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Mortgages
Real Estate Financing in Mexico,
Latin America and the Caribbean
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Buying Real Estate in the Dominican Republic
Legalities and Ownership
Foreigners can purchase and own real estate in the
Dominican Republic without any restrictions. In order to buy a property in the
Dominican Republic, a foreigner requires no special approval. However, a special
permit is needed if a property is to be purchased in the "maritime zone" which
is a 60-meter broad strip along the entire coastline of the Dominican Republic.
All purchases made by foreigners are to be recorded in the Title Registry
Offices (Catastro) for statistical purposes.
In order to buy a
property the buyer must sign a "Contract of Sale" (Contrato de
compraventa) with the seller, in front of a Notary (notario) who
will authenticate it. The Contract of Sale will contain the legal description of
the property involved, the price, and other provisos agreed upon for the sale.
The other steps involved in the process of buying and registering
property in the Dominican Republic are as follows:
The buyer must take a
copy of the identification card (Cédula) or passport from the seller.
He or she must then get a non-encumbrance certificate (certificado de no
gravamen de una finca) from the Property Registry in order to ensure that
the property has no liens or other hidden financial encumbrances. This should be
followed by a site inspection of the property to establish the exact
location.
An application must be submitted in the Tax Authority
(Dirección General de Impuestos) for the valuation of the property. It
is this valuation that is used in the determination of one’s property taxes. An
inspector from the Tax Authority will visit the property and makes a
determination as to its value. Once the inspection is over and the value of the
property has been calculated, the next important task is for stamps and taxes to
be paid to the Tax Authority.
After all the payments have been made and
all the required documents are ready, the buyer must then apply for the
registration of the property at the Property Registry. With the implementation
of the new Ley de registro de la propiedad inmobiliaria, which was
passed in March 2005, the Registry must now complete the transfer within 15 days
(which earlier could take up to 45 days). The buyer will have to pay a special
contribution of 1% of the value of the property if it is the first transfer and
2 % for all subsequent transfers.
Financial MattersA deposit or advance payment is normally made at the
time of signing of the “Contract of Sale”. All the procedures involved in the
process of buying and registering of real estate are accompanied by fees and
costs. Taxes and other expenses on the conveyance of real estate reside around
5% of the sale price.
The cost of obtaining a non-encumbrance certificate
is ROD 192.55 and the site inspection cost can vary from ROD 5,000 to ROD
12,000.
Notarization of the sale purchase agreement involves an
expenditure that varies between 0.25 and 1 percent of the price of the
property.
The tax obligations are as follows:
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Transfer Tax: 3% of property value. |
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Tax according to Law 80-99: ROD 232 + 1.3% of property value for excess over
$ 20,000 |
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Tax according to Law 33-91: ROD 20 |
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Stamp according to Law 370: ROD 2 |
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Stamp according to Law 91: ROD 5.25 |
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Stamp according to Law 67: ROD 0.25 |
Buyers can
finance their property purchase in Dominican Republic. Commercial banks as well
as special mortgage societies offer mortgages (hipotecas) up to 75% of
the value of the property, though mortgage interest rates in the Dominican
Republic itself are quite high range between 18 and 26 percent.
Other Important IssuesNotaries in the Dominican Republic are a far cry
from what may be understood by this term in the United States. Notaries in Latin
America are important public officials and required to have a law degree and are
the final arbiters in the process of title legalization. All transactions should
end with the approbation of a duly licensed notary.
In the Dominican
Republic the government provides title insurance which allows the buyer to feel
secure he or she will actually own the property when the transaction is
complete. In the event of any dispute, the title insurance company defends the
buyer in the court of law and will pay all valid claims or losses up to the
amount of the policy. Title insurance can be purchased during or after the
purchase of the real estate.
In Dominican Republic, the inheritance law
(Ley de herencia) has created substantial inheritance taxes.
Inheritance taxes range from 17 to 32 percent of the appraised value of the
estate, depending on the relationship between the beneficiary and the deceased.
If the beneficiary resides outside the Dominican Republic, then inheritance
taxes are subject to a surcharge of 50%.
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