Real Estate Law in Dominican Republic

The Constitution of the Dominican Republic – supreme law of the country - in Article 51, recognizes the right to property as a fundamental guarantee. This provision ensures that all individuals, whether citizens or foreigners, can freely acquire, use, and dispose of property, provided that such actions are in compliance with the law. The Constitution not only protects the right to property but also establishes that property must fulfill its social function, meaning it should contribute to the common good, and may be subject to expropriation only in cases of public utility or social interest, with fair compensation.

In conjunction with constitutional provisions, the Civil Code of the Dominican Republic establishes the fundamental principles of property ownership. It governs how property can be acquired, transferred, and managed, providing a comprehensive legal framework for the rights and obligations of property owners. The Civil Code also regulates contracts related to the sale and lease of real estate, ensuring that transactions are legally binding and enforceable. For instance, it mandates the formalization of real estate transactions through written contracts, public notarization, and registration in the public registry.

Another legislation is Law No. 108-05 on Real Estate Registration, which provides the legal foundation for the registration of property rights. This law is vital in securing ownership and providing transparency in real estate transactions. By establishing a centralized land registry system, it ensures that ownership titles are legally recognized and publicly accessible. This system protects property owners from fraudulent claims and facilitates the verification of ownership prior to any sale or transfer.

This law also sets out the process for resolving disputes related to property boundaries and title claims.

Furthermore, Law No. 189-11 for the Development of the Mortgage Market and Trusts, regulates the use of mortgages as a mechanism for financing real estate acquisitions, making property ownership more accessible to individuals and businesses. It also introduces trust structures, which are increasingly used for real estate development and management. Trusts allow investors to pool resources for large-scale projects, offering a flexible and secure way to manage assets and liabilities in real estate ventures.

In the Dominican Republic, various acquisition structures can be employed for real estate transactions, depending on the needs and goals of the investor. Typically, individuals and entities can acquire real estate directly through purchase agreements or indirectly through corporate structures such as local companies, joint ventures, or trusts. The use of corporate vehicles is common for larger projects or when foreign investors are involved, as it offers flexibility in managing ownership and investment interests.

For foreigners, the legal framework is generally favorable. Under Dominican law, there are no significant restrictions preventing foreigners from acquiring real estate in the country. Both individuals and legal entities, whether domestic or foreign, enjoy equal rights in acquiring and owning property. This openness has made the Dominican Republic an attractive destination for international investors in the real estate sector, particularly in areas such as tourism and vacation homes.

However, certain restrictions apply in specific areas or for particular types of land. According to Article 10 of the Constitution of the Dominican Republic, foreigners are prohibited from owning properties within 50 kilometers of the national borders. This restriction is primarily for national security reasons and applies to land near the borders with Haiti to the west and other designated border zones. This constitutional limitation is enforced to protect the sovereignty and security of the country, and exceptions are not commonly granted.

Additionally, while foreigners can acquire beachfront properties, there are regulations regarding the use of the maritime zone—the 60-meter-wide strip of land measured from the high tide line along the coast—which is considered public domain and cannot be privately owned. Although the maritime zone cannot be owned outright, concessions can be granted for its use, typically for commercial or tourism purposes, subject to governmental approval.

Another potential limitation relates to protected areas designated under environmental and conservation laws. Real estate located in national parks, ecological reserves, or other protected zones may be subject to strict development regulations, and certain activities or construction may be restricted or prohibited altogether. These restrictions are intended to preserve the natural resources and biodiversity of these areas, aligning with the country’s environmental protection policies.

The real estate registry system in the Dominican Republic is governed by Law No. 108-05 on Real Estate Registration and its accompanying regulations. This legal framework shows a comprehensive system for the registration and management of real estate transactions, ensuring the legal certainty and transparency of property ownership.

The National Registry of Title (Registro Nacional de Títulos) is the main entity responsible for maintaining the official record of property ownership. Every real estate transaction, whether it involves the transfer of ownership, the creation of a mortgage, or other encumbrances, must be duly recorded in this registry to be legally recognized. The registration of these transactions serves as public notice, guaranteeing that third parties are aware of any legal claims or rights over the property.

The process begins with the land demarcation and surveying by the National Directorate of Land Registry (Dirección Nacional de Mensuras Catastrales), which ensures that each property has a defined and recognized boundary. After the demarcation is completed, the property must be registered under the name of the rightful owner in the National Registry of Title, which issues a Certificate of Title (Certificado de Título) as proof of ownership. This certificate is essential, as it constitutes the only valid and legally binding proof of real estate ownership in the country.

One of the key features of the Dominican real estate registry system is its principle of publicity, meaning that all registered information related to a property is publicly accessible. This transparency is intended to protect the rights of property owners and prevent disputes, fraud, or multiple claims to the same property. Before any real estate transaction can be completed, it is customary to conduct a title search to verify that the seller is the legitimate owner and that there are no pending legal claims, liens, or encumbrances on the property.

Another critical element of the system is the guarantee of legal certainty provided by the registration process. The Dominican Republic operates under the Torrens System, where once a title is registered, the registered owner enjoys an incontestable right to the property, subject only to registered encumbrances. This system minimizes the risk of legal disputes over ownership and offers strong protection for property rights.

Additionally, the law facilitates the resolution of real estate disputes through the Land Courts (Tribunales de Tierras), specialized judicial bodies that handle issues related to property boundaries, ownership claims, and registration conflicts. These courts ensure that disputes are resolved within the framework of the real estate laws, providing an efficient mechanism for conflict resolution.

In summary, the real estate registry system in the Dominican Republic is designed to promote transparency, legal certainty, and the protection of property rights. It ensures that all transactions are properly recorded, and that ownership is clearly established, thus fostering a secure environment for both domestic and foreign investors.

In real estate transactions in the Dominican Republic, the seller has significant legal responsibilities, which are typically formalized through contractual representations and warranties included in the purchase agreement. These representations and warranties serve to protect the buyer by ensuring that the seller guarantees certain facts about the property being sold, and by assuming legal responsibility in case these facts prove to be false or inaccurate.

One of the primary representations made by the seller is the guarantee of clear and marketable title. According to Dominican law, specifically the provisions of the Civil Code and Law No. 108-05 on Real Estate Registration, the seller must assure that the property being sold is free of encumbrances, liens, or claims by third parties, unless otherwise disclosed in the contract. This includes guarantees that the property is not subject to any pending legal disputes, mortgages, or unpaid taxes. The issuance of a clear Certificate of Title by the National Registry of Title is typically required to confirm that the seller holds valid ownership of the property and that it can be legally transferred to the buyer.

The seller is also responsible for ensuring that the property complies with all relevant zoning laws, land use regulations, and environmental protections. Failure to disclose any issues related to these areas can lead to legal claims by the buyer, as the seller is obligated to provide full and accurate information about any restrictions or legal requirements that could affect the buyer's use or enjoyment of the property.

The seller must also warrant that there are no hidden defects (vicios ocultos) that could significantly impair the value or use of the property, which were not apparent at the time of sale and not disclosed to the buyer.

Finally, it is common for purchase agreements in the Dominican Republic to include indemnification clauses, which specify the seller's obligation to compensate the buyer in case of losses arising from any breach of the seller's representations and warranties. These clauses provide further protection to the buyer, ensuring that they are made whole if any undisclosed or misrepresented facts cause financial harm after the transaction is completed.

In summary, the legal responsibility of the seller in Dominican real estate transactions is significant, encompassing both the obligation to transfer clear and marketable title, and the duty to disclose any material information that could affect the buyer’s decision to purchase the property. Failure to meet these obligations can result in legal claims, indemnification, or other forms of compensation.

In the Dominican Republic, mortgages are the most common form of guarantee used in the financing of real estate and other significant assets. Governed by the Civil Code and Law No. 189-11 for the Development of the Mortgage Market and Trusts, mortgages provide a legal mechanism by which a lender secures repayment of a loan by placing a lien on the property of the borrower. The property, while remaining in the borrower’s possession, serves as collateral for the loan, and the lender has the right to foreclose on the property in the event of a default.

A mortgage must be formalized through a public deed (acto auténtico), typically executed before a notary, and registered at the National Registry of Title to be legally enforceable. Once registered, the mortgage is noted in the property’s title record, providing public notice that the property is encumbered. Mortgages are commonly used not only for the purchase of real estate but also for refinancing existing properties or financing large development projects.

In addition to mortgages, several other types of guarantees are commonly used in the financing of assets in the Dominican Republic:

Pledges (garantías): This refers to a security interest in movable property, such as machinery, vehicles, or shares of stock. Unlike a mortgage, which applies to immovable property (real estate), a pledge can be applied to personal property that the borrower uses as collateral to secure a loan. The borrower retains possession of the pledged asset, but in the event of default, the lender has the right to seize and sell the asset to recover the loan amount. Pledges are governed by the Dominican Civil Code and require registration in certain cases, such as for shares in a company.

Trusts: These have become increasingly popular in the Dominican Republic for real estate and project financing. A trust allows an asset, such as real estate, to be transferred to a trustee who manages it on behalf of the beneficiaries. Trusts can be used to secure financing by placing the asset in a separate legal entity, ensuring that it is protected from claims by other creditors of the borrower.

This structure provides a flexible and secure way to finance large-scale developments or manage investment portfolios.
In summary, mortgages remain the primary form of security in real estate financing in the Dominican Republic, but other guarantees such as trusts, are also commonly employed, particularly in complex or large-scale transactions. These guarantees provide essential protection for lenders while offering borrowers flexible options to access to financing.

In the Dominican Republic, the rental of movable and business property is regulated by several laws that affect both landlords and tenants, as well as the rights and obligations of both parties. Below is a summary of the laws and regulations governing the rental of movable property and the rental of businesses in the country:

Lease contract: The Dominican Civil Code regulates the contractual relations between landlord and tenant. In lease contracts for movable property (e.g., vehicles, machinery, or furniture) and business contracts, it is important that the contract is in writing and contains clauses that clearly define the rights and obligations of both parties. To guarantee the validity of the contract, it must contain information about the object of the lease, the amount of the rent, the duration of the contract, maintenance obligations, and the causes of early termination, among others. As for its registration and formation, it is not mandatory to register the lease of movable property, but it is advisable in certain cases, especially to avoid possible disputes. In the case of the rental of businesses or commercial premises, it is common for the contract to be registered with the Chamber of Commerce and Production of the place where the property is located, which helps to have legal support.

In addition to this, there are legal mechanisms for the protection of the tenant's rights in cases of disputes, breach of contract, or abusive rent increases. In the event of a conflict, the parties may resort to the courts or resort to alternative dispute resolution mechanisms, such as mediation or arbitration.

As for the duration of the lease of movable and business property, this is usually stipulated in the contract, and it may or may not be renewable. The termination of the contract may occur by mutual agreement, due to non-compliance by one of the parties, or at the end of the stipulated period.

In summary, the legal regime in the Dominican Republic offers a clear and well-regulated structure for leases of movable property and businesses, ensuring that both landlords and tenants are protected under the law. However, it is essential that contracts are formalized in writing and that the parties comply with their legal and tax obligations.

In the Dominican Republic, the construction or restructuring of assets requires several administrative permits to ensure compliance with legal, safety, and environmental standards. These permits are granted by various government institutions depending on the type and scope of the project. Below is a summary of the main permits that are generally required:

Land Use and Zoning Permit: This is issued by the local municipalities. This permit ensures that the intended construction or restructuring project complies with the zoning regulations of the area where the property is located. Each municipality has specific land use plans that dictate whether a certain plot of land can be used for residential, commercial, or industrial purposes.

Construction Permit: This is also issued by the local municipalities. This is the primary permit required to begin any construction work. It ensures that the building plans meet local building codes, safety standards, and other technical requirements. The project must be reviewed by engineers or architects employed by the municipality.

Environmental Impact Assessment (EIA): This is issued by the Ministry of Environment and Natural Resources (Ministerio de Medio Ambiente y Recursos Naturales). For large projects, especially those involving significant changes to the landscape, an EIA may be required to evaluate the potential environmental consequences of the project. This applies to commercial buildings, factories, or projects near protected areas, water bodies, or urban developments.

Non-Objection Certificate: These can be issued by multiple entities, such as the electricity body, water regulator (INAPA), and/or the Ministry of Public Works and Communications (MOPC). There may be required for projects that involve the installation of utility systems such as electricity, water, sewage, and roads, the relevant authorities must provide no-objection certificates indicating their approval.

Fire Safety and Risk Prevention Permit: This is issued by the National Fire Department or a certified fire safety entity. This permit ensures that the construction or restructuring project adheres to fire safety regulations, including the installation of fire exits, sprinklers, and other necessary safety measures.

Health and Sanitation Permit: This is issued by the Ministry of Public Health, and is particularly important for commercial buildings, restaurants, hotels, and other facilities where public health concerns are vital. The project must comply with regulations on sanitation, waste management, and the installation of septic or sewage systems.

Approval from the Ministry of Tourism: This is required for any construction or restructuring project related to the tourism sector, such as hotels, resorts, or other tourism facilities. All tourism-related projects must receive approval from the Ministry of Tourism to ensure it aligns with the country’s tourism development policies.

Other permits: Permits for the use of Natural Resources, Electricity and Utility Connection Permits, Certificate of Occupancy, among others are granted depending on the nature of the project (industrial, commercial, residential, etc.). Additional permits may be required. For example, restructuring heritage buildings or projects located in historical areas may require special approval from the Dominican Institute of Cultural Heritage.

Navigating the permit process for construction or restructuring in the Dominican Republic involves securing various approvals from municipal and national authorities. It is essential to work with local professionals such as architects, engineers, and legal advisors to ensure compliance with all legal requirements.

In the Dominican Republic, the real estate sector must increasingly comply with ESG regulations and principles, which align with both national and international frameworks. The country's legal framework has been evolving to integrate sustainability, social responsibility, and governance aspects, particularly for real estate developers, investors, and companies involved in construction. Below is an overview of the applicable ESG-related regulations and practices in the Dominican Republic:

Environmental regulations: Environmental laws are among the most developed within the ESG framework for real estate projects in the Dominican Republic. These regulations aim to promote sustainability, reduce environmental impact, and ensure that projects do not harm ecosystems or communities.

Environmental Impact Assessment (EIA): Law 64-00 on Environment and Natural Resources is the principal law governing environmental issues in the Dominican Republic, any construction, development, or real estate project that could affect the environment must undergo an EIA before receiving a permit to proceed. The Ministry of Environment and Natural Resources is responsible for evaluating and approving these assessments.

Increasingly, local regulations and standards are encouraging sustainable building practices. The government, along with organizations like the Dominican Association of Sustainable Construction (ADCS), is promoting the adoption of international standards such as LEED (Leadership in Energy and Environmental Design) certifications.

Protected areas: Law 202-04, which regulates the national system of protected areas, affects real estate projects near environmentally sensitive areas, such as national parks, coastal zones, and areas with significant biodiversity. Special permits or restrictions may apply to these regions. Developers must ensure that their projects do not harm protected species or ecosystems and may be required to restore or offset any environmental damage caused.

Social regulations: Social factors are also essential in real estate development, especially in terms of how projects impact local communities, labor rights, and housing availability.

Community impact and social responsibility: Developers are expected to engage in social responsibility initiatives, which could include investing in local infrastructure, affordable housing, or social programs that benefit surrounding communities.

In the Dominican Republic, real estate sales are subject to several direct taxes that both the buyer and seller must consider during the transaction. These taxes are imposed by the Tax Authority (DGII). Below is an overview of the direct taxes applicable to real estate sales:

Transfer tax on real estate property: 3% of the property's sale price or the property’s appraised value, whichever is higher. Typically, this tax is paid by the buyer. The tax is due within six months of the transaction. The property cannot be transferred to the new owner until this tax is paid and all legal documents are updated. Please note that the DGII assesses the property to determine its appraised value. If the purchase price declared is lower than the appraised value, the tax is calculated based on the higher value.

Capital gains tax: 27% on the net capital gain. Typically, this is paid by the seller. Capital gains tax is applicable to the profit made from the sale of real estate. The net capital gain is the difference between the selling price and the original purchase price (or appraised value if the property was inherited), adjusted for inflation, and any documented improvements or expenses directly related to the property.

Property tax on real estate holdings (IPI): 1% annually on properties with a value exceeding DOP 9,491,042 (2024 threshold, which is adjusted annually). This tax is paid by the property owners. This tax is not directly linked to the sale of property, but it is an important tax to be aware of for property owners (individuals). It applies to individuals who own real estate valued above the threshold. Properties below the threshold, as well as properties held by companies, are not subject to IPI. In real estate sales, unpaid IPI may need to be settled before the sale can proceed. The property used as a primary residence may also be exempt from this tax.

Inheritance tax: 3% on the appraised value of the property. This tax is paid by the beneficiary of the property (the person receiving the property by inheritance). If the property is transferred through inheritance, the recipient must pay this tax. This is similar to the transfer tax but is applied when the property is passed on outside of a sale.

Gift tax: The Dominican Republic imposes a gift tax at a rate of 27% and is typically paid by the person who receives the donation.

Tax on sales by non-residents: Non-resident sellers of real estate in the Dominican Republic are subject to the same capital gains tax as residents, but they may also face additional withholding taxes or reporting requirements depending on their country of residence and any applicable tax treaties. The Dominican Republic has double tax treaties with Canada and Spain.

Both buyers and sellers must be aware of all applicable taxes to ensure compliance and avoid delays in property transfers. Legal advice and tax planning are often recommended to navigate these tax obligations effectively.

Chapter authors and key jurisdiction contacts: 

Marguerite Brown | Deloitte Legal | Dominican Republic, Indira Ogando | Deloitte Legal | Dominican Republic and Marcela Peña | Deloitte Legal | Dominican Republic

Download: Handbook for Real Estate Transactions