Buying in the DR is very similar to buying in Canada or the US. The process is mostly the same with the exception of an additional “contract of sale” and “deed of sale”.
Offer to purchase is written and presented
Offer is accepted (signed by both vendor and buyer)
Buyer sends a deposit to their solicitor – it is held in trust until the contract below is signed.
A “Contract of Sale” is written – this is the legal Spanish document that is filed with land titles
Buyer sends the balance of the monies (unless it is a progress draw construction, then the monies are send at scheduled intervals during construction)
Deed of Sale (A Contrato de Venta): This is also a formal document, written by a real estate lawyer, binding on both parties, and signed by them in the presence of a notary public. It is used primarily for the purpose of conveying the property from the seller to the buyer. In case of a cash purchase, it is simpler and cheaper to go directly from an Offer to Purchase to the signing of a A Contrato de Venta, instead of taking the preliminary step of signing a Promise of Sale.
Buyer receives ownership of the property, land titles is notified and title changes hands. In the case of a company then a new company is established with the buyers owning the shares, or in the case of a resale, the share ownership is transferred to the buyers upon completion of the transaction.
Real estate transactions in the Dominican Republic are governed by Property Registry Law No. 108-05 and its Regulations, in force since April 4, 2007. Ownership of property is documented by “Certificates of Title” issued by Title Registry Offices.
Steps Involved in a Real Estate Transaction
Preliminary Steps: Real estate purchases in the Dominican Republic do not usually follow the North American pattern of a written offer tendered by the buyer to the seller, followed by the seller’s written acceptance. Instead, after verbal agreement is reached by the buyer and seller on the price, a binding Promise of Sale is prepared by an attorney (solicitor) or notary public which is signed by both parties. (Notaries in the Dominican Republic are required to have a law degree.) (Dominican Republic Properties does follow the North American standard of preparing an Offer to Purchase, which sets out the conditions of the sale, included items, price, etc. Consequently, a formal Promise of Sale is produced by a real estate attorney)
Because of certain peculiarities of Dominican Real Estate Law, it is recommended that the prospective buyer retain a real estate attorney (solicitor) before signing any documents or making a deposit. Depending on the wishes of the parties, the attorney (solicitor) may proceed with the due diligence first, before preparing the Promise of Sale, or alternatively, prepare the Promise of Sale first, conditioning the purchase to the results of the due diligence to be done in a specified term.
Promise of Sale: This is a formal document, binding on both parties, and signed by them in the presence of a Notary Public. From a practical point of view, it is more important than the Deed of Sale, since it generally contains a complete and detailed description of the entire transaction up to the time when the purchase price has been paid in full and the property is ready to be conveyed to the buyer. A well-drafted Promise of Sale should contain at least the following provisions:
Many attorneys (solicitors) and notaries in the Dominican Republic do not protect the buyer adequately in the Promise of Sale. Among the most common deficiencies are the following:
(a) The buyer is allowed to pay a large percentage of the price of sale without any security or direct interest over the property. In case of misuse of these funds, the buyer’s remedies may be limited to suing the seller personally. Many condo buyers in Santo Domingo have suffered through this experience in the last few years. Generally, the developer uses the buyers’ funds, along with a bank loan, to finance the construction. The bank collaterizes the loan with a mortgage on the property. If the developer runs into financial difficulties or misappropriates the funds, the bank forecloses and the buyers lose both their money and Atheir@ property.
(b) Payments are not conditioned on the availability of clear title or the adequate progress of construction. Sellers, therefore, may demand payment or place the buyer in default without performing their own basic obligations.
(c) Escrow agents are rarely used. The seller, therefore, has control over the funds as they are paid.
Deed of Sale (AContrato de Venta): This is also a formal document binding on both parties, and signed by them in the presence of a Notary Public. It is used primarily for the purpose of conveying the property from the seller to the buyer.
In case of a cash purchase, it is simpler and cheaper to go directly from verbal negotiations to the signing of a AContrato de Venta@, instead of taking the preliminary step of signing a Promise of Sale.
Determination and Payment of Transfer and Registry Taxes: The authenticated Deed of Sale is taken to the nearest Internal Revenue Office where a request is made for the appraisal of the property. The Internal Revenue Office checks if the seller is in compliance with his tax obligations and selects an inspector to do the appraisal. The determination of the amount of taxes to be paid may take a few days or weeks, depending on the availability of the property inspector.
Filing at the Registry of Title: Once the property has been appraised and taxes paid, the Deed of Sale and the Certificate of Title of the seller are deposited, along with the documentation provided by Internal Revenue, at the Title Registry Office for the jurisdiction where the property is located.
Certificate of Title: At the Title Registry Office, the sale is recorded and a new Certificate of Title is issued in the name of the buyer. The property belongs to the buyer from the time the sale is recorded at the Registry. The time for 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.
Many attorneys (solicitors) in the Dominican Republic do not perform the required due diligence on real estate transactions, limiting themselves in many cases to obtaining a certification on the status of the property from the Title Registry Office. It often happens that the real estate agent and/or the seller pressure the buyer into a hurried closing despite the advice of legal counsel.
To start the due diligence, the seller should provide the buyer or the attorney with the following documents:
• Copy of the Certificate of Title to the property.
• Copy of the official survey to the property or plat plan. Under the new Property Registry Law, the sale of properties without a government-approved plot (Adeslinde@) cannot be recorded at the Registry, except in the following cases: (1) Sales executed before April 4, 2007, which may be recorded during a two-year period ending on April 4, 2009, and (2) Sales of the entire property executed after April 4, 2007 (sales of portions are not allowed), for just one time.
• Copy of his or her identification card (Cédula@) or Passport and that of the spouse, if married.
• Copy of the receipt showing the last property tax payment (IPI) or copy of the certificate stating that the property is exempt from property tax, and certification from the Internal Revenue Office showing the seller is current with his or her tax obligations.
• Copy of the corporate documentation, including bylaws, up-to-date registration at the Mercantile Registry and resolution authorizing the sale.
• Certification from the Internal Revenue Office showing the corporation is current with its tax obligations, specially Income Tax and Tax on Assets.
If the property is part of a condominium:
• Copy of the condominium declaration.
• Copy of the condominium regulations.
• Copy of the approved construction plans.
• Certification from the condominium administration showing the seller is current with his or her condo dues.
• Copies of the minutes of the last three condominium meetings.
• Copy of the approved construction plans.
• Inventory of furniture, etc.
• Copies of the utilities contracts and receipts showing that the seller is current.
Once the documentation listed above is obtained, the attorney should address every item on the following checklist:
• Title Search: A certification should be obtained from the appropriate Title Registry Office regarding the status of the property, stating who the owner is and whether any mortgages, liens or encumbrances affect it. The buyer should insist that his or her attorney confirm the results of the Registrar=s search by investigating the pertinent files at the Title Registry Office.
• Survey: An independent surveyor should verify that the property to be sold coincides with the one shown on the survey presented by the seller except when the property is located in a previously inspected subdivision. Cases have occurred in which a buyer acquires title over a property some distance away from the one he or she believes to be purchasing 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 plat.
• 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.
• Permits: The attorney should confirm that the property to be purchased may be used for the purposes sought by the buyer. There are many legal restrictions which should be taken into account before purchasing. For example, Law 305 of 1968 establishes a 60-meter Amaritime zone@ along the entire 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 Branch. Also, in tourist areas, there are building restrictions administered by the Ministry of Tourism.
• Possession: The attorney should check that the seller is in possession of the property. It should be ensured that no squatters= 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.
• Employees: The seller should pay any employees working on the property their legal severance; otherwise the buyer may find himself liable for the payment later.
• Utilities: The attorney or buyer should check that the seller does not have any utility bills pending by enquiring at the appropriate power distributor, water, cable and telephone companies.