Purchasing Real Estate
in the Dominican Republic:
An Overview

Introduction
Real estate transactions in the Dominican Republic are governed by the Land Registry Law of 1947 and its amendments. Ownership of property is documented by "Certificates of Title" issued by Title Registry Offices. The required steps to convey or transfer ownership of real estate from a seller to a buyer are the following:

1. Buyer and seller must sign a "Contract of Sale" before a Notary who will authenticate it (Notaries in the Dominican Republic are required to have a law degree). The Contract of Sale will contain the legal description of the property, the price and other conditions of sale.
2. The authenticated Contract of Sale is then taken to the nearest Internal Revenue Office for payment of the appropriate taxes (see Taxes below).
3. The Contract of Sale and the Certificate of Title of the seller are deposited at the Title Registry Office for the jurisdiction where the property is located and the sale is recorded.
4. The Title Registry Office issues a new Certificate of Title in the name of the buyer and cancels the old Certificate issued previously to the seller. The time from the filing of the Contract of Sale to the issuance of the new Certificate of Title may vary from a few days to a few months depending on the Title Registry Office where the sale was recorded

Due Diligence
Before purchasing property, it is highly advised that buyers retain a real estate attorney to do the due diligence. Although possible, it would be too risky for the buyer to do it on his own. To start the due diligence, the seller should provide the buyer's attorney with the following documents:

1. Copy of the Certificate of Title to the property.
2. Copy of the survey to the property of plot plan.
3. Copy of his identification card ("Cedula") or Passport.
4. Copy of the receipt showing the last property tax payment (IVSS) or copy of the certificate stating the property is exempted from the IVSS tax.
5. If the seller is a corporation: a. Copy of the corporate documentation, including bylaws and resolution authorizing the sale. b. Certification from the Internal Revenue Office showing the corporation is current with its income tax filings.
6. If the property is part of a condominium: a. Copy of the condominium declaration. b. Copy of the condominium regulations. c. Copy of the approval construction plans. d. Certification from the condominium showing the seller is current with his condo dues. e. Copies of the minutes of the last three condominium meetings.
7. If the property is a house: a. Copy of the approved construction plans. b. Inventory of furniture, etc. c. Copies of the utilities contracts and receipts showing the seller his current with his payments.

Once the documentation listed above is obtained, the attorney should every item on the following checklist before the closing:

1. Title Search: A certification should be obtained from the Title Registry Office regarding the status of the property, whether any liens or encumbrances affect it. The buyer should insist that his attorney confirm the results of the Registrar's search personally by investigating himself the appropriate files at the Title registry (see Buying Property in the Dominican Republic: Title Searches).
2. Survey: An independent surveyor should always verify that the property to be sold coincides with the one shown on the survey presented by the seller unless the property is located in a previously verified subdivision. Cases have occurred in which a buyer acquires title over a property some distance away from the one he believes to be buying due to careless work by a previous surveyor or to fraud by the seller. The survey should be checked even when the seller provides a government-approved survey.
3. Inspection of Improvements: A qualified builder or architect should examine any improvements to be sold (house, condo) to confirm that the plans presented are correct and that the improvements are in good condition.
4. Permits: The buyer's attorney should confirm that the property to be purchased may be used for the purposes sought by the buyer. Although in the Dominican Republic there is no zoning law as such, many existing legal restrictions should be taken into account before purchasing. For example, Law 305 of 1968 establishes a 60-meter "maritime zone" along the whole Dominican coastline, measured from the high tide mark inland, which in effect converts all beaches into public property. No building is allowed within the maritime zone without a special permit from the Executive. Also, in tourist zones, there are building restrictions administered by DEFINPRO, a department of the Central Bank.
5. Possession: The attorney should verify that the seller is in possession of the property. It should be ensured that no squatter's rights of any kind exist. Special precautions should be taken with unfenced properties outside known subdivisions. Fencing them before closing is advisable. If there are tenants on the property, the buyer should be informed that Dominican law is protective of a tenant's rights and that evicting a recalcitrant tenant is time-consuming and expensive.
6. Employees: The seller should pay any employees working on the property their legal severance up to the time of the closing, otherwise the buyer may find himself liable for the payment later.

Many attorneys in the Dominican Republic do not perform the required due diligence on real estate transactions. Usually, the entire due diligence is limited to obtaining a certification from the Title Registry Office. Sometimes, the real estate agent and the seller pressure the buyer into a hurried closing despite the advice of his legal counsel.

Taxes and Expenses on Property Transfers

Taxes and expenses on the conveyance of real property are approximately 5% of the sale price. This amount includes a transfer of 4.48%, document taxes, special stamps for registration and tips. Taxes must be paid before filing the purchase at the Title Registry Office.

Title Insurance

In the Dominican Republic, as in many Latin American and European countries, the government provides title insurance. The Land Registry Law establishes and indemnity fund with which to pay claimants who due, for example, to an error of the Registrar, are deprived of their property. Unfortunately, the indemnity fund never collected sufficient funds to become operative and property owners remain unprotected. Recently, however, it has become possible to obtain insurance from private insurers (see Buying Property in the Dominican Republic: Title Insurance).

Purchase of Real Estate by Foreigners

There are no restrictions on foreigners purchasing real property in the Dominican Republic. Formerly, Decree 2543 of March 22, 1945 and its amendments required that foreigners obtain prior Presidential approval except in certain cases. Decree 21-98 of January 8, 1998 abolished this regulation and established as the only requirements that the Title Registry Offices keep a record, for statistical purposes, of all purchases made by foreigners.

Inheritance of Real Estate by Foreigners

There are no restrictions on foreigners inheriting title to real property in the Dominican Republic. Inheritance taxes range from 17% to 32% of the appraised value of the estate depending on the relationship between the beneficiary and the deceased. If the beneficiary resides outside the Dominican Republic, inheritance taxes are subject to a 50% surcharge,
Inheritance of real property is governed by Dominican law which provides for "forced heirship": part of the estate must go to certain heirs by law. For example, a foreigner with a child must reserve 50% of the estate to that child despite the existence of a will or of the law of his country of residence. To avoid the application of Dominican rules of inheritance to the estate, it is advisable for foreigners to hold real property indirectly through a holding company.

Text provided by GUZMAN ARIZA & ASOCIADOS
Please refer to their website for more information.
www.guzmanariza.com

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