Buying Real-Estate in Sosua

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Real Estate Buying for foreigners

Article by: Janet Tims

For foreign buyers, real estate in the Dominican Republic is very attractive, not least because of the climate, but also because of the prices which are noticeably lower than other Caribbean Islands. Added to this is the fact that there are no restrictions on the purchase of real estate in the DR by foreigners. You don't need to be a resident. If you can afford it, you can buy it! There are also no restrictions on renting the property out, so buying real estate in the Dom Rep can be a good investment.

If you are considering buying property in the Dominican Republic, consider the following important points:

1. Property Title

The title is basically the right of ownership of the property. Whover owns the title, owns the property. This goes back to the Land Registration Law (No. 1542 of 7 November 1947). Each region maintains records of title ownership at the offices of the Registry of Titles and provides certificates for each legally registered land owner. This law dictates that the Title Certificate guarantees the correct and legal owner.

When you buy land in the Dominican Republic, your lawyer will ensure that you, as the new legal owner are registered with the Registry of Titles. The important thing to check before buying, is that the current Title is in order. Check that the current owner has a valid Title, that the ownership rights are intact, that there are no incumbrances, and that there are no problems that would affect your getting the new title certificate when the sale completes.

It is possible that obtaining the new title certificate could take some time, due to issues with the present owner of the property having tax arrears; sometimes a property has never had construction documents filed so no tax has been paid. In these cases it could be a lengthy problematic process to obtain a new title. Also your sale may grind to a halt as the present owner cannot pay the back taxes and fines.

So it is essential that all these matters are checked thoroughly before you buy.

2. Property Taxes

Like most other countries, the Dominican Republic taxes real estate, and if your are buying property there are some transfer taxes you will be required to pay. The first tax is a straightforward 2% of the value of the transfer. Also, there is a tax of 4%of the total value of the sale plus 12% of the 4% . Aside from this, there is the IVSS tax ( Tax on Luxury Dwellings and Empty Urban Lots) whic is an anual tax on the holding of luxury dwellings and empty urban lots whose market value exceeds RD$1,500,000 (around $45,000 US) ,which most villas will be liable for. The IVSS tax is calculated as 0.25% of the bona fide value of the property if the owner or family are owner occupiers, or 0.5% if you are renting or leasing the property out.

The bona fide value of the property is not necessarily the price as declared on the sales contract. The minimum admissible value of the property is 70% of the market value as determined by the Dominican Tax Authority (Dirección General de Impuestos Internos - DGII). Any difference between this determined value and the sale price is deemed by the Dominican Tax Authority to be a 'donation' and as such will be subject to taxes according to Law No. 2569 on Successions and Donations.

3. Building and Zoning Restrictions

The Municipal Council in each municipality generally sets the zones for their municipality, although the director of Urban Planning for each municipality may also be involved, so if you are planning to build it would be wise to check both of these parties before making a decision.

Buying Tips

As with many other countries, there are other things to check out when looking to purchase.

The property you are considering buying may look beautiful on a sunny afternoon (and lets face it - most afternoons are sunny), but how does the locality compare in the evening? Is there loud music blaring out from neighbours, or busy passing traffic? Visit at different times of the day. Explore the whole area, not just the road where the property is located. What's around the corner? If you can, try to meet the neighbours. They may be able to provide you with vital information.

Think long term. If the property has been on the market for some time - why? If it's difficult to sell now, how easy will you find it to sell further down the line.

Buying a property for most people is a big comitment. Make sure it's a decision you won't live to regret! Thankfully most foreigners who do choose to buy real estate in the Dominican Republic are able to enjoy their property unencumbered. Being aware at the beginning should ensure that you do too!