Buyers Guide
This guide sets out the basic steps involved in buying a property in The Dominican Republic. It is not intended that this should in any way replace legal advice provided by a lawyer. It is always recommended that qualified legal advice be sought in any purchase and that purchasers should deal only with fully qualified English and Spanish speaking lawyers as our selves, regulated by the Law Society. The risks in buying properties in the Dominican Republic are very small if you use the services of a reliable lawyer. DOCUMENTATION REQUIRED 1. For the property Domestic properties must have the following documents in place, and generally the vendors provide these. In specific cases, some other documents may be needed. Most common situations require the following: - Copy of Certificate of Title. This document shows the legal and registered owner of the property. - Copy of the Survey to the Property - Copy of the plan to the property - Copy of the receipt showing the last payment of the property tax (IVSS) or certification showing that the property is exempted of this tax. 2. From the Vendor When all property documents are in order and the parties are in agreement about the price, payment terms, etc, some documents about the parties will be needed in order to proceed. Commonly, these are the following although occasionally others may be requested. If the Vendor is on or more individuals, then for each of them: a. Passport card b. Information about residence, marital status and occupation c. Information about Marital status If the Vendor is a company : a. Copies of the Companys documentation and copy of the resolution authorising the sale of the property. b. Certificate from the Inland Revenue office certifying that the company is current with its income taxes. c. Personal document for the representative of the company If the Vendor intends to be represented by an attorney, then a Power of Attorney (Poder) will be necessary. 3. From the Purchaser If the Purchaser is one or more individuals, then for each one of them: a. Passport card b. Information about residence, profession, marital status and if married, proof of the property regime. If the purchaser is a company a. Company number b. Copy of the company registration document and appointment of director c. Personal documents for the representative of the company If the purchaser intends to be represented by an attorney then a power of attorney will be necessary. A power of attorney can be signed in the Dominican Republic before a Notary or in the Dominican Consulate in London. The purchasers lawyer should be able to draft the power of attorney and arrange for its signature. STEPS INVOLVED IN THE TRANSACTION Reservation Although not used in all transactions, parties sometimes start their legal relationship by signing a reservation form or reserva. This procedure is usually followed when the parties cannot enter immediately into a Promissory Contract for any reason, such as: a. Legal documents such as those set out above have not been provided or examined. b. The buyer cannot immediately pay a deposit c. The buyer does not want to pay a deposit until has been duly advised by a lawyer. The main purpose of such reservation is for the purchaser to be assured that the property has been taken off the market (usually for a limited period of time) and for the seller to ensure that the purchaser is really interested in proceeding. The reservation implies that the promissory contract (contrato de promesa de venta) will be signed within a pre-determined period and if that does not happen, the property will be again placed on the market. The reservation form should include identification of the parties and the property and define the amount to be paid upon its signature, the total price, payment conditions and the period in which the Promissory Contract will be signed. The amount paid on reservation is deducted from the total price to be paid by the purchaser. The form should also establish the consequences of (i) not signing the Promissory Contract (ii) any of the parties withdrawing from the transaction. The reservation form must be dated and signed by both parties. However, in most of the cases the reservation it is usually signed by the estate agent on behalf of the vendor. Promissory contract of sale and purchase Although not mandatory, normally both parties enter into a promissory agreement identifying the property to be sold and detailing conditions of the transaction: this is the Promissory Contract of Sale and Purchase. This type of contract is used in almost 100% of transactions in the Dominican Republic. The contrato de promesa de venta is legally binding on both sides. Before the purchaser signs the promesa de venta, his lawyer must make sure of the following: a. That a proper search has been carried out in the Title Registry Office and a Certificate of Title has been obtained confirming the description, ownership and charges (if any) of the property. b. That a survey has been done. An independent surveyor must check the property is the same that the one showed in the survey provided by the vendor. c. If some improvements have been made, a qualified architect must check the improvements and confirm that these are in order and comply with the Dominican regulations relating to planning laws, building regulations, permits and licences. d. The purchasers lawyer must make sure that all necessary permits have been obtained. i.e. building permits, no construction limitations, no rental prohibitions, etc. e. That the property does not have any tenants or occupiers. f. That the seller has paid any employees working on the property their legal severance up to the time of completion. If not, the new owner could be responsible for any outstanding payment. g. That there are no outstanding amounts for the utilities services. h. If the property is part of a condominium or community of owners. The Purchasers lawyer should obtain the following: - Copy of the condominium declaration - Copy of the condominium regulations - Copy of the approved construction plans - Certification from the Condominium administrator confirming that the property does not owe any payment to the Condominium. Flats and some dwelling houses in the Dominican Republic are organised in Condominiums. An administration company manages the Condominium. The annual expenses are determined according to the size and situation of the property. Completion When the above requirements have been completed, the formal act of sale takes place before a Notary in The Dominican Republic. This act known as the signature of the Contrato de Venta takes place in front of the selected Notary. The Contrato de venta is then taken to the Inland Revenue office to pay the taxes and then registered with the Title Registry Office. A new Certificate of Title is issued in the name of the new owners. COST OF PROPERTY PURCHASE 1. Legal fees Usually lawyers fees average between 1%-1.5% depending on the value of the transaction. These fees usually include the following services: examining the reservation form; requesting and examining all relevant documents regarding the property and the parties; preparing or examining the promissory contract; signing the promissory contract; assisting the purchasers on completion; dealing with the post completion formalities. Purchasers must check with their lawyers what service is provided with their fees. 2. Surveyor. His fees depend on the object of the sale. The cost would be around $350-$450, depending on the size of the plot. The surveyor is not always necessary. The purchaser lawyer will inform his client whether a surveyor is necessary or not. 3. Transfer taxes Taxes must be paid before registering the purchase at The Title Registry. Taxes and expenses on the conveyance of real property are approximately of 4-5% of the sale price, as follows: a. 3% Transfer tax b. 1.3% Document Stamp tax Other expenses such as tax, stamps and Registry Transfer 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. Some places are exempt of taxes. Buyers must check with their lawyers if the area they are buying offers these exemptions. 4. Title Insurance Due to the many irregularities with the property titles in the Dominican Republic it has become the norm for purchasers to take out Title Insurance. This means that an insurance company, usually from the USA or Canada, assumes the obligation of indemnifying the purchasers in cases where the following occur: title vested in another person, title defect, liens, charges, mortgages, forgery, fraud, undue influence, lack of right of access, erroneous description of the land, etc. In the event of a lawsuit disputing the title, the insurance will cover the legal expenses and if the lawsuit is lost will pay for all claims and losses. The purchasers lawyer should be able to obtain a good quote from these companies although the general cost is around 1% of the purchase price. We are able to undertake this for you. 5. Incorporation Inheritance taxes are quite high for non-residents in the Dominican Republic. At the same time, the Dominican laws provide what is called compulsory beneficiaries under the doctrine of forced heirship to the children. This means that the owner of a property in the Dominican Republic cannot dispose freely of his/her assets as the children have an in-disputable right to inherit part of the estate. To avoid this most lawyers recommend buy a property through a Dominican company. The company will also be taxed in a different way. Go back to main information of Property
|
Buyers Guide
