loans. These loans are short-term loans and
are primarily given to Colombian nationals.
Foreign buyers should engage
a local broker with ample experience. The commission that the buyer has to pay
to the broker is customarily 3% of the property value.
Other Important IssuesTaxes and other charges applicable during the
process of acquiring real estate in Colombia as well as certificates dealing
with the history of the property, detailed title enquiry and two certificates
from the municipality, the Paz y Salvo Predial (which indicates that all
municipal taxes on the property have been paid) and the ‘ Paz y Salvo de
Valorización (which indicates that all taxes related to the increases in the
value of the property due to improvements to the property or area have been
paid) are generally borne by the buyer.
The notary office where the
public deed is registered charges notary fees equivalent to 2.7 per each
thousand of the sales price (normally the buyer pays 50% and the seller the
other 50%).
If the seller is an individual, then 1% of the sales price
is deducted as withholding tax (this tax corresponds to the seller). It is
deducted at the source with the objective that the income does not leave the
country with out being taxed.
Registration of the purchase/sale public
deeds with the Public Instrument Records Office (Catastro) carries a payment of
the corresponding registration tax (equivalent to 1% of the sales price), as
well as the registration fee (equivalent to 0.5% of the sales price).
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