Many attorneys (solicitors) in the Dominican Republic do not perform the required due diligence on real estate transactions, limiting themselves in many cases to obtaining a certification on the status of the property from the Title Registry Office. It often happens that the real estate agent or the seller pressure the buyer into a hurried closing despite the advice of legal counsel.
To start the due diligence, the seller should provide the buyer or the attorney with the following documents:
* Copy of the Certificate of Title to the property.
* Copy of the official survey to the property or plat plan. Under the new Property Registry Law, the sale of properties without a
government-approved plot (“deslinde”) are severely restricted.
* Copy of his or her identification card (“Cédula”) or Passport and that of the spouse, if married.
* Copy of the receipt showing the last property tax payment (or asset-tax payment in case the seller is a corporation) or copy of
the certificate stating that the property is exempt, and certification from the Internal Revenue Office showing the seller is current
with his or her tax obligations.
If the seller is a corporation:
* Copy of the corporate documentation, including bylaws, up-to-date registration at the Mercantile Registry and resolution
authorizing the sale.
* Certification from the Internal Revenue Office showing the corporation is current with its tax obligations, specially Income Tax
and Tax on Assets.
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 administration showing the seller is current with his or her condo dues. Copies of the
minutes of the last three condominium meetings.
If the property is a house:
* Copy of the approved construction plans.
* Inventory of furniture, etc.
* Copies of the utilities contracts and receipts showing that the seller is current.
Once the documentation listed above is obtained, the attorney should address every item on the following checklist:
Title Search. A certification should be obtained from the appropriate Title Registry Office regarding the status of the property, stating who the owner is and whether any mortgages, liens or encumbrances affect it.
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 or she believes to be purchasing 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.
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.
Permits. The 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 areas, there are building restrictions administered by the Ministry of Tourism.
Possession. The 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.
Employees. The seller should pay any employees working on the property their legal severance, otherwise the buyer may find himself liable for the payment later.
Utilities. The attorney or buyer should check that the seller does not have any utility bills pending by enquiring at the appropriate power distributor, water, cable and telephone companies.