Steps Involved In A Good Real Estate Transaction - Preliminary Steps
One time container import when applying for residency status Each person is allowed a 1 time importation of personal property tax free. You can send a 40ft container full of all the furniture and/or vehicles you want to use in the Dominican Republic. You are only allowed to do this one-time tax free. This is a huge savings to you as the import tax is the main income for the island.
All land titles require Deslinde which is a GPS survey of the land The Dominican Republic requires a GPS land survey on all land titles to ensure that your land title is 100% accurate. This law eliminates any problems or confusion in the land registry as to property lines and divisions.
Real estate purchases in the Dominican Republic do not always follow the North American pattern of a written offer tendered by the buyer to the seller, followed by the seller's written acceptance. At Blue Sail Realty we follow the North American pattern. After a written offer is prepared and accepted by both the buyer and seller, a more detailed 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. At Blue Sail Realty we follow the North American pattern and we start with a written offer and a signed acceptance before we move on to the Promise Of Sale. This is for the protection of buyer and seller. 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. At Blue Sail Realty we work only with the best and most reliable of lawyers. 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 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: (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 collateralizes 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. At Blue Sail Realty we make sure you are protected. (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. At Blue Sail Realty we make sure you are protected by keeping the funds in YOUR lawyers escrow account until the project is completed. We also do hold-backs until the Title is cleared. 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 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: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 some cases. 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 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 assets. 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. Title Insurance 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 to 4.5%. Inheritance of real estate is governed by Dominican law which provides for Aforced 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 company.
Be Aware: Real Estate is not regulated here. Many "companies" are nothing more than a web site and many "agents" have no training and ever less scruples. We have been in the real estate business for years here in the Dominican Republic . All of our clients are very satisfied with our professionalism and integrity we provide. Just take a look what a few of them have to say over on our testimonials page.