Advice for purchasing a real estate in Dominican Republic
What legal precautions must be taken when buying a real estate property in the Dominican Republic? This question arises when we buy a house, apartment, commercial property or a piece of land to build a home or business. With so many frauds and illegal transactions that occur today when buying real estate, people have become more aware and cautious in an effort to have a clean and legal transaction.
As legal advisors, our recommendations will vary depending if the real estate property will be purchased by an individual or by a company, since each form will have advantages and disadvantages that will help the purchaser decide which route to go for; both scenarios which will be discussed herein.
An Individual as the Purchaser
When acquiring a property as a physical person, the purchaser will benefit from not having to comply with corporate formalities and obligations. In addition the transfer process is quicker and if the property is valued for less than five million Dominican pesos, the purchaser will be exempt of paying annual real estate taxes. As far as the disadvantages when purchasing a property as an individual are: in case a lawsuit involving the property arises the same will directly target the owner and holder of the property and also, if the owner of the property dies, the owner’s heirs must pay the Inheritance Tax which is a 3% of the value of the real estate property if the owner was Dominican and 3.5% if foreigner.
A Company as the Purchaser
Now let’s take a look at the situation when the buyer is a company. The benefits include: minimized personal liability, since the property would be under the company’s name rather than the shareholders and if the property is recognized as a contribution to the company it would be exempt from paying a 3% for transfer tax. As far as the disadvantages under this scenario are: the payment of a 2% of the value of the property when purchasing from an individual, in addition to the payment of 1% of the company’s total assets.
Before deciding to acquire a property as an individual or through a company, it is extremely important to make sure the property’s legal status is in order. In order to do so, an investigation must be executed at the corresponding Title Registry Office in order to determine if the property has a mortgage, an opposition or a delicate legal situation that may later affect the buyer once the transfer has been completed. The Title Registry Office will issue a Certification of Liens and Encumbrances in approximately one to two weeks after the same has been requested. With this document the purchaser will be able to avoid falling into inheritance conflicts, or litigations in order to determine who owns the property or if mortgages that have not been discharged, etc.
With this certification in hand and after determining to purchase the property as an individual or through a company, it’s just a matter of finding out the requirements and documents to file those which are outlined in our easy to follow article: Steps to a transfer a Real Estate Property in Dominican Republic.