NICARAGUA: NICARAGUA'S COASTAL LAND LEGISLATION

UNCLAS MANAGUA 001265

SIPDIS

STATE FOR WHA/CEN GSCHIFFER, EB/IFD/OIA, L/CID AND WHA/EPSC
TREASURY FOR INL MDONOVAN AND GCHRISTOPOLUS, OWH/ASCHWARTZMAN
STATE PASS TO USTR

USDOC FOR 4332/ITA/MAC/WH/MSIEGLEMAN
3134/ITA/USFCS/OIO/WH/MKESHISHIAN/BARTHUR

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EINV ECON EWWT USTR KIDE NU
SUBJECT: NICARAGUA: NICARAGUA'S COASTAL LAND LEGISLATION


1. (SBU) SUMMARY: In the last decade, there has been a significant
increase in Nicaraguan beachfront property investments, including
many investments by American citizens. Land laws do not
discriminate between foreign and domestic owners, but investor
uncertainty in the face of a history of tangled land tenure and
questionable leasing and sub-leasing practices suggests the need for
clarity in legislation. A recent effort to regulate beachfront
property, known as the Coastal Bill (Ley de Costas),was defeated in
the National Assembly in mid 2006 after intense lobbying by the
tourism and construction sectors. Although no revised bill is
likely to pass soon, the National Assembly continues to debate
issues related to coastal law. END SUMMARY.


2. (U) In the last decade, there has been a significant increase in
Nicaraguan beachfront property investments, including many
investments by American citizens. Contributing to what some labeled
"a boom" during the past few years has been a major increase in
property values in neighboring Costa Rica; Nicaraguan land prices
seem attractively low by comparison. Most investments and
developments have centered around Tola and San Juan del Sur in the
southern Pacific Department of Rivas.


3. (SBU) Property investment in Nicaragua has been far from worry
free. A history of tangled land tenure was exacerbated by the 1980s
Sandinista-era confiscations, subsequent land invasions, and
competing legal claims in the 1990s and new millennium.
Complicating the situation has been more than a century of improper
mapping, registration irregularities, as well as a variety of
leasing anomalies. Accusations of wrongful behavior in real estate
transactions are rife; corrupt municipal officials only make matters
worse. The result is a climate of insecurity for the average U.S.
investor.

What the Law Says
--------------


4. (U) The 1917 Agrarian Law is the primary legislation governing
beachfront property ownership. All titles and leases issued after
that date abide by this law. The legislation states that property
situated within two kilometers of an ocean and/or 800 meters from a
lake or river, that was not privately owned in 1917 (verified by a
registered title),belongs to the state and cannot be sold. Common
practice is to measure distances from the high tide mark. For the
San Juan River and protected areas, such as natural parks, the limit
is 3,500 meters. As no laws are retroactive in Nicaragua, all
titles issued prior to 1917 were unaffected. They are, therefore,
perfectly valid and can be sold without restriction. In addition to
the 1917 Agrarian law, municipal laws proscribe construction located
within the first 100 meters from high tide. There is no difference
in the treatment of foreigners or locals when it comes to land
ownership or leases.


5. (U) Municipalities are responsible for managing land assigned to
the state by the 1917 Agrarian Law. Private parties may contract
land use leases via grants that are available for up to 99 years.
This represents the conventional means of gaining possession of the
land. The leases constitute a legally binding contract between an
individual and the municipality. Any construction on the property
belongs to the party responsible for building it. The lease and
improvements on the land can be registered in the local Public
Registry for Real Estate Property to provide more legal certainty.
Sub-leasing is prohibited by Nicaraguan law, unless approved by the
landlord. Therefore, legal transfers from one investor to another
require a reassignment of rights (Cesisn de Derechos) in which all
lease rights are transferred to the new investor. One of the main
problems in dealing with municipalities has been corruption. For a
price, some municipal officials will issue multiple leases on the
same property, and illegally create municipal leases for land titled
before 1917.

New Regulations
--------------


6. (U) The most recent effort to regulate beachfront property is the
Coastal Bill (Ley de Costas) introduced to the National Assembly in

2005. This legislation would have increased the prohibition on
construction from 100 meters to 200 meters at high tide. Lease
terms would be limited to a maximum of 25 years, instead of 99
years, and there would be no automatic renewals. After strenuous
lobbying by tourism and construction companies, voting on the bill
in the National Assembly was postponed in mid-2006 until further
notice.


7. (U) The idea of a comprehensive law regulating coastal lands has
resurfaced in recent months as a reaction against private developers
fencing in large tracts of beachfront land to obstruct public
access. The Nicaraguan constitution states that all beaches should
be open to the public. Although no revised bill is likely to pass
soon, the National Assembly continues to debate issues related to
coastal law.

Comment
--------------


7. (SBU) Given U.S. and foreign investment along the coast,
especially for vacation homes, a new coastal law will likely attract
considerable attention overseas. While clarification of the law
governing coastal lands is needed, there is no guarantee that new
legislation will fulfill this purpose. It may well be that, as has
often been the case in Nicaragua, party politics and personal
interests will determine the essential content of the law.

TRIVELLI