Introduction

Purchasing real estate in the Dominican Republic is a rather straightforward process which involves several legal steps similar to the process in the United States, with some exceptions. As a real estate broker, it is our responsibility that foreign buyers are effectively guided over the course of their property purchase, contracting the right Notary Public and making sure all the legal protections and guarantees are respected accordingly. 

This article provides a detailed description of the buying process to properly inform buyers before entering in a real estate transaction in the Dominican Republic.

The real estate transaction in 6 steps

1.  The Preliminary Steps

Purchasing real estate in the Dominican Republic does not always 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 between both the buyer and seller on the purchasing conditions, a binding Promise of Sale is drafted by an attorney or

notary public. The contract is signed by both parties. Notaries in the Dominican Republic are

required to have a law degree. 

It is highly recommended that the prospective buyer retain a trusted real estate attorney before signing any document or making a deposit. Ocean Edge selected the more professional attorneys to guarantee a faultless legal process.

1.  The Promise of Sale

The Promise of sale is a legal document, binding on both parties at signature, in the presence of a Notary Public. From a practical point of view, it is more significant

than the Deed of Sale because it contains a detailed description of the

transaction up to the full payment of the property and transfer of property title to the buyer.

A well-drafted Promise of sale must contain the following articles:

* (a) Full name and identities of both parties. If the seller is married, the spouse is required to sign.

* (b) Legal description of the property to be purchased

* (c) Purchase price and payment terms

* (d) Default clause and penalty

* (e) Delivery date of the property

* (f) Due diligence required or completed

* (g) Representations by the seller and remedies in case of misrepresentation

* (h) Obligation by seller of signing the Deed of Sale upon receipt of final payment

In order for buyers to be protected adequately it is highly recommended to follow these 3 advices:

1. The downpayment made by the buyer at signature of the Promise of Sale should be high enough to guarantee good execution of the transaction (equivalent penalty for breaking the agreement). It is common practice to make a downpayment of 10% to 20% of the purchasing price.

(b) Payments must be conditioned on the availability of clear title of property or the adequate progress of construction

(c) Use Escrow agents so that the seller does not have access to the funds until completion of its obligations

•  The Deed of Sale

The Deed of sale, like the Promise of Sale, is a contract binding on both parties at signature and in the presence of a Notary Public. Its purpose is to attest that the property has been paid in full and the original Property Title has been transferred from the seller to the buyer.

The 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 verifies that the seller is in compliance with his tax obligations and sends 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.

1.  Filing at the Registry of Title

Once the property has been appraised and the 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 in the jurisdiction where the property is located.

•  Certificate of Title

The sale is registered at the Title Registry Office and a new Certificate

of Title is issued in the name of the buyer. Once the sale is recorded at the Title Registry, the property legally belongs to the buyer. The issuance of the new Certificate of Title

can vary from several days to a few weeks depending on the Title Registry Office where the

sale was registered.

2 Due Diligence

Many attorneys in the Dominican Republic do not perform the required due diligence on real

estate transactions, limiting themselves to obtaining a certification on the

status of the property from the Title Registry Office. Hence the importance to contract a trusted and certified Notary Public. 

To start the Due Diligence, the seller/broker needs to provide the Notary with the following documents:

• Copy of the Certificate of Title of the property

• Copy of the official survey to the property land or “Deslinde”. The Deslinde is an official document demarcating the property with GPS points and approved by the government. Under the Property Registry Law, the sale of properties without a government-approved plot (Deslinde) cannot be recorded at the Registry

• Copy of Identification card (Cédula) or Passport and ID of the spouse, if married

• Copy of the receipt for 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 confirming that the seller is in order with the tax obligations

If the property is owned by a company:

• Copy of the corporate documentation (latest general meeting of the board), 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, especially with Income Tax and Tax on Assets

If the property is part of a condominium:

• Copy of the condominium declaration

• Copy of the condominium rules

• Copy of the approved construction plans

• Certification from the condominium administration showing the seller is in order with the

condominium fees (HOA’s)

• Copies of the minutes of the last three condominium meetings

If the property is an individual house:

• Copy of the approved construction plans

• Inventory of furniture included

• Copies of the utilities contracts and receipts showing that the seller is current with it.

After obtaining the documentation listed above, the attorney must address the following items:

• Title Search: Obtain a certification from the corresponding Title Registry Office

regarding the property status, identifying the owner, eventual mortgages and

liens affecting the property

• Survey: Verification by an independent surveyor that the property coincides with

the survey/Deslinde. Not necessary when the property is located in a previously inspected subdivision. The survey/Deslinde should be double-checked even when the seller provides a government-approved plot/Deslinde

• Inspection of Improvements: Examine the improvements on the property land to be sold (house, condo) by a qualified constructor or architect 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 maritime 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.

4 – PROPERTY TAXES

• 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.

Taxes must be paid before filing the purchase at the Title Registry Office. Taxes and

expenses on the conveyance of real estate are approximately 3.5% of the government appraised

value of the property, as follows:

• 3% Transfer Tax (Law # 288-04)
• Minor expenses such as cost of certified check required to pay taxes to Internal Revenue,

sundry stamps and tips at the Registry.

Taxes are paid based on the market value of the property as determined by the tax

authorities, not on the price of purchase stated in the deed of sale.

Buyers wishing to lessen the impact of transfer taxes have the option of using a loophole in

the law which allows the contribution in kind of property into corporations without paying

transfer taxes. For this, cooperation from the seller is essential.

3 – TAXES AND EXPENSES ON PROPERTY TRANSFERS

Properties held in the name of an individual are subject to an annual property tax (« IPI ») of

1% of government-appraised value in excess of RD$5,000,000 pesos except for unbuilt lots

or farms outside city limits and properties whose owner is 65 years old or older, who has

registered it in his or her name for more than 15 years and has no other property.

If the property is held by a corporation, no property tax is due. Instead, the corporation must

pay a 1% tax on corporate assets. However, any income tax paid by the corporation will

constitute a credit toward the tax on assets, so that if corporate income taxes paid are equal

to or higher than the taxes on assets due, the corporation will have no obligation to pay

taxes on its assets.

5 – 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 requirement that the Title Registry

Offices keep a record, for statistical purposes, of all purchases made by foreigners.

There are no restrictions on foreigners inheriting title to real property in the Dominican

Republic. Inheritance taxes have been recently lowered to 3% of the appraised value of the

estate. If the beneficiary resides outside the Dominican Republic, inheritance taxes are

subject to a 50% surcharge, raising the tax rate to 4.5%.

6 – INHERITANCE OF REAL ESTATE BY FOREIGNERS

Inheritance of real estate is governed by Dominican law which provides for forced heirship:

part of the inheritance 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 estate indirectly through a holding company.

Note: While every effort has been made to ensure the accuracy of this publication, it is not

intended to provide legal advice as individual situations will differ and should be discussed

with an expert and/or lawyer. For specific technical or legal advice on the information

provided and related topics, please contact us via email and we will be happy to put you in

touch with our Notary and Lawyer.

We hope this more specific guide was useful to you, if you have any questions you can reach us via

email at info@realestatelasterrenas.com and we will be back to you with all the answers very soon.

Wishing you all the best in your future real estate ventures!

Atlantique Sud’s Team

Oldest Real Estate Agency in Las Terrenas, Dominican Republic.