Text by Guzmán Ariza & Asociados
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
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.)
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 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:
(a) Full name and particulars of the parties. If the seller is married, the
spouse must also sign.
(b) Legal description of the property to be purchased.
(c) Purchase price and payment terms.
(d) Default clause.
(e) Date of delivery of the property.
(f) Due diligence required or done.
(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
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 “their” 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 (“Contrato 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 “Contrato 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
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
plat (“deslinde”) 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.
If the seller is a corporation:
- 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.
If the property is a house:
- Copy of the approved construction plans.
- Inventory of furniture, etc.
- Copies of the utilities contracts and receipts showing that the seller
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 “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
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
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 and Expenses on Property Transfers
Taxes must be paid before filing the purchase at the Title Registry Office.
Taxes and expenses on the conveyance of real estate are approximately 4.4% of
the government-appraised value of the property, soon to be raised to 6.4%, as
- 3% Transfer Tax (Law # 288-04)
- 1.3% Document Stamp Tax (Law # 835-45) (Actually, RD$232 pesos for the
first RD$20,000 pesos and 13 per thousand for the rest).
- 2% Registry Tax (Law #108-05), applicable to properties valued at RD$5
million pesos or more, which will come into effect sometime in the near
future upon creation of the Indemnity Fund established by the Law.
- Minor expenses such as tax on certified check, sundry stamps and tips at
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.
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 asset. 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.
In the Dominican Republic, as in many Latin American and European countries, the
government provides title insurance. The old Land Registry Law established an
indemnity fund with which to pay claimants who due, for example, to an error of
the Registrar, were deprived of their property. Unfortunately, the funds
collected were used by the government for other purposes.
The Property Registry Law in effect since April 4, 2007, has created a new 2%
tax on all conveyances in order to establish an indemnity fund. It is also
possible to obtain title insurance from private insurers.
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.
Inheritance of Real Estate 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
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
Real Estate Agents
Real estate agents in the Dominican Republic are not licensed or regulated by
the government. There is presently a bill in Congress which may regulate the
practice in the near future.
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