Buy a Piece of Paradise in the Dominican Republic
By Susan Haskins The Dominican Republic is one of the only places I have visited where you have to pay for your tourist visa. You stand in a line with other foreigners, pay $10 for your visa, and then stand in another line for immigration. Luckily-besides the buffet line at my hotels-this was the only time I would be kept waiting. For the local poor people, though, I was to discover that it is a country of queues. In every sizable town we passed through, people were waiting in lines, holding propane tanks in the hopes they would be one of the lucky few who would have them filled that day. It seems the Dominican government had neglected to pay the Venezuelan government for the gas the latter country has been selling them. No gas, no cooking. If you are a person of some means, of course, you never wait in line. The propane man comes to your home regularly and fills your tanks, no problem. This disparity between rich and poor is typical throughout Latin America. It is something each new governmental administration promises to address, but they never seem to get far. So why do I, and so many foreigners who live in the DR, believe in the future of this country? Despite its recent economic ups and downs (more about that in a minute), there are signs that the country's middle class is growing. I met many local people, well educated and articulate, who are working as secretaries, salespeople, tour guides, drivers, and employees for companies large and small. Most work in tourism-related fields as that industry is the country's biggest source of revenue. These people love their country, believe in its future, and are champions of the less fortunate. They see progress and opportunity around every corner. New president, new start - In 2000, the Dominican economy captured the attention of the international community and was acclaimed as having the fastest-growing economy in all of Latin America and the Caribbean. From 1996 to 2000, the president of the DR was Leonel Fernandez. During his time in office, the economy grew by over 7% a year, led by tourism and duty-free assembly plants, making clothes, and other goods for the United States. In 2001, in spite of what was going on in the rest of the world, the economy grew by 2.7%-a rate that was five times higher than most other Latin American countries. In 2002 and 2003, under the new leadership of left-of-center president, Hipólito Mejía, things turned sour. A banking crisis put the economy into a tailspin. The DR peso lost half its value against the U.S. dollar last year. Two years ago, it traded at 16 pesos to $1. (Today, it is trading at 32.5 pesos to $1.) Inflation has been pushed to 35%. Electricity blackouts, frequent enough in the DR, occur even more often now. President Mejía responded by imposing a 5% tax on exports and tourism, a 2% import surcharge, and a tax on financial transactions. But receipts have been lower than expected since businessmen are reluctant to pay more taxes as long as the government fails to cut its spending. The DR's history has been just as colorful. Between 1916 and 1924, it was under U.S. control. From 1930 until his assassination in 1961, Rafael Trujillo ruled with an iron fist. A coup and counter coup in 1965 led U.S. President Lyndon Johnson to send in the Marines. A massively corrupt government during the 1970s ruined the country economically. During the 80s and 90s, protests, riots, and more corruption ensued. Today's Dominican Republic - In May 2004, Leonel Fernandez was re-elected as president. One of the major reasons for his victory was that while he was president from 1996 to 2000, the country prospered. Fernandez promises to tidy up government finances. The economy already looks like it will recover-although it is still struggling with political and economic issues. Protests still erupt with volatility at times-most often in Santo Domingo, the capital. But in tourist areas, including the tranquil Caribbean-kissed shores of La Romana and Punta Cana, and along the northern shore from Puerto Plata to Sosúa and Cabarete, all is peaceful. No one wants to jeopardize tourism, the country's top source of revenue. Most accommodations are all-inclusive resorts and are among the least expensive in Latin America and the Caribbean, making this island truly a bargain destination. The northern coast of the DR has long been the most popular spot on the island for tourists, as well as for foreigners looking to buy property. Visitors to this area usually fly into the international airport at Puerto Plata. The town itself, which owes its name ("silver port" in English) to Christopher Columbus (who discovered the island in 1492), is crowded and bustling. Motorbikes are ubiquitous, darting in and out and around. I wouldn't want to drive here. Not only because of the constant traffic, but both sides of the narrow city streets are lined by large sewer culverts, at least a 12-inch drop off. I can only imagine what might happen if you had to swerve into one of these. But Puerto Plata is not without charm. With colorful Victorian-style houses, lively plazas, and a nice ocean promenade, it has a truly Caribbean lilt...bringing to mind Belize City or Nassau, for instance. There are some interesting tourist sites here, including the ruins of the old San Felipe Fort, the Brugal Rum Factory, and a couple of nice amber museums and galleries. (Dominican amber is the best in the world.) Still, I wouldn't want to live in Puerto Plata. Too much hustle, bustle, and congestion. Instead, I would set my sights further east along the coast. The "Acapulco of DR" - A few miles east of Puerto Plata is Playa Dorada, name to both a beautiful stretch of beach and a gated complex containing (at last count) 17 resorts, an 18-hole golf course, several dance clubs and casinos, and a sizable shopping center with a multi-screen cinema. Many visitors here never leave this complex.
A bit farther east (15 miles from Puerto Plata) is Sosúa. After Puerto Plata, it is the commerce center of the north shore, followed by Cabarete, further east. In Sosúa, you can still find a few of the lovely handcrafted houses built by Jewish settlers in the 1940s. Nearby Playa Sosúa is a gorgeous stretch of tranquil beach. Because the north shore of the DR is bordered by the Atlantic Ocean, many of the beaches here are a bit rough. But not sheltered Playa Sosúa. Occasionally referred to as the "Acapulco of DR," this area is known for its nightlife, but in my opinion, seems to attract a more sedate crowd than Cabarete, which is a popular windsurfing spot and attracts a younger, hipper crowd. Cabarete is funky, fun, and lively. Located on a lovely white-sand beach along an enormous bay, the former fishing village now caters to tourists. Surfers, windsurfers, divers, and party-makers crowd the beaches by day and the bars at night. A "perfect moment" can be had at one of the many beachside restaurants here, enjoying a meal on a warm, tropical night. Good food, good wine, twinkling lights, a cooling sea breeze rustling through the palm trees, lapping waves, your shoes kicked off, and toes dug firmly into the sand...it doesn't get much better. Between Sosúa and Cabarete you will find many lovely expanses of beaches, including Perla Marina, Seahorse Ranch, Encuentro, Punta Goleta, Kite Beach, Playa Laguna, and others. This area is home to many of the area's residential districts, both along the beach and high in the hills with an ocean or mountain view. Many foreigners have invested here. A thriving property market - Realtor Juan Perdomo of Century 21/Juan Perdomo Real Estate Company provided some perspective into the local property market. From 1989 to 1992 and from 1999 to 2002, the area suffered through an economic recession, he said, and there was no growth at all in real estate sales. Prices were stagnant. From 1993 through 1998, though, a real estate boom occurred and prices rose accordingly. He is seeing this trend repeat itself now, with properties starting to sell steadily beginning in 2004. He is confident that prices will continue to rise, and investments appreciate, during the coming years. Juan informed us that along the north shore, prices of well-built residences are highest in Sosúa (approximately $15 per square foot), up to two-thirds less in Cabarete ($4 to $5 per square foot), and much less the further away you get ($2 to $2.50 per square foot). Realtor Dean Brown showed us properties along the north shore. Dean is a transplanted North Carolinian who moved to the DR about four years ago and has never looked back. He says that the generosity and hospitality of the people is one reason he stays, along with the relaxed island lifestyle. Families with young children will be happy to hear that the English-based International Schools of Sosúa is accredited in the U.S., and Dean tells us tuition is approximately $5,000 per year. Some property samplers - You can buy a magnificent ocean-view house in Sosua measuring 3,766 square feet, with three bedrooms and four bathrooms for $340,000. The property sits on 1.7 acres of land with a swimming pool. Or, how about this-a seven bedroom/six bathroom home with 5,380 square feet, on 1.11 acres of land with a swimming pool, waterfall, and Jacuzzi for $330,000-it was originally listed for $550,000. That's on the high end of the property scale. $179,000 will buy you a two-bed/two-bath house in a good location, with a swimming pool. Or an apartment in a secure complex with swimming pool for $43,500. All these properties are available through http://www.caribbeanrealtyinvestment.com It's easy to buy - In 1998, a law was written allowing foreigners to buy property in the Dominican Republic with the same rights and obligations as a Dominican citizen. The only requirement is that the Title Registry Offices keep a record, for statistical purposes, of all purchases made by foreigners. Acquiring property here is straightforward, but, still, foreigners purchasing property anywhere in the world outside their native countries need to exercise extra caution. The realtor and the notario (real estate attorney) you work with should be able to help you through the process. It never hurts to hire your own attorney, but it is common for realtors to recommend attorneys they feel comfortable with. The attorneys I have listed were recommended to me by Turalu Murdock of First American Title Insurance Company. The attorneys, in turn, recommended who they believe are the island's best real estate brokers. I trust their judgment but it never hurts to seek your own resources and advice.Real estate purchases in the DR work a little differently than in the U.S. Instead of tendering a written offer, you first negotiate and reach a verbal agreement on the price with the seller. Then, a binding "Promise of Sale" or "Option to Purchase" is prepared by an attorney and signed by both parties. At this time, the deposit or advance payment is normally made. I am told that many attorneys and notaries in the DR do not protect the buyer adequately in the "Promise of Sale." For instance, sometimes buyers are asked to pay a large percentage of the sale price without any security or direct interest over the property. (Escrow agents are rarely used.) If these funds are misused, the buyer's only recourse is to sue the seller personally-and he may have become insolvent by then. This can be particularly disconcerting if a bank forecloses on a development property. Even if the developer has not performed his basic obligations, you could still be responsible for making your payments as contracted.
Your best protection is to get a trustworthy, reliable attorney, and title insurance. In the Dominican Republic, as in many Latin American and European countries, the government provides title insurance. Unfortunately, this governmental arm is not known for its solvency, so seek out a private insurer like First American Title Insurance. Four simple steps to ownership
1. Buyer and seller sign a "Contract of Sale" before a notario who authenticates it. (Notaries in the Dominican Republic are required to have a law degree.) The Contract of Sale contains the legal description of the property, the price, and conditions of sale.
2. The authenticated Contract is then taken to the nearest Internal Revenue Office for payment of the appropriate taxes.
The authenticated Contract 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.
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 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 span from the filing of the Contract of Sale to the issuing 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. Taxes and closing costs - Expect to pay approximately 5% of the sale price for taxes and closing costs. This amount includes a transfer tax of 4.48%, document taxes, special stamps for registration, and tips. Taxes must be paid before filing the purchase at the Title Registry Office. Many buyers, with the complicity of their attorneys or notaries, have been known to evade paying part of the transfer tax by lowering the true purchase price in the Contract of Sale. This is common practice in the DR and it has become so blatant and widespread that the tax authorities have now set a minimum value for properties in some locations. But, considering that property taxes here are extraordinarily low (1% per year of the declared value), unless you are buying a high-priced property, your annual taxes will be negligible. So, committing fraud to lower your annual rate may not be worth doing...especially if, when you go to resell, and 25% capital gains taxes are due, your property is assessed at its true worth. For these reasons, you should probably do the right thing from the beginning and claim the true price of purchase in your purchase documents. Ask your attorney for advice...if you use a loophole in the law that allows you to buy property through a DR corporation you have formed, you can lessen your tax burden considerably. Inheritance of real estate - There are no restrictions on foreigners inheriting title to property in the Dominican Republic. Inheritance taxes range from 17% to 32% of the appraised value of the estate depending on the relationship between the beneficiary and the deceased. If your beneficiary resides outside the DR, inheritance taxes are subject to a 50% surcharge. As in many Latin countries, inheritance of real property is governed by a law which provides for "forced heirship," meaning that part of the estate must go to certain heirs. 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. To avoid this application, you can own your property indirectly through a holding company. Again, ask your attorney to advise you of your options. Perform due diligence - Before purchasing a property, hire a real estate attorney to do the due diligence. To start this process, the seller should provide you and/or your attorney with:
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. If the seller is a corporation, it should provide:
1. Copy of the corporate documentation, including by-laws and resolution authorizing the sale.
2. Certification from the Internal Revenue Office showing the corporation is current with its income tax filings. If the property is part of a condominium, you need:
1. Copy of the condominium declaration.
2. Copy of the condominium regulations.
3. Copy of the approved construction plans.
4. Certification from the condominium showing the seller is current with his condo dues.
5. Copies of the minutes of the last three condominium meetings. If the property is a house, you need:
1. Copy of the approved construction plans.
2. Inventory of furniture, etc. (Many properties in Latin America are sold furnished and you want to be sure that, come closing time, you get the furnishings you originally agreed to purchase and not lower-cost substitutions. This should include bathroom and lighting fixtures, etc., right down to the kitchen sink. (Tip: take photos.)
3. Copies of the utilities contracts and receipts showing the seller is current with his payments. Once all the above documentation is obtained, your attorney should go through this checklist:
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, and you should insist that he/she confirms the results of the Registrar's search by personally investigating the appropriate files at the Title Registry Office.
Survey: An independent surveyor should verify that the property being sold coincides with the one shown on the survey provided by the seller. (An exception can be made if the property is located in a previously inspected subdivision.) 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 made to any structures to confirm that the plans presented are correct and that the improvements are in good condition.
Permits: Have your attorney confirm that the property may be used for the purposes you desire. Why? Because restrictions may exist that you are unaware of. For example, a 60-meter "maritime zone" exists along the entire Dominican coastline-from the high tide mark inland-designating all beaches as public property. No building is allowed within the maritime zone without a special permit. And in tourist zones, there are specific building restrictions.
Possession: Your attorney should ensure that the seller is in possession of the property and that no squatters rights exist. Dominican law is protective of the rights of any tenants on the property, and evicting someone who doesn't want to leave willingly is time consuming and expensive. Be especially careful with unfenced properties outside known subdivisions. Fencing them before closing is advisable.
Employees: The seller should pay any employees working on the property their legal severance up to the time of the closing; otherwise you may find yourself liable for these costs later. Want a Dominican Republic passport? - It is an easy matter to obtain residency visas in the DR. You may first obtain a provisional residency visa at the Dominican consulate closest to you and then your permanent residence card at the General Immigration Office in Santo Domingo. If you buy property in the DR, your residency visa will be expedited. To speed the process, the Office for Foreign Investment Promotion has implemented a special program for foreign investors making investments of more than 200,000 DR pesos. This means you need to investment less than $6,000 to expedite your visa request. Should you want to become a Dominican national, it is easy to do so. If you were born in the DR or have a Dominican parent, you are eligible for citizenship. If you do not meet these requirements, you can apply for naturalization. This request is made to the President of the country through the Ministry of Police and Inner Affairs. Documents including birth certificate and police records from your country of origin are required, as well as an explanation of why you wish to become a naturalized citizen. You can submit documents that support your request, including copies of your Property Certificate if you have made a real estate investment, as required for a residency visa. A DR attorney will normally charge $15,000 to $20,000 to help you through this process. The naturalization procedure lasts from one to two years and then, voila, you are a passport-carrying Dominicano. |
