Preliminary Steps: Once a property is chosen for offer, your trusted real estate agent will draft an Offer for Purchase Agreement to present to the seller. Once the buyer and seller reach an agreement on the terms and 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.)

Depending on the parties, due diligence may begin prior to Offer for Purchase, or after the Offer to Purchase and prior to deposit. The lawyer (solicitor) may proceed with the due diligence conditioning the purchase to the results of the due diligence to be done in a specified term. The Offer for Purchase Agreement may be adjusted depending on the findings of the due diligence.

Promise of Sale: This is 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:

1. Full name and particulars of the parties. If the seller is married, the spouse must also sign.
2. Legal description of the property to be purchased.
3. Purchase price and payment terms.
4. Default clause.
5. Date of delivery of the property.
6. Due diligence required or done.
7. Representations by the seller and remedies in case of misrepresentation.
8. Obligation by seller of signing the Deed of Sale upon receipt of final payment.

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:

1. • • 1. 1. 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.
          2. 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. This is where having a trusted real estate professional, a competent real estate lawyer and having done due diligence prior to providing a deposit, play an important role in purchasing abroad.
          3. Mortgage agents are rarely used. The seller or the seller’s lawyer, 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 AContrato 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 inspector.

• 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.

  Due Diligence

  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 (Dislande). Under the new Property Registry Law, the sale of properties without a government-approved plot (Adeslinde@) 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 (ACédula@) 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, especially 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 (if preconstruction).
• Inventory of furniture, etc.
• Copies of the utilities contracts and receipts showing that the seller is current.Once the documentation listed above is obtained, the lawyer 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 afect it. The buyer should insist that his or her attorney confirm the results of the Registrars search by investigating the pertinent files at the Title Registry Office.

• Survey (Dislande): 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.

• 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 efect 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 Tourism.

• 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 tenants rights and that evicting a reluctant 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 payment later.

• 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 3.1% of the government-appraised value of the property, as follows:

• 3% Transfer Tax (Law # 288-04)
• Minor expenses such as cost of certified check required to pay taxes to Internal Revenue, sundry stamps and tips at the Registry.

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.

Property Taxes

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 6.5 million 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. The real estate tax is payable every year on or before March 11, or in two equal installments: 50% on or before March 11, and the remaining 50%, on or before September 11.

Legal & Professional Fees

Your real estate lawyer will charge you a percentage of the purchase price of the property. Generally fees are 1 to 1.5% of the purchase price. This amount includes all disbursements, due diligence, and will convey the title into your personal name or corporation, depending on which way you choose to buy. Real estate fees are paid by the seller or developer, not the purchasers.

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.

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 to consult with a knowledgeable estate planner.