By Robert Michael
www.robertmichael.com
Robert Michael & Company understands that purchasing real estate in a foreign country can be an intimidating task. Not only will we walk you through the appropriate steps of buying land, our knowledge of Dominican tax laws will help maximize your real estate investment. The Dominican government has created laws to promote foreign investment and there are no laws restricting foreigners from owning land. Before purchasing property, we recommend that buyers retain a Dominican real estate attorney to perform the due diligence required. We can recommend reputable attorneys, their fees averaging 1% of the purchase price.
Buying Property:
1. The buyer and seller must sign a "Contract of Sale" before a notary (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 Contract of Sale is then taken to the nearest Internal Revenue Office for
payment of the appropriate taxes. (approximatetly 4.25% of the purchase price)
3. The Contract of Sale and the Certificate of Title of the seller are deposited
at the Title Registry Office where 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.
Due Diligence
To start the buying process, 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 (Existing Plat Map).
3. Copy of sellers 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.
Once the documentation listed above is obtained, the attorney should
address 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 the appropriate files at the
Title Registry Office.
2. Survey: An independent surveyor needs to 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
by fraud from the seller. The survey should be checked even when the seller
provides a government-approved survey.
3. Permits: The buyer's attorney should confirm that the property to be
purchased, may be used for the intended purposes of the buyer. Existing zoning
restrictions should be taken into account as well, before purchasing. For
example, Law 305 of 1968 established a 60-meter "maritime zone" along the entire
Dominican coastline, measured from the high tide mark inland. No building is
allowed within the maritime zone (without a special permit).
4. 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 tenant is time-consuming and expensive.
5. 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.
Taxes and Expenses on Property Transfers
Taxes and expenses on real estate transactions are roughly 5% of the sale price.
This includes a 4.25% transfer tax, a document tax, and fees for registration
stamps. Taxes are paid before the closing at the title registry office.
Purchase of Real Estate by Foreigners
There are no restrictions on foreigners purchasing real estate in the Dominican
Republic. The only requirement is, the real estate purchase must be kept on
record at the Title Registry Office (Decree 21-98 of January 8, 1998)