Frequently Asked Questions

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1. Can a tourist purchase real estate in the Dominican Republic? What are the requirements?

Tourists must fulfill the same requirements as Dominicans and legal foreign residents in the Dominican Republic. The Dominican government, though, requires that the Title Registry Offices keep a record, for statistical purposes, of all purchases made by foreigners. Back

2. Is buying real estate in the Dominican Republic risky?

The risk is small if the persons involved in the real estate transaction (developer and real estate attorney) are reputable. The major risk is that you may be issued a title that does not reflect the liens and charges that may encumber the property, or that it may not reflect the real owner of the property. This can be avoided if you secure a reputable firm that will ensure that a title search gets done certifying the actual status of the property.

When purchasing property in the Dominican Republic you should also be aware of the zoning, or lack of zoning, and who your neighbors are or could be in the future. Like with any property purchase decision, try to envision what factors that could lead your property to gain or lose value in years to come.

Today it is possible to reduce to a minimum your risk. US-based private companies offer title insurance on real estate purchases.

The companies provide title guaranty, escrow and closing services for buyers and sellers of residential and commercial property. Back

3. What are the taxes on real estate purchases in the Dominican Republic?

If the purchase is done through a Savings and Loan Association (Asociación de Ahorros y Préstamos) total closing costs amount to approximately 2.5% of the purchase price, including legal fees. Interest rates on the loan, however, are incredibly high from a North American point of view: 18%+ per annum. Being a peso loan, however, you may end up paying less than at home depending on the rate of depreciation of the peso.

For a straight purchase from an individual to another, total closing costs come up to approximately 6% of the purchase price: approximately 5% for transfer taxes and 1% for legal fees. Back

4. What other taxes do real estate property pay in the Dominican Republic?

Dominican Republic Property taxes ("IVSS" taxes) are levied on sumptuous homes and unbuilt city lots. Unbuilt city lots of any value pay at an annual tax rate of 0.50% of appraised value. Sumptuous homes pay at a 0.25% p.a. tax rate. Any home worth more than RD$1,400,000 pesos (approx. US$85,000) is considered “sumptuous”for tax purposes. Homes worth less than RD$1,400,000 pesos and commercial buildings are exempt from property taxes. The government penalizes late payment with a 10% tax due for the first month and 4% for each subsequent month.

In practice, many real estate in the Dominican Republic property owners will not bother to pay the real estate taxes on an annual basis. The tax department does not send out bills. The tax needs to be paid, though, for the property to be transferred to another owner. Back

5. How can I find out how much IVSS my property will pay in the Dominican Republic?

Go to the local office of the “Dirección General de Impuestos Internos (DGII)” (Internal Revenue) with a copy of your certificate of title.

What documents will I need to purchase property in the DR?
What you need will vary with the institution and with the form of purchasing. The minimum you will need is: Two forms of official photo ID, one being your passport. If you plan to finance the property, some type of official document is required to disclose your income. This could be copies of last years income tax filing, a letter from your present employer on company letterhead (if you plan to move and work in the DR, get a letter of intent from your prospective new employer, noting start date, length of employment and salary); documents of other sources of income; savings and checking statements; outstanding debts and proof of on time payments. You should bring anything you can to prove your solvency. You will also need to show plans of the house/building you wish to build or copies of the title of the property you wish to buy. It’s not much different from buying property in the US. Back

6. How is land measured in the Dominican Republic?

Officially, the metric system should be used in all real estate transactions, the hectare (10,000 m2 = 2.47 acres) being the basic unit. However, the “tarea”, a unit of measurement from colonial times equivalent to 628.86 m2 is still widely used. An acre is equivalent to approximately 0.4 hectares or 4004 m2 or 6.4 tareas.
Other land measurements are:

1 M sq = 10.795 sq ft ,1 Tarea =629 m2, 6.433 Tareas=1 acre, 15.89 Tareas= 1 Hectare, 1 Hectare = 2.47 acres , 1acre=43, 560 sq ft. Back

7. Who pays the vendor/seller commission in a real estate transaction in the Dominican Republic?

Usually the vendor/seller pays the commission. But there are many occasions when the seller will stipulate that his price is a net price and therefore the buyer will in effect compensate the real estate broker for his work.

To transfer the title from one individual to the next, there are transfer taxes. The buyer/purchaser pays approximately 5% of the declared value.

The custom is that the lawyer for the buyer makes the contract and thus the buyer pays for that, sometimes the seller wants a lawyer to represent his interests so he will have to pay too. Back

8. What are the interest rates on a mortgage loan?

The lowest real estate interest rate that can be secured at present is 18%. Interest rates had climbed to 22% in 2001, but made their way down in mid 2001. Back

9. What is a normal down payment for a real estate purchase in the Dominican Republic?

Most loans and savings banks will finance up to 80% of the loan in a real estate purcahse in the Dominican Republic. In the past, despite the high interest rates, purchasers of real estate have had the advantage of the devaluing peso, so in the long run their real interest rate has been much lower. While you will pay less financing the property abroad, in the long run if you take out a long mortgage locally you may end up paying less.

If you are not financing through a loans and savings bank, you may be asked to make a bigger down payment. Back

10. Are there any taxes on renting real estate property in the Dominican Republic?

The tax reform implemented in January 2001 establishes a 20% withholding tax on rental payments. Also, commercial rentals are subject to a 12% ITBIS tax. Back

11. What are the advantages of forming a Dominican company to purchase real estate in the Dominican Republic?

The main advantage to forming a Dominican company to purchase real estate in the Dominican Republic are that you will not be personally liable for debts or problems incurred during the operation of the business. A second very important reason to incorporate is to avoid the application of Dominican rules of inheritance to your Dominican properties. Inheritance of real property in the Dominican Republic is governed by Dominican law which provides for "forced heirship": part of the estate 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. A third advantage is to avoid having to put up a bond in case you (a foreigner) have to sue in the DR. Back

12. What are the chances I will lose the money invested with devaluation in the Dominican Republic?

Over the years real estate investments in the Dominican Republic have proven to be good business for many. In many areas, such as Casa de Campo, Cabarete, and select areas of Puerto Plata where values in foreign currency have never gone down, only up. In other areas, the values have stabilized, or in some, you will be lucky to get back what you invested. Whether your investment gains will depend on how you have financed it (if you can get a loan in pesos you will probably gain more), or if the area where you invest gains or loses worth as it becomes more developed. This is no different anywhere else in the world. Back

13. Should I rent or buy real estate in the Dominican Republic?

If you have plans to live in the Dominican Republic for a short term, consider renting property in the Dominican Republic. This gives you the flexibility of changing where you are living. However, if you are interested in participating in the real estate appreciation potential that the Caribbean offers, then you may want to consider purchasing real estate property in the Dominican Republic as it offers you a price point considerably lower than most other Caribbean Islands.

The usual well-intentioned advice is that if you are not familiar with the area or the Dominican Republic, you should first rent until you do or have a trustworthy consultant or real estate agent that can present real estate opportunities in the Caribbean. If you will be staying permanently or will be residing for more than three years in the country, you should find a short term rental and then find a property for purchase. This is primarily because rentals in the Dominican Republic are many times the same as what a monthly mortgage would cost.

Keep in mind that if you buy and then have to leave the country, there is always the option of putting purchased property on the rental market. Vacation properties in tourism rental areas of the Dominican Republic offer the advantage of management rental pools that will secure short term rentals on a continuous basis. This is a practice that helps pay for the mortgage of your Caribbean vacation home.

If you are not renting as part of a tourism development management pool, caution should be taken when choosing a tenant as rental laws in the Dominican Republic are overtly in favor of the tenant. Back

14. What is the usual commission realtors in the Dominican Republic charge?

Realtors in the Dominican Republic normally charge between 6%-10% commission. This is negotiable most of the time.

I want to rent my investment vacation home in the Caribbean and have been asked for a guarantor who is legally liable for paying my rent in the Dominican Republic. If I am a new arrival and don’t know anyone how can I get around this?
Sometimes making a six-month security deposit will work. In tourist areas, property owners will be more flexible because most of the newly arrivers will of course not have local guarantors. In Santo Domingo, it is difficult to rent without a guarantor. Back

15. Can foreigners qualify for a mortgage loan from a loans and savings institution?What will be required in order to qualify?

Yes, foreigners can obtain loans. However, most savings and loan will require residency status. Back

16. What other channels of lending are there available to foreigners and/or Dominicans?

Are there builders that will finance? Many sellers will offer financing on the sale of their properties. In some subdivisions, the owner will offer financing both for lot purchase and home construction.

What are the steps to follow to purchase real estate in the DR?
According to Fabio Guzman, of the Guzman Ariza & Asociados law firm ( drlawyer.com), the required steps to convey or transfer ownership of real estate from a seller to a buyer are the following:

1. Buyer and seller must sign a "Contract of Sale" before a Notary who will authenticate it. (Notaries in the Dominican Republic are required to have a law degree). The Contract of Sale will contain the legal description of the property, the price and other conditions of sale.

2. The authenticated Contract of Sale is then taken to the nearest Internal Revenue Office for payment of the appropriate taxes.

3. The Contract of Sale and the Certificate of Title of the seller are deposited at the Title Registry Office for the jurisdiction where the property is located and the sale is recorded.

4. The Title Registry Office issues a new Certificate of Title in the name of the buyer and cancels the old Certificate issued previously to the seller. The time from the filing of the Contract of Sale to 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.

Before closing, many attorneys in the DR will limit themselves to obtain a certification from the Title Registry Office. Guzman, of the Guzman Ariza & Asociados law firm recommends that due diligence be carried out on real estate transactions to avoid any surprises in the future.

To start the due diligence, the seller should provide the buyer or the attorney with the following documents:

1. Copy of the Certificate of Title to the property.

2. Copy of the survey to the property or plat plan.

3. Copy of his/her identification card ("Cédula") or Passport.

4. Copy of the receipt showing the last property tax payment (IVSS) or copy of the certificate stating the property is exempted from the IVSS tax.

5. If the seller is a corporation:

Copy of the corporate documentation, including bylaws and resolution authorizing the sale.
Certification from the Internal Revenue Office showing the corporation is current with its income tax filings.

6. 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 showing the seller is current with his condo dues.
Copies of the minutes of the last three condominium meetings.

7. If the property is a house:

Copy of the approved construction plans.
Inventory of furniture, etc.
Copies of the utilities contracts and receipts showing the seller is current with his payments.

Once the documentation listed above is obtained, the attorney should address every item on the following checklist before the closing:

1. Title Search: A certification should be obtained from the Title Registry Office regarding the status of the property, whether any liens or encumbrances affect it. The buyer should insist that his attorney confirm the results of the Registrar's search personally by investigating himself the appropriate files at the Title Registry Office.

2. Survey: 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. Cases have occurred in which a buyer acquires title over a property some distance away from the one he believes to be buying due to careless work by a previous surveyor or to fraud by the seller. The survey should be checked even when the seller provides a government-approved plat.

3. 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.

4. Permits: The Dominican Republic 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 effect 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 zones, there are building restrictions administered by DEFINPRO, a department of the Central Bank.

5. Possession: The Dominican Republic 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 tenant's rights and that evicting a recalcitrant tenant is time-consuming and expensive.

6. Employees: The seller should pay any employees working on the property their legal severance up to the time of the closing, otherwise the buyer may find himself liable for the payment later.

7. Power/water/telecommunication/cable TV/condominium maintenance bills pending: The attorney should check that the seller does not have any power/water/garbage bills pending. A visit to the appropriate power distributor (Edesur, Edenorte or AES Distribuidora del Este), as well as to the CAASD (Santo Domingo) or appropriate water company, and to Codetel/and to the present distributor to ascertain that the dwelling does not have pending bills that would have to be inherited if not previously cleared. Back

Frequently Asked Questions: Real Estate in the Dominican Republic

Frequently Asked Questions:
Real Estate in the Dominican Republic