Dominican Republic Real Estate Guide
The purpose of this guide is to enable a better understanding of the Dominican Republic real estate sector; Offering at the same time a broad summary of the relevant legal framework necessary to establish a real estate business in the country.
The first thing to note is that the Dominican Republic enjoys clear socio-political stability and a modern and transparent legal framework, which together with its recognized natural and landscape attractions has contributed to a true emergence of the national real estate sector; Together with the absence of any legal restrictions on the acquisition of real estate by foreigners, has boosted the business environment and long-term investment around the different types of real estate, whether villas, apartments, squares or premises commercial.
The boom experienced by Dominican republic real estate projects of all kinds and very special tourism projects, and the subsequent arrival of interested investors, is driven by the following factors: the gradual reduction in taxes related to the transfer of real estate, the existence of Tax exemptions to which the developer and the investor can avail themselves, the possibility of obtaining financing with local banking and financial institutions and, finally, the existence of a wide offer for the acquisition of real estate.
For proper understanding, we have divided this guide into three parts, as follows:
I. GENERAL REGIME OF INVESTMENTS IN Dominican Republic REAL ESTATE
In the Dominican Republic Real Estate there are two main routes through which an investor, whether natural or legal person, can participate in the real estate market:
A) Through the acquisition of immovable property directly; Y
B) By participating as a shareholder / partner in a company that owns real estate.
On the other hand, under certain circumstances, which we will explain later, and in order to provide greater security to investors, certain real estate projects may also be organized in the form of a trust in accordance with the provisions of the recently enacted Law No. 189-11 for the Development of the Mortgage Market and the Trust. Puerto Plata Real Estate.
In all cases of acquisition of properties it is advisable to carry out, prior to the signing of any commitment, a thorough due diligence or due diligence, on various aspects concerning the transaction, namely:
A) Aspects related to the parties involved in the transaction;
B) Aspects related to the thing or object of the transaction (real property, its antecedents, physical, legal-fiscal and administrative status, its environmental situation, etc.); Being the document fundamental from the legal point of view called “Certification of Legal State of the Property”, which is issued by the corresponding Title Registry, in order to verify the ownership and existence of liens on the property and
C) Aspects related to the intended project or development, if applicable (feasibility, applicable regulatory framework, etc.).
This due diligence should be complemented simultaneously with analysis and similar studies from other areas or specialties: accounting and financial advisors, architects, engineers, surveyors, among others.
The decision to acquire holdings in a company entails a deeper analysis, since, in addition to the analysis of the real estate itself, a thorough investigation (also due diligence) of the legal, accounting, fiscal and financial framework of With the objective of knowing its situation, its contingencies and / or liabilities, among others.
In the event that the investor chooses to acquire shares of a real estate developer, the analysis should include a review of the criteria used by this developer to evaluate the different projects in which he participates, since sometimes such criteria differ with those applied by the developer. Own investor in their accounting and / or practices.
As provided by the Civil Code, property can be acquired in different ways: by sale or transfer, by law, donation, succession tested, and by prescription purchase or usucapión.
In order to transfer ownership of a property in the Dominican Republic Real Estate, basically three documents are needed: (i) the contract of sale; (Ii) the title certificate of the original owner or seller (if it is a registered real estate); And (i) the certification of IPI (Property Tax).
The next step is the registration of the sales contract in the Registry of Deeds of the corresponding judicial department, who then proceeds with the issuance of the corresponding certificate of title in the name of the acquirer, and the latter is the document that proves the existence of the real right and Ownership over the property.
Fiscal Regime. Notwithstanding the foregoing, the transfer of the right of ownership can not be carried out without first complying with certain tax obligations.
When we refer to the fiscal regime of transfers we can differentiate between taxes related to the sale transaction, and the current taxes that must be paid to maintain the property of a property. In the first case, we have the obligation to pay the Real Estate Transfer Tax for 3% of the sale price, a prerequisite for registering the sale before the Title Registry. In the case of having chosen to finance the property with a bank, the tax to be paid is 2% of the amount of the mortgage. Finally, the General Directorate of Internal Taxes requires the annual payment of the Real Estate Tax, Sumptuary Housing and Urban Non-Building Plots to property owners that are valued at more than RD $ 5,000,000. The rate of this tax is 1% of the surplus of the value of the property with respect to the mentioned RD $ 5,000,000.
II. LEGAL FRAMEWORK for Dominican Republic Real Estate
In the Dominican Republic real estate property is basically regulated by two legal texts: (a) the Constitution and (b) the Dominican Republic Real Estate Registry Law and its Regulations.
A. Dominican Republic Constitution
Article 51 of the Constitution of the Dominican Republic, proclaimed on January 26, 2010 (hereinafter “the Constitution”), recognizes and guarantees the right to property and its social function; Enshrines that this right assists all persons and entails the enjoyment, enjoyment and disposition of their property; And access to the property, especially to real estate titled. For this reason, no person may be deprived of his property, but for justified cause of public utility or social interest, upon payment of its fair value.
It also guarantees the non-existence of confiscations or confiscation for political reasons, except in the case of property owned by natural or legal persons, national or foreign, that originate in illegal acts committed against public property.
B. Real Estate Registry Law and its Regulations
For the registration of property rights in our country there is a duality of systems, which apply depending on whether the property in question is or is not properly sanitized and consequently individualized and registered by the Registrar of Deeds.
Law No. 108-05 of Real Estate Registry, dated March 23, 2005, No. 10316 of April 2, 2005, as amended by Law No. 51-2007 (hereinafter “Law 108-05”), , Is intended to regulate the sanitation and registration of all real property, principal or accessory rights, charges, levies and provisional measures that may be registered, in relation to the properties that make up the territory of the Dominican Republic.
This law, based on a real estate advertising system, is characterized by the following criteria:
(I) Specialty: which consists in the correct determination and individualization of subjects, objects and causes of the right to register;
(Ii) Legality: which consists in the prior clearance of the right to register;
(Iii) Legitimacy: which establishes the existence of the registered right exists and belongs to its holder;
(Iv) Publicity: which establishes the presumption of accuracy of the record by providing public evidence of its record.
The State, in order to comply with the object of Law 108-05, and in addition, guarantee the legality of the operations that affect real property rights of the Dominican Republic, uses the competent bodies that make up the Real Estate Jurisdiction.
• The Real Estate Jurisdiction in the Dominican Republic.
The Real Estate Jurisdiction has exclusive jurisdiction to know everything related to real estate rights and its registration in the Dominican Republic, since its registration and throughout the legal life of the property, except exceptions established in Law 108-05. This is directed by the General Administration of the Real Estate Jurisdiction, which is in charge of the management of all the common services and of administrative character in each one of its dependencies located in the different localities of the country, with the purpose to achieve a synergy for the fulfillment Of the common objectives.
The Dominican Republic Real Estate Jurisdiction is composed of the following bodies:
A) Superior Courts of Lands: They are collegiate courts that know in the second instance all the appeals that are interposed against the decisions that emanate of the courts of original jurisdiction within its jurisdiction. At present there are three (3), with jurisdiction to hear issues of the different judicial departments of the country.
B) Courts of Original Jurisdiction: They are single-member courts that know in the first instance all actions that are within the jurisdiction of the Real Estate Jurisdiction, through direct seizure by the interested party and according to their territorial delimitation. They are attached to a Superior Land Court.
At present there are twenty three (23) courts of Original Jurisdiction, one in each Province seat of a Registry of Titles.
C) National Directorate of Registry of Titles: It is a national body that coordinates, directs and regulates the functioning of the Registry Offices of Titles at national level; With headquarters in the city of Santo Domingo, National District.
The Registry Offices are subordinate to the National Registry of Securities and are responsible for registering property rights, issuing and / or canceling title certificates that guarantee the existence of the property right within its jurisdiction; To carry out the loading, liens, transfers and land modifications. There are currently twenty-three (23) National Registry Offices.
D) National Directorate of Cadastral Measures: It is a national body, with its headquarters in the city of Santo Domingo, National District, which is responsible for coordinating and directing the development of the Regional Cadastral Measures Directorates at the national level. It also provides technical support to the Real Estate Jurisdiction, in order to ensure that real estate can be determined, located and individualized and documented through a cadastral map.
The Regional Directorates of Cadastral Measures are bodies subordinated to the National Directorate of Cadastral Measures and are in charge of knowing, controlling, approving or rejecting technical work; And to grant the cadastral designation of the plots under its jurisdiction. There are currently three Regional Cadastral Measures Directorates.
These bodies and all processes of their jurisdiction, as well as the services offered by the Real Estate Jurisdiction, are regulated by a series of regulations issued by the Supreme Court of Justice, in compliance with the regulatory authority conferred by Law 108-05 to dictate The complementary regulations and norms required for the application and development of the provisions contained in said Law 108-05; namely:
• The Regulation of the Superior Courts of Lands and of Original Jurisdiction of the Real Estate Jurisdiction, modified by Resolution No. 1737-2007 of July 12, 2007; Which regulates the functioning of the Courts of the Real Estate Jurisdiction and all the actions of its jurisdiction;
• The General Regulations for the Registry of Securities, instituted by Resolution No. 2669-2009 of September 10, 2009, and its amendments; Which regulates the operation of the National Registry of Securities and the Registers of Securities, as well as the procedure and the manner in which real property rights are registered in accordance with Law 108-05;
• The General Cadastral Measures Regulation, modified by Resolution No. 628-2009 of April 23, 2009; Which standardizes the operation of the National Directorate of Cadastral Measures and their dependencies, as well as the procedure and form in which are registered the measurement works, land modifications and divisions for the constitution of condominium, in accordance with Law 108-05 ;
• The Regulation for the Land Regularization and the Deslinde, established by Resolution No. 355-2009 of March 5, 2009; The purpose of which is to (i) establish agile and safe mechanisms that allow the location, determination and individualization of plot portions based on annotated records, and (ii) regulate parcelization and demarcation throughout the territory of the Dominican Republic.
These last two regulations regulate the acts of piecemeal uprising; That is to say, those acts of territorial survey practiced with the purpose of constituting, modifying, verifying or recognizing the land state of the real estate.
Among the main land-clearing acts we find: (i) the sanitation measure; (Ii) the land modification; (Iii) the subdivision; (Iv) recasting; (V) land development; (Vi) land regularization; And (vii) the demarcation; These two last regulated in Resolution No. 355-2009 of the Supreme Court of Justice, which contains the Regulation for Parcel Regularization and Demarcation and which we explain below in more detail due to its importance in real estate.
Said regulation defines the land regularization procedure as the act of land division by which all owners of records recorded by common agreement, locate, determine and individualize one or more of their portions of plots by administrative means, mediation and subject To the approval of the Regional Directorate of Cadastral Measures, in accordance with the conditions and in accordance with the procedure established in the Regulations and other provisions, to be forwarded to the corresponding Registry of Deeds. This can be submitted jointly with other technical operations, including land modifications and division for the constitution of condominiums.
In order for the land regularization procedure to be carried out, the following conditions must be established: (i) Existence of an agreement or non-written voluntary objection of all holders of Annotated Constants in force within the scope of the parcel to be regularized; And (ii) Establishment of the owner’s quality in a Certification of Property Rights Effective in the parcel subject to the procedure, issued by the corresponding Registry of Titles.
On the other hand, and contrary to the land regularization procedure that is processed in an administrative way, the regulation defines the demarcation as a contradictory process by which the rights covered in Annotated Constancias are located, determined and individualized. The judge in charge of the file establishes the legality of the documentation submitted to him.
Dominican Republic real Estate Process
This process has three phases:
(I) Technical, by means of a land survey carried out by a Surveyor, is located, determines and individualises the land on which the property right is consolidated. This stage ends with the technical approval of the operations by the Regional Directorate of Cadastral Measures territorially competent. These technical works must comply with particular advertising conditions, in order to protect the right of the adjoining property to be demarcated.Dominican Republic Real Estate.
(Ii) Judicial, by means of a contradictory process, the necessary guarantees are given so that all the holders of records recorded on the same plot and the holders of charges and liens, can make the claims that they consider pertinent.
(Iii) Registral, approved the processes indicated in the previous paragraph, are sent to the corresponding Registry of Titles so that the corresponding Certificate of Title is issued and the Supplementary Register of the demarcated property is authorized.
• The Regulation for the Control and Reduction of Annotated Constants, instituted by Resolution No. 517-2007 of March 22, 2007, modified by Resolution No. 1737, of July 12, 2007. Its purpose is to suspend the issuance of New records recorded; Control and regulate existing ones; Limiting their granting to exceptional cases and laying the foundations in order to reduce the inventory of existing ones over time.
Pursuant to these regulations, an annotated document is understood as the document issued by the Securities Registry which, without having its own cadastral designation or with a duly approved individual measurement plan, establishes the existence of a property right over a portion of the parcel .
Since the entry into force of this regulation, a non-renewable 2-year exemption period has been authorized so that cases of partial sales acts or any transfer of rights based on a certificate of title, In an annotated record, or in a judicial decision, made prior to the entry into force of this regulation, be regularized, allowing for a single time the issuance of a new record annotated with the legend “CONSTANCIA ANNOTATED INTRANSFERABLE AND WITHOUT PROTECTION OF THE FUND OF WARRANTY”. Once said term has expired, for the transfer of rights recorded in annotated records, they must be individualized by means of a land survey approved and registered in the Regional Direction of Cadastral Measures. Although it is allowed for a single time, the registration of a total transfer of the rights held in recorded records, provided that the portion to be transferred is fully contained in a single recorded record, recorded prior to the entry into force of this Regulation.
Also, as of the validity of said regulation, new portions of parcels, or partial transfers of rights based on an Annotated Certificate, are not admitted, based on acts performed after the entry into force of these Regulations. Portions of parcels are understood to mean buildings that are the subject of a right of ownership or co-ownership registered only in the Registries of Deeds and supported by an annotated record, whose geometrical dimensions, location and individual cadastral designation have not been determined by an act of land division , Nor has its actual existence been verified on the ground.
• Main Procedures Carried Out by the Dominican Republic Real Estate Jurisdiction.
Among the proceedings before the Dominican Republic Real Estate Jurisdiction indicated in Law 108-05, we can highlight the following:
A) Sanitation: It is the process of public order by which the terrain is determined and individualized, the rights that fall on it are purified and these are registered for the first time. This process can be promoted by the State or by any natural or legal person claiming or owning a right over an unregistered property. Only the courts of the Real Estate Jurisdiction are competent to know the sanitation process. It consists of three stages: (i) measurement, defined as the technical procedure by which it is individualized, locates and determines the land on which the property right to register is claimed; (Ii) judicial, by which the right to register before the courts of the Dominican Republic Real Estate Jurisdiction is eliminated; And (iii) registration, is the act by which the Certificate of Title that certifies the existence of the right is issued, and the complementary registration seats are authorized and with that it is publicized.
B) Litigation On Registered Rights: The contradictory process that is introduced before the Courts of the Real Estate Jurisdiction in relation to a registered right or property, and is initiated by the court of original territorial jurisdiction.
C) Eviction of Registered Properties(Dominican Republic real estate): This is the procedure by which a registered real estate is released from any illegal occupation.
D) Partition of Registered Properties: This is the procedure by which the state of indivisión between the co-owners, co-heirs and / or partners of a registered real estate is terminated. Only the courts of the Dominican Republic Real Estate Jurisdiction are competent, and is initiated by the court of original territorial jurisdiction jurisdiction. In the cases of friendly partition, this one is executed by the administrative route.
For buildings that are not registered according to Law 108-05, governs the ministerial system, in which the State intervenes through the Conservative of Mortgages for the registration of real estate transactions. In this system documents are transcribed instead of registering the rights. The transcription or registration is done by reason of the person, differing from Law 108-05 in which the registration is done by reason of the property.
The boom in real estate development in the Dominican Republic Real Estate has been concentrated in recent years in the constitution of buildings and residential under the condominium regime. Hence the growing importance of its regulation, which is established in Law No. 5038 of 1958 of November 21, 1958, which establishes a special system for property, by floors or departments (GO No. 8308 of November 29, 1958), in turn was modified by Law No. 108-05. This Law No. 5038 establishes a special regime for real estate property, with the purpose of establishing condominiums of two or more units, belonging to different people. These condominiums are made up of individualized properties on which an exclusive domain can be exercised in favor of different owners, maintaining one or more assets in the common domain of all of them. Condos can be built as real estate built for family purposes as those for commercial activities. The laws of the matter have established the necessary requirements for the constitution of a condominium, being the primary requirement the individualization or delineation of the property on which the condominium will be constituted. Dominican Republic real estate Inportant Information.
The condominium is constituted through the approval by the relevant Registry of Securities of the corresponding consortium constitution, the declaration of condominium and the regulation of the condominium regime. This last document is fundamental for the life of the condominium as it establishes the rights and duties of the condominium, legal relations between the condominium owners and the regime of the private and common elements of the condominium, as well as the decision-making organs that will govern the life of the condominium, To which legal personality is recognized.
It is important to note that at present this regime is applicable to other real estate developments such as shopping malls and parking buildings, among others.
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