Real Estate 2020

• Published date: 27 May 2021
• Subject Matter: Corporate/Commercial Law, Real Estate and Construction, Corporate and Company Law, Contracts and Commercial Law, Construction & Planning, Real Estate, Landlord & Tenant - Leases
• Law Firm: Guzman Ariza Attorneys At Law
• Author: Mr Alfredo A. Guzm'n Saladín, Fabio Guzm'n Ariza and Julio Brea Guzm'n

1. GENERAL

1.1 Main Sources of Law

Since gaining its independence in 1844, the Dominican Republic had a legal system based on French law, specifically on the Napoleonic Code; however, since the first half of the 20th century, there has been a move away from the French model, with the adoption of many statutes and codes inspired by other legal systems, such as the Land Registry Law of 1920, based on the Australian Torrens system. In the real estate area, the authors can mention as a key source Real Estate Registration Law No 108-05 (2015), as well as the resolutions issued by the Judicial Branch's Council.

The Constitution of the Dominican Republic lays out the fundamental framework for the organisation and operation of the Dominican government and its institutions, and recognises an impressive list of civil rights for all individuals, Dominicans and non-Dominicans, including an equal protection clause for non-Dominican citizens and investors. Article 25 of the Constitution expressly states that foreign nationals are entitled to the same rights and duties in the Dominican Republic as Dominican nationals, except, understandably, for the right to take part in political activities. Article 221 of the Constitution sets forth that the government will ensure equal treatment under the law for local and foreign investments.

Individuals and entities, domestic and foreign, have a quick and inexpensive remedy for the protection of their constitutionally protected rights: the writ of amparo, which is granted by all courts and is subject to an appeal to the Constitutional Court.

Cases in Dominican courts are decided by judges, not by juries. Judges rule based on the texts of the Constitution and existing statutes, the precedents of the Constitutional Court (which are binding), and the precedents of other courts (which are not binding). They do not rule in equity, as in some common law countries, but the principle of good faith is recognised by statutory law and grants the courts some discretion. Punitive damages are not awarded in injury cases - just compensatory damages.

Regarding evidence, parole evidence is admissible in criminal, labour and commercial matters, and, under certain circumstances, in civil and real estate matters.

Finally, real estate laws are national in scope and application.

1.2 Main Market Trends and Deals

The main trends in the real estate market in the Dominican Republic continue to be the development of important projects in the tourism sector, as well as new projects for the cruise sector after the success story of Amber Cove project in Puerto Plata. Many well-known international developers have started projects, some of which are already operational, in the areas of Punta Cana, Bani, Miches, Puerta Plata, Santo Domingo and the southwest provinces of Pedernales, Barahona and Peravia - Bani.

Of note in the last 12 months can be mentioned Club Med's Miches Playa Esmeralda hotel, a five-star, 400-room hotel just built in a 93 acres beachfront property in Miches, Dominican Republic, the first major hospitality venture in the Miches area, destined to become the next Punta Cana in terms of tourism development in the Dominican Republic. The firm assisted Club Med in both the acquisition, permits and tax exemption matters under the country's Tourism Incentive Tax Law (CONFOTUR).

1.3 Impact of Disruptive Technologies

Tech adoption in commercial real estate, although increasing, is still slow compared to other industries.

At this point in time it is very difficult to navigate the many technological offerings available and in development for real estate professionals without a clear idea on how these tools will affect the business. As trends begin to emerge on how companies are using these technologies and the competitive advantage they provide, adoption rates will increase at a faster rate.

So far, the biggest adoption has been on data analytics and streamlining workflows to work more efficiently, propelled by international franchises operating in the country, and it is obvious that they will be a big influence on what technology is adopted and how fast. The outlook is that in the next 10 to 12 years the industry will look very different from what it does today.

1.4 Proposals for Reform

On the legislative front, the much-anticipated new statute on Real Estate Evictions, Law 396-2019, has been in force since October 2019. This new law regulates a formerly relaxed practice in real estate evictions and at the same time brings added security to the protection of real estate rights against unlawful eviction processes.

2. SALE AND PURCHASE

2.1 Categories of Property Rights

Dominican real estate law recognises the following interests in real estate: absolute ownership, usufruct, easements, betterments, leases, condominium regimes, and privileges and mortgages. It does not recognise co-operative ownership arrangements or other occupancy interests.

2.2 Laws Applicable to Transfer of Title

Registration rules are established by the General Director of the Registries of Title and are applicable nationwide. The Dominican Civil Code states that buyers pay all the fees, expenses and taxes required for conveyances, unless agreed otherwise by the parties.

The legal requirements for recording conveyances are the following:

• a deed of sale (sales contract), authenticated by a Dominican notary;
• a certificate of title issued to the seller by the Registry of Title;
• a certification showing that the seller is up to date with its property taxes;
• a receipt attesting to the payment of the real estate transfer taxes;
• a copy of the ID card or passport of the parties, or tax card if a legal entity; and
• non-resident foreigners need to provide an additional ID document from their country of origin in addition to their passports.

2.3 Effecting Lawful and Proper Transfer of Title

The legal requirements for recording conveyances are the following:

• a deed of sale (sales contract), authenticated by a Dominican notary;
• a certificate of title, issued to the owner by the Registry of Title - a completely different document from the deed of sale which serves as the only proof of ownership;
• a certification showing that the seller is up to date with its property taxes;
• a receipt attesting to the payment of the real estate transfer taxes (currently 3% of the government-appraised value of the property); the buyer is exempt from this tax in some cases (eg first purchases in certain tourism projects and low-cost housing acquired with a bank loan);
• a copy of the identity card or passport of the parties, or tax card if a legal entity (non-resident foreigners need to provide an additional identity card from their country of origin in addition to their passports); and
• a copy of evidence of purchase price or mortgage payment through a non-cash method, for operations involving more than DOP1 million.

2.4 Real Estate Due Diligence

The typical real estate due diligence overseen by the buyer's attorney regarding title consists of the following:

• obtaining a certification from the Registry of Title stating the legal status of the property;
• obtaining a certified report from an independent surveyor confirming that the official survey coincides with the property and that there are no overlapping surveys;
• obtaining a certificate from the internal revenue stating that the property tax, if any, has been paid;
• confirming that the property to be purchased may be used for the purposes sought by the buyer; and
• due diligence at the local real estate, civil and labour courts to ascertain any liabilities in those fronts.

2.5 Typical Representations and Warranties

Warranties typically specify that:

• the property is registered to the seller and is of the dimensions mentioned on the title;
• there are no overlapping parcels;
• there are no liens, mortgages, or third-party registered rights;
• the conveyance will not be affected by any tax liabilities;
• the seller will have to provide any documentation and sign any additional set of documents required for the final conveyance of the title to take place; and
• all liabilities, including utility bills and contractors' fees, are paid up to the date of closing.

The warranties are provided both in relation to the property and to the shares of the holding entity being purchased, if that is the case.

2.6 Important Areas of Law for Investors

In the Dominican Republic, before buying real estate, investors must consider tax law, real estate law, environmental legislation and administrative law for licences, planning and...