Real Estate 2021

• 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

For the first 100 years or so from becoming independent in 1844, the Dominican Republic had a legal system based on French law, specifically on the Napoleonic Codes – civil, civil procedure, commercial, criminal and criminal procedure – under a constitution based on the US model, with three branches of government: a strong presidency, a legislature and a judiciary with the power to strike down acts of the other branches found to be unconstitutional.

Since the first half of the 20th century, however, there has been a move away from the French model, with the adoption of many statutes and codes inspired by other legal systems. Examples include:

• The Land Registry Law of 1920, founded on the Torrens system of Australian origin;
• The Labour Code of the 1950s and 1992, modelled on South American codes;
• The new Code of Criminal Procedure of 2002, based on the same adversarial principles that govern US criminal litigation;
• The new arbitration statute of 2008, taken from the model arbitration code prepared by the United Nations; and
• The new bankruptcy and insolvency statute of 2015, influenced greatly by US bankruptcy law.

The Constitution of the Dominican Republic lays out the fundamental framework for the organisation and the 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, parol 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 the Amber Cove project in Puerto Plata.

Many well-known international developers have continued with multiple 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 past 12 months can be mentioned Club Med's Miches Playa Esmeralda hotel, a five-star, 400-room hotel just built in a 93-acre beachfront property in Miches, Dominican Republic, the first major hospitality project 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 the acquisition, permits and tax exemption matters under the country's Tourism Incentive Tax Law (CONFOTUR).

1.3 Impact of Disruptive Technologies

Disruptive technologies have transformed every step of the real estate value chain, providing massive opportunities for the industry. The technologies with the highest rate of adoption include augmented reality (AR) and drones artificial intelligence (AI), along with instant communication channels and social media, big data and the 5G network.

So far, the fastest adoption has been on augmented reality and drones for surveying properties and neighbourhoods and for providing virtual tours, and obviously, due to the fast-paced nature of the business, instant communication tools and social media.

There is still room for improvement in the way big data is being used by the industry, but this will likely change as AI-powered customer relationship management and listings become more prevalent.

There are a lot of expectations of the 5G network, to which the president has given high priority, which will influence real estate development, from the way existing structures are used, to the way new ones will be integrated to the IoT (internet of things). Smart buildings have been the standard for new constructions in the country for some time now.

The outlook for the future is that as blockchain technology becomes more mainstream it will permeate to the industry, for it has been touted as a far more secure and transparent way to conduct transactions.

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.

2.3 Effecting Lawful and Proper Transfer of Title

The legal requirements for recording conveyances are the following:

• Deed of sale (sales contract), authenticated by a Dominican notary;
• 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;
• 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.

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.

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;
• Investigating whether a third party is occupying the property;
• Investigating the property's environmental status; and
• Ensuring that the seller, especially if a corporation, has the authority to sell and can convey clear title.

As noted above, under the Torrens system, there is no need to do a chain-of-title search. Title insurance is available but is not used frequently for various reasons – especially limited protection and costs – even though the indemnity fund set forth by the Real Estate Registration Law has not functioned properly.

The Real Estate Registration Law establishes that whoever registers first has priority over those who register after. Registration is deemed to be complete on the date the application is submitted for registration provided that the application is approved, not on the date the Registry of Title issues the corresponding certificate. Priority among different interested parties can be contractually reordered.

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...