Published on and written by Cyril Jarnias
Purchasing real estate in Nicaragua is attracting an increasing number of foreign investors, drawn by the prices, landscapes, and potential for rental income. But behind the photos of paradise beaches and colonial houses lies a complex legal, tax, and political environment. US authorities speak frankly about the need for “extreme caution” for their citizens, due to a fragile rule of law, a history of confiscations, and an often chaotic land registry.
This article identifies common mistakes made by foreign investors, explaining the pitfalls and how to avoid them, based on the legal framework, market practices, and documented experiences. The goal is to inform, not to discourage investment.
Underestimating Legal Complexity and the Legacy of Confiscations
Many newcomers assume that since they have, on paper, the same property rights as a Nicaraguan citizen, the transaction will proceed as in their home country. This is a first mistake.
The Nicaraguan Constitution, through its Articles 44 and 27, protects private property and guarantees equal treatment for foreign investors. The Foreign Investment Promotion Law (Law 344) reinforces this principle. In theory, a foreigner can therefore buy and hold property outright, directly or through a local company, without a minimum investment amount.
Number of properties expropriated by the Sandinista government between 1979 and 1990 in Nicaragua.
Not factoring this legacy into one’s analysis means accepting the risk of buying a property that could be challenged years later by a former owner, their heirs, or a beneficiary of land reform.
Title Deed vs. “Right of Possession”: A Fatal Confusion
Another frequent source of error is confusion between a titled property (a deed in proper form, registered in the registry) and a simple “right of possession.” The latter is common in certain areas, notably the Corn Islands or rural zones. A right of possession can sometimes be regularized, but it offers significantly less security than a fully registered title.
Buying based on a simple right of possession, without a very strong legal strategy and without verifying the possibility of titling, exposes the buyer to having their right contested or not recognized by the courts.
Believing the Public Registry Provides Absolute Security
The Public Property Registry (Registro Público) is supposed to ensure publicity of land ownership. But it is itself a reflection of decades of reforms, confiscations, and re-registrations. Cadastral numbers have changed due to subdivisions and consolidations, part of the archives has been damaged, and not all property transfers are registered or are sometimes registered for fictitious amounts.
A classic mistake is to settle for a recent extract from the land registry. The recommended practice is to systematically trace back the chain of title: at least to 1979 for most properties, and to before 1917 for coastal properties, due to the frequent involvement of the state at that time.
A superficial examination of the registry, without serious historical reconstruction, leaves the door open to all disputes related to past confiscations, unsettled successions, or sales made without all the required signatures.
Neglecting Proper Due Diligence Work
Ignoring or rushing due diligence is arguably the most common and costly mistake. Many disputes could have been avoided with a few extra weeks of investigation and a few hundred dollars invested in solid verifications.
Serious due diligence in Nicaragua is not limited to “looking at the title.” It combines legal, technical, tax, and on-the-ground analyses: ownership history, absence of liens, cadastral consistency, checking for unpaid debts, verification of actual occupancy, environmental risks, road access, availability of services, compliance with special laws (coastal, border, indigenous, etc.).
Key Documents Too Often Overlooked
Several documents are essential to reduce risk, but many foreign buyers do not systematically require them, out of ignorance or haste. The following table summarizes the major documents and common associated mistakes.
| Document / Verification | Main Purpose | Common Buyer Mistake |
|---|---|---|
| Escritura Pública (notarized deed) | Basic deed of ownership | Settling for an old or incomplete copy |
| Libertad de Gravamen (free of liens) | Certifies absence of mortgages, seizures, etc. (valid 30 days) | Not updating it just before signing |
| Solvencia Municipal | Attests to payment of municipal taxes (valid 30 days) | Ignoring arrears that can block resale |
| Updated cadastral plan | Official plot location plan | Not verifying consistency between plan, land, and registry |
| Complete registry history | Traces the entire chain of ownership | Limiting review to only the last transfer |
| Certificación de No Objeción (PGR) | Required for certain “sensitive” properties | Not obtaining it before paying the price |
Not demanding these documents, or not having them analyzed by a seasoned local lawyer, is like walking blindfolded through a notoriously complex system.
Neglecting Physical Inspection and On-the-Ground Checks
Another widespread mistake is to rely solely on plans and photos. In Nicaragua, a physical inspection is nonetheless essential, for several reasons.
During the inspection of a plot of land in Nicaragua, it is crucial to observe that physical boundaries (fences, walls) may not match the cadastral plan, for example if a neighbor has encroached by a few meters or if an access path is disputed. This inspection also allows one to ensure there are no unauthorized occupants, such as squatters, or tenants who may claim compensation for improvements (“Indemnización por Mejoras”), and to verify that the seller actually has physical control of the property.
Furthermore, “hidden defects” are frequent: foundation issues, leaks, termites, undersized electrical systems, slopes prone to erosion, flood risks. A technical assessment by an experienced engineer or builder helps to document these aspects. The law offers only limited protection to the owner if hidden defects are discovered later; it is therefore better to identify them before signing.
Before any purchase, it is crucial to precisely assess the land’s environment. Check the quality of the road and its accessibility year-round (is a 4×4 needed?), the frequency of water and power outages, internet availability, potential noise nuisances, neighborhood safety, and real distances to services and shops. Avoid the classic trap of buying “jungle land” without knowing the timeline for utility connections or the practicability of access, especially during the rainy season.
Misunderstanding Special Laws: Coasts, Borders, Indigenous Lands
Nicaraguan property law contains gray areas and, above all, “sensitive” areas where rules differ: coastline, border zones, indigenous communal lands. A serious mistake is to ignore these special regimes or to rely solely on verbal assurances from a seller or agent.
Coastal Properties: Highly Specific Legislation
The 2009 Coastal Law (often referred to as Law 690 or Ley de Costas) strictly regulates the use of lands bordering beaches, lakes, lagoons, and rivers. It establishes several key principles.
The strip from the sea to the high tide line, extended 50 meters inland, belongs to the public domain. No private property can be established there; only public use is permitted. Beyond the 50 meters, up to 200 meters from the high tide line, it is possible to have private titles or concessions, but with restrictions on use, public access (rights of way), density, and construction.
This law has been the source of many conflicts, for example when buyers discovered that their land – sold as “private title by the sea” – actually overlapped all or part of the public maritime zone or the 50-meter strip. In some cases, existing constructions are tolerated because they predate the law, but possibilities for expansion or reconstruction are limited.
Coastal Law
Another often misunderstood point: a number of coastal properties, or properties historically belonging to the state, require for their registration a Certificación de No Objeción issued by the Attorney General’s Office (PGR). Without this document, the transaction cannot be completed at the registry, even if everything else seems in order. Obtaining this certificate can take months, or longer, and getting it after paying the full price is extremely risky.
Border Zones: The Pure and Simple Prohibition for Foreigners
For reasons of national security, border law prohibits foreigners from owning land within 5 km of the borders with Costa Rica and Honduras. Between 5 and 15 km, special authorizations may be required and obtaining them can take years.
Using a Nicaraguan company as an intermediary to circumvent legal limitations exposes one, without specialized legal advice, to risks of the structure’s validity being challenged or its registration being blocked.
Indigenous and Communal Lands: A Minefield
The autonomous regions of the Caribbean coast (RAAN and RAAS) contain significant indigenous and Afro-descendant lands managed collectively. These lands are governed by specific norms, often consolidated by Law 445 and by international court decisions.
In these zones, classic “private property sale” transactions are not always possible. One speaks more of concessions or leases granted by community councils. These rights are sometimes poorly documented, rarely registered in the classic land registry, and disputes are difficult to resolve within the framework of ordinary civil law.
A consequential mistake is to buy, via private contracts, plots in indigenous territory without having obtained, in black and white, validation from the competent community body, nor clarified the actual limits of the concession. In case of conflict, it is common for buyers to find themselves without effective protection, even with a signed deed.
Relying on “Bad” Professionals or Having None at All
In a complex legal environment, the choice of professionals makes the difference between a secure transaction and a nightmare. A major mistake is to rely solely on the seller or the real estate agent, or to accept the lawyer “recommended” by the agent without asking questions.
An Independent, Local, and Specialized Lawyer is Not an Option: It’s a Necessity
The Nicaraguan system is based on civil law, with codes and practices very different from North American common law or certain European legal systems. Key concepts like “afectación familiar” (declaration of family property requiring both spouses’ consent for sale), “título supletorio” (supplementary title), unregistered easements, rights for improvements, etc., can completely change the game.
For a real estate purchase in Nicaragua, it is imperative to hire a local lawyer experienced in real estate and accustomed to transactions with foreigners. It is perilous to settle for a lawyer representing both parties, which creates an obvious conflict of interest. Specialized firms report that a significant proportion of the cases they refuse or advise against present serious problems detectable during a thorough examination (due diligence).
Real Estate Agents: Recent Licensing, But Still Disparate Practices
Since 2024, real estate agencies must obtain an official license from INVUR and comply with tax reporting obligations (VAT on commissions) and anti-money laundering rules. On paper, this professionalizes the sector. In reality, the market remains very fragmented, with many informal intermediaries, including on platforms like Facebook Marketplace.
Most agents represent the seller, aiming for a high price. Without a public sales database, foreigners risk a ‘gringo tax’, a substantial markup. Relying solely on the agent’s estimates without becoming an expert yourself on local prices, after several weeks of visits and comparisons, can lead to an overpayment of 20 to 30%.
Misstepping on Taxation and Additional Costs
Another common mistake is to underestimate taxes and transaction fees, or to allocate them to one’s disadvantage for lack of understanding the rules.
Confusion Over Who Pays What at Signing
The total cost of a real estate purchase in Nicaragua, adding up taxes, registry fees, notary and lawyer fees, generally ranges between 6 and 8% of the property price, sometimes more for very large amounts. Typical details include:
| Cost Item | Approximate Amount / Indicative Rate |
|---|---|
| Transfer Tax (Impuesto de Transmisión) | Progressive scale from 1% to 7% depending on value |
| Registry Fees | Approximately 1% of the declared value |
| Lawyer Fees | Generally 1 to 2% of the price |
| Notary Fees | Approximately 0.5 to 1% |
| Escrow fees, wire transfers, certificates | Approximately $1,000 USD (variable) |
In theory, the transfer tax is the responsibility of the seller. In practice, it is common for sellers and agents to try to make the buyer pay it, especially if foreign. Accepting this unknowingly significantly increases one’s real cost. Clear negotiation, backed by legal advice, allows one to set in black and white who bears each cost item.
Underestimating Annual Taxation and Cadastral Uncertainties
The annual property tax (IBI) is low compared to North America: approximately 1% of 80% of the cadastral value of the property, which itself is generally much lower than market price. Some small urban or agricultural properties are even exempt. Many municipalities offer a discount (around 10%) for early payment at the start of the year.
After the 2018 crisis, some municipalities drastically increased cadastral appraisals, sometimes multiplying them by four, with no connection to market reality. The scales often lack transparency, forcing taxpayers to actively contest revaluations perceived as arbitrary.
Furthermore, authorities do not systematically send tax notices; the obligation to inquire and pay falls on the owner. Failing to do so can prevent obtaining the essential municipal solvencia needed to sell, develop, or renew certain licenses.
Ignoring the Impact of Holding Structure on Future Taxes
The way the property is held also has tax consequences. A Nicaraguan company generally bears a capital gains tax of about 15%, while holding in one’s own name may be subject to a 30% rate under personal income tax. Moreover, selling the shares of a company holding the property rather than the property itself can, under certain conditions, avoid a new transfer tax and some fees.
Not integrating tax aspects from the very structuring of the acquisition deprives one of legal optimizations and exposes one to a heavier tax bill upon resale.
Falling into the Trap of “Easy” Financing and Payment
Many investors assume they can finance their purchase in Nicaragua like at home, with a local bank, or that they can pay in cash without consequence. Here again, the context is very particular.
Counting on Local Bank Credit
Nicaraguan banks rarely grant mortgage loans to foreigners. When they do, the conditions are demanding: local residency, proof of stable income in Nicaragua, down payment of 40 to 50%, interest rates around 9 to 15% over a long term. Suffice to say that for the vast majority of international buyers, the market is a cash market.
For acquiring property abroad, it is risky to count on obtaining a local loan. Recommended solutions are financing in your home country (e.g., via refinancing an existing mortgage), paying cash, or seller financing.
Using Seller Financing Without Strict Legal Framework
Seller financing is common, often with 30 to 50% down, terms of 3 to 7 years, and interest rates of 5 to 10%. Well structured, with a clear contract on interest, payment schedules, late penalties, and recovery procedures in case of default, it is a useful tool.
Many contracts, drafted hastily, omit essential clauses: non-transferability of the debt, coordination between payment and title registration, and consequences if the property cannot be registered. These omissions generate litigation, exposing the buyer to loss of the property in case of non-payment and the seller to a blocked, untransferable title.
Paying Without Escrow in a Partially Informal Market
Transactions in Nicaragua are still often concluded with cash payments, sometimes in a suitcase, or with loosely regulated bank checks and wire transfers. The use of an escrow account is not systematic, nor yet fully habitual. However, it is one of the few “safety nets” available to buyers and sellers to ensure that the transfer of funds only occurs in parallel with a legally valid transfer of title.
Not using a reliable escrow service – often operated by a law firm with its own escrow company – increases the risk of fraud, disappearance of funds, or conflict over the conditions for releasing the money.
Trying to Do Everything Remotely and Getting Trapped by Online Information
The temptation to buy remotely is great: virtual tours, promises of a bargain, “off-market” offers relayed on social media. Many foreigners make the mistake of signing a purchase promise, or even finalizing a purchase, without having set foot on the ground.
Online real estate ads, especially on platforms like Facebook Marketplace, are often approximate, duplicated, or misleading (fantasy prices, inaccurate sizes, misrepresented legal status). In a still very informal market where transactions often rely on word-of-mouth, trying to buy a property from abroad solely based on these ads directly exposes one to scams.
Even if a Special Power of Attorney (Poder Especial) allows delegating signature to a representative, it is strongly advised not to use it without having personally conducted an on-the-ground exploratory phase: multiple visits, meetings with lawyers, discussions with expatriates on forums or in associations (ANID, AMCHAM, etc.), scouting several towns and neighborhoods.
On the other hand, absolutely avoid General Powers of Attorney (Poder General or Poder Generalísimo), which grant a third party very broad powers, including the ability to sell your assets without clear limits. Many disputes stem from abuses of such powers of attorney.
Poorly Linking Real Estate Investment and Residence / Incentives
Many foreigners combine real estate purchase and a residence project in Nicaragua, either via investor status or via regimes for retirees (pensionado) or rentiers (rentista). A common mistake is to believe that buying a $30,000 house automatically qualifies one for an investor residence permit.
To obtain a visa via the investor program, you must create a local company (often an S.A.), present a 5-year business plan, demonstrate the creation of at least two jobs for Nicaraguans, and obtain approval from the ministry (MIFIC) which may conduct inspections. Simply buying real estate to live in or rent out occasionally is not sufficient.
The strategic error here is twofold. On one hand, some invest in a property unsuitable for the purpose (purely residential, or poorly located for commercial use), thinking it will be accepted as an “eligible investment.” On the other hand, they do not correctly set up the legal structure (purchase in one’s own name instead of a company, unformalized financial flows), which greatly complicates recognition of the investment by the authorities.
Sectoral tax incentives (for example Law 306 for tourism projects) also work on precise criteria: nature of the project, location, size, economic impact. Thinking that a simple beachfront bungalow will automatically benefit from income tax and customs duty exemptions is illusory if the setup is not calibrated to the text’s requirements.
Ignoring Political, Judicial, and Security Risks
Even a perfectly structured file does not fully protect from risks inherent to the Nicaraguan context. Analyses by international organizations and warnings from the US State Department converge on several points.
Judicial and administrative institutions lack resources and are exposed to political influences. Procedures are slow: a land dispute can last years, and even a favorable decision will not always be enforced on the ground. Police or local authorities may be reluctant to evict illegal occupants, especially if they invoke improvement rights or political protection.
In rural areas and on some coveted sites, intrusions by squatters and property “hold-ups” are reported, sometimes with the complicity of caretakers or employees. Hiring a guard without proper oversight can aggravate the risk, as these employees can turn against the owner.
Finally, announced megaprojects, like the interoceanic canal, once generated strong uncertainties over large land corridors, with announced or feared expropriations. Even if these projects seem stalled, the specter of expropriation or reassignment of strategic zones remains a risk factor to consider when choosing a location.
Conclusion: Investing in Nicaragua Without Getting Burned
The Nicaraguan real estate market holds real opportunities: property rights theoretically open to foreigners, moderate property taxation, interesting potential rental yields in certain segments, competitive construction and labor costs, tourist dynamics, and an investment legal framework (Law 344, schemes for retirees and investors) rather favorable on paper.
But these assets come with an equally real set of risks: titles complicated by the history of confiscations, incomplete registries, poorly understood special laws (coasts, borders, indigenous lands), opaque market practices, difficult bank financing, slow and sometimes politicized justice, presence of squatters and social conflicts.
Most serious mistakes in Nicaragua stem from tenacious illusions: believing the system works like at home, thinking a recent title and a smiling agent are enough, underestimating the importance of an independent lawyer and exhaustive due diligence, wanting to do everything remotely, neglecting special laws applicable to the land, and considering taxes and formalities as secondary details.
Conversely, those who take the time to come on-site, understand the market, get multiple opinions from lawyers and technicians, and intelligently structure their holding and financing, significantly reduce their exposure. In a country where the basic rule remains “buyer beware or abstain,” caution, patience, and professionalism are not options, but the only real safeguards against the pitfalls of real estate in Nicaragua.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
