In this blog post we’re going to take a step by step look at the land purchase process in Colombia. At Tycoon, we help foreigners buy land in Colombia. In fact, we have a growing directory of land listings for sale in Colombia that more and more people are visiting each month. In today’s post we wanted to take a few moments to walk you through the land purchase process here in Colombia.
Study of land title
The first step in the land purchase process in Colombia is the study of its title. This study examines the property’s ownership history, which is important to determine if the land has any liens such as a mortgage or urban affectation, etc. It also determines who the true owner of the land is, which prevents purchasing the property from someone other than its true owner, which would render the sale void.
This process results in the issuance of an ownership history and no-lien certificate (chain of title certificate) by the Public Registry (“Oficina de Instrumentos Públicos”), which in Colombia is called “Libertad y tradición” and the process to obtain it can be done entirely online.
Promise of sale
After the property is found not to have any encumbrance or lien, a promise of sale is signed, in which both parties agree on the sale of a specific property, by a certain date, on a specific Notary, as all formal real estate transactions in Colombia are done in notaries.
The promise of sale can also stipulate the payment of a penalty clause by any of the parties, should they fail to go through with the transaction. It is important to point out that promises of sale must be made in writing and set a specific date for the sale to be closed. For example, a promise of sale can determine a closing date of April 18, 2021, and its location at Notary No. 5 of Medellin, Colombia, along with the description of the promise of sale. Article 1611 of the Colombian Civil Code states that:
“The promise to enter into a contract does not produce any obligation unless the following circumstances concur: 1. That the promise is in writing. 2. That the contract to which the promise refers is not one that laws declare as invalid for not meeting the requirements established in article1511 <sic1502> of the Civil Code. 3. That the promise includes a term or a condition that sets a time for the contract to be executed. 4. That the contract is configured in such a way the only thing missing to perfect it is to add the traditional legal formalities. The terms of a promised contract will only apply to the specific matter on which it has been contracted.”
Can the purchase be made through a proxy?
Yes, it is possible to purchase property through a proxy. Still, it must be done through a special power of attorney that specifies the property, value, negotiating capacity awarded to the proxy, prohibitions, and other conditions. If the power of attorney is conferred abroad, it must be apostilled to be valid.
The purchase transaction itself
At this point of the transaction, the buyer must go to the Notary’s office to request a notary to formalize the sale through a purchase contract and public deed, which lends the transaction legal value.
What should I set in the sales contract?
The sales contract must set the price and describe the property or land being sold. It is common in Colombia to register property sales for a price lower than the actual purchase price to pay lower taxes.
However, it is important never to stipulate less than half its cadastral value because a seller can rescind a purchase contract if paid less than half the market value. Buyers can also rescind a purchase contract if they are paying more than double the property’s value.
It is also possible to set in the contract a promise to resale, this is, if the seller returns a set amount of money to the buyer within a specific period, the property must be returned to them. It is important to read the contract carefully to ensure that the property is not affected because properties must be returned to the original owner if they exercise their repurchase rights, even if the property has been sold to a third party.
The purchase contract also includes a remedy for eviction and hidden defects (albeit in an implicit way.) This applies when the property is occupied by a third party (squatter) or if it has structural problems not disclosed or detected at the time of purchase, etc.
Is it required to make the full payment immediately?
However, the law allows for installment payments to be made. In case of defaulting on payments, the contract is rendered void, and the property must be returned to the seller.
It is also important to point out that payment does not necessarily have to be made in money. Property can be paid with other property such as a car, jewelry, works of art, etc.
The registration process must be done immediately at the Public Registry (“Oficina de Instrumentos Públicos”) after the purchase is made. Otherwise, the seller may sell the property again, as registration is the only way to announce the property’s new ownership.
Recommendations for buying real estate property in Colombia
When buying land in Colombia, the most important recommendation is to request a study of title and to hire a specialized attorney’s advice. If the study of title is not done or is done incorrectly, this can expose the buyer to future legal issues such as lawsuits that may result in the loss of both the property and money.
It is also advisable not to buy “posesiones” (properties without title or deed) because they may belong to a person other than the seller. In such a case, a lawsuit must be filed to secure its ownership, which may or may not be awarded to the buyer. The general rule is that if someone has not acted as the property owner for ten years, ownership is transferred to the state, in which case the purchase price is lost.