Thought transfer from Real Estate Forum

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kfrancis

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Jan 8, 2002
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Per suggestion:

Hypothetical Problems is Search of Answers

Basic premise:

40,000 sq m Tract is sub dividided into 10 - 4,000 sq meter parcels.

All parcels, Lots # 1 -10 are presold and have titles and fees paid

All lots are in a gated community under construction

Transactions under discussion are considered within 6 months of inital sale

Questions looking for answers: Type of Legal work involved

1: Owner of Lot # 3 wants to sell to a new buyer for X$$. This one seems straight forward. New buyer, new contract.

2: Here is the kicker. Owner of Lot # 5 wants to " switch " parcels with the owner of Lot # 8. No money to change hands, they just like the other's parcel better than the one they each just purchased. How would this be handled is the question.

All thoughts and discussions appreciated in advance.

I think this is what I said over there.

kFrancisco de Cabral
 
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Fabio J. Guzman

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Jan 1, 2002
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40,000 sq m Tract is sub dividided into 10 - 4,000 sq meter parcels.All parcels, Lots # 1 -10 are presold and have titles and fees paid.

Do you have a unique Certificate of Title for each lot, i.e. 10 different Certificates with different cadastral numbers?

Questions looking for answers: Type of Legal work involved

1: Owner of Lot # 3 wants to sell to a new buyer for X$$. This one seems straight forward. New buyer, new contract.

If a unique Certificate exists, the transaction is simple: contract of sale, appraisal by Internal Revenue, payment of transfer taxes (approx. 4.4% of appraised value), recording of the sale at the Registry of Titles, and obtaining a new title in the name of the buyer.

2: Here is the kicker. Owner of Lot # 5 wants to " switch " parcels with the owner of Lot # 8. No money to change hands, they just like the other's parcel better than the one they each just purchased. How would this be handled is the question.

This is a "permuta" or exchange, which under Dominican law is equivalent to a double purchase/sale for tax purposes. Transfer taxes will be owed as if there were two purchases or sales.

An alternative would be to form two holding companies, one for each lot, and exchange shares. This would still constitute a double taxable event but the taxes owed would be 2% instead of 4.4%. However, now you have to take into account the new 1% annual tax on corporate assets.
 
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kfrancis

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In this situation....

Thanks Fabio for your prompt input.

As stated in the problem premise the inital sales were within 6 months of the sales under discussion. Each initial sale was for an " individual title " but let us clarify that the sales have not yet been recorded awaiting final surveying.

I see part of the answer to the problem questions in just where the " system " is at in processing the inital sales data. I would think sales contracts completed, taxes paid but sale not yet registered might require a more complex solution?? Might not??

Given that your answer to this new input might also influence your answer to question # 2 I have only one other thought on your permuta response.

When making use of the Permuta how would you formulate the legal fees? The tax fees are a known factor having just been paid with the last 6 month. But no real $$ are changing hands just names and physical descriptions of parcels owned.

kF
 
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