Real Estate 101: Buying Properties in the Dominican Republic

When acquiring a real estate property, either as a residence or for business, it is highly advisable to hire a lawyer to assist you throughout the process and make sure all documents are complete as well as complying with all government requirements. Skipping any step or missing any type of documentation may end in legal disputes.

 

The first step of the process, as a buyer, is to request a Certification of Liens and Encumbrances at the Land Registry Office where the property is located. This certification specifies who the current owner of the property is and if the same is free of liens and encumbrances such as mortgages, liens and seizures. The information rendered by this previous investigation or “due diligence” will raise any false information the seller might be providing the prospective buyer in order to serve as his/her advantage. The buyer, in fact, must be clear when proceeding with the property transfer whether the same has mortgages or pending liens he/she would now have to become responsible of. It is important to mention this certification is issued in 3-4 weeks.

 

The next step is to gather all required documents and make the corresponding tax payments. But before doing so, the following scenarios must be clarified:

 

1- If the property is under the name of two spouses, both spouses must sign the purchase-sale agreement.

2- If the property is owned by an individual whom is listed as married, the other spouse must sign as the intervening spouse, acknowledging that the property is no longer within the community regime of the marriage.

3- If the property is under the name of two persons who are currently divorced, but they have not made the process of property distribution, which is to divide and determine who will stay with the property, then you cannot purchase that property until this situation has been resolved.

4- The same happens for a property that is under the name of a deceased person. If the heirs have not completed the heir determination process in the Dominican Republic, the property cannot be sold. This is because it must first be determined who will inherit the property since a property in the name of a deceased person cannot be transferred.

5- If you are only purchasing a portion of a property a process called demarcation must be completed. This consists in determining the exact boundaries of the property that will be acquired. In this effect, a title deed will be issued specifying the partial sale.

Once you have completed any of the before mentioned scenarios, if applicable, the next step is to proceed with the payment of the real estate property transfer taxes. This tax is paid in the Internal Revenue Office and accounts to three percent (3%) of the amount resulting higher between the value of the sale which appears in the Purchase- Sale Agreement and the value assigned by the Internal Revenue Office.

 

Following the tax payments you need to compile the original documents to be filed at the Title Registry, which will vary if the property is under a person or a company’s name. Among the documents to be filed are the Original Title Deed of the property, the original sales contract with the tax payment seal, copy of ID or passport of the seller and buyer, a copy of the ID of the intervening spouse or representative if one of the parties is not in the country, original power of representation for the person not in the country, real estate property tax declaration also known as Impuesto sobre

Viviendas Suntuarias y los Solares (IVSS), which applies when the owner of the property is a physical person.

 

In case a company is involved in the transaction, as a seller or buyer, all the documents mentioned above will apply in addition to the Shareholders’ Meeting Act specifying the person signing the agreement on behalf of the company, copy of the signing representative’s ID, copy of the National Tax Registry card, Mercantile Registry of the company and an asset certification known as the Real Estate Property Tax (IPI), which applies when a company owns the property.

 

All documents are filed in the Title Registry Office and in approximately forty-five (45) working days the new title deed with the new owner’s name will be issued. However, if the Land Registrar understands the file is incomplete he/she may reject the transfer request. It is imperative to review the new title deed in order to verify no errors exist, which in the future can cause many inconveniences and as time passes may be more difficult to resolve.

 

It is important to note that once the Purchase- Sale Agreement is signed, the buyer has six months from that day forward to transfer the property and pay all corresponding taxes. If the property is not transferred and the taxes are not paid, the buyer will be responsible to paying fines and interests as a penalty based on the amount registered in the Internal Revenue Office.

 

It is important to keep in mind that purchasing a real estate property in any country is a long term investment formalized in a short period of time reason why it is very important to be informed of the details of the process so that the transfer is legal and successful.

Bibiography

Law 108-05 of Real Estate Registry

Law 288-04 of the Real Estate Property Tax

Law 557-05 Tax Reform

www.dgii.gov.do