Not for the faint-hearted, gullible, stupid or otherwise impaired adventurer but, if you are none of these things other than an ‘adventurer’, building your own home is eminently do-able in the Dominican Republic.
The ingredients for this recipe include a sense of humor, a good lawyer (which does not necessarily mean one who speaks good English), patience, a plot of land, an architect (same applies as for lawyer), the ability to laugh at yourself, an engineer/master builder (see lawyer and architect), plans, permissions, your hard earned money to purchase all of the above, and………..did I mention a sense of humor?
Readers will note that the article is entitled building a home in the Dominican Republic. I am assuming that your wish is to build a house that you will one day live in - either immediately it is finished or at some stage in the future when you retire from the working world. I am not addressing myself to the concerns of property investors who buy up large numbers of properties or large tracts of land with a view to building homes for sale to others or for rental to vacationers. This is considered a business here and different rules (and taxes!) apply. And in any event I have some reservations about the ethical principles on which that could be based in a third world country and how much the indigenous inhabitants really benefit from such activity. But, I will keep those to myself as they are no part of ‘home’ building!
This article will be divided into three parts: Part 1 will cover finding your plot of land, ensuring it is saleable by the persons wanting to sell it to you (!), title searches and finding a good lawyer. Part 2 will examine finding an architect and a builder and Part 3 will cover the innumerable permissions needed before construction can start, the actual construction itself and the use and variability of subcontractors.
The first requirement is a plot of land. The purchaser will need to decide which location suits them within the laws of the country - it is, for example, not possible (and certainly not advisable) to build on the beach. Law 305 of 1968 sets out a 60 meter zone from the high tide mark inland, where building is not permitted without a special permit from the Government. This means in effect that all beaches are public property although it has recently been commented on in the press, how some of the large hotel chains seem unaware of or unwilling to comply with this law, or perhaps they have obtained a special permit. The second thing to look for is whether the plot of land you wish to purchase has the sorts of services you want - power, water, sewage and the like. The further away from towns and tourist developments you get, the less this is likely, but of course you can provide all these services for yourself if your prime goal is a place up in the hills, off the beaten track or in the back of beyond.
We will pass over whether the plot of land you have spotted is for sale, since most plots will be for sale if the price is right. Far more important is the question of whether the owner is indeed the owner and whether they have the right to sell it, namely it is unencumbered by any liens or litigation over disputed ownership. This is where a good lawyer comes in. By this I mean a lawyer who is working in his client’s interests and is prepared to manually search the title to the land at the local Title Registry office. Many lawyers will simply apply to the Registrar with the correct land parcel and cadastral district numbers and leave it to the Registrar to undertake the search and produce the required certificates. Indeed, by law, it is the Registrars responsibility and not the lawyers.
Visiting a Title Registry Office here in the Dominican Republic is an education all of itself - the filing system is usually piles of folders tied with string mounting upwards from the floor! It is thus not totally unsurprising that mistakes can happen and an overworked Registrar does not have the time to do a thorough job. Worse than this are the Land Registry scams which came to light last year but which date back 50 years or more. One national paper, Diario Libre, investigated what they called a ‘mafia’ involving lawyers, judges and Land Registry personnel whereby some plots changed hands 3 times in a 24 hour period through the issuance of duplicate titles, all without the ‘real’ owner knowing anything about it. This was not, by the way, a scam directed at foreigners; it was a scam directed at Dominicans by Dominicans. Foreigners, of course, are potentially even more likely to find such an ‘encumbrance’. As a footnote, whilst some of the shady lawyers involved in the ‘mafia’ have been prosecuted, the one person without whom none of this could have happened, the Land Titles Registrar, decided to take early retirement in order to write poetry! Yes the justice system in the DR is not without its idiosyncrasies either!
A good lawyer will painstakingly do the search him or herself, working in the Registrar’s office with the amazing filing system. Recently the DR is beginning to convert to a computerized system of land title records. It is probably safe to say that eventually this will simplify matters, but it is unlikely to do so immediately since inevitably there will be teething troubles. The good lawyer, as indicated above, should not be equated with one who speaks English. There are honest, diligent lawyers who are multi lingual. There are also lawyers who speak English, specialize in the foreigner who does not speak Spanish, charge a lot more for their services and know every trick in the book. Including getting the client to sign on the wrong line so that the lawyer ends up as ‘owner’ of the property and the foreigner as ‘witness’ to the signature! Take the recommendation of someone you trust when looking for your lawyer, ask around, find someone who used the lawyer for the same task you wish to use them for and then were satisfied with the outcome. Check also how long the lawyer has been in business and who their family is. High profile does not necessarily equal honest. If you are really keen, check how many lawsuits against that lawyer are lodged with the Supreme Court………………
It is possible for the title search to be carried out by the intending purchaser. This is not recommended if you don’t know your way around Dominican bureaucracy and impossible if you do not speak Spanish. For those who do, all that is required is a photocopy of the title in question, a copy of the survey or plan of the property, showing where it begins and ends, a copy of the last luxury tax property payment (or exemption from same), a solicitud – a letter in Spanish requesting a title search, a copy of your ID (cedula if you live here and have residency or passport if you do not) as well as receipt proof that you have paid in advance for the search at the local tax office (Rentas Internas). From here you will require two receipts, numbers 232 and 10 and a 30 pesos tax department stamp.
Given the enormous interest generated by the Diario Libre investigation into the titles ‘mafia’ I personally searched my own title, some six years after purchase, to make sure it had not changed hands without my knowledge and a duplicate for the same land had not been issued to someone else! Although I did not really have any doubts about the validity of my title, particularly since we had lived (and learned) in the DR for some 7 years prior to this purchase, I had no way of knowing if the ‘mafia’ had spread to Puerto Plata and if what had indeed been a valid title when we purchased had subsequently become one ’shared’ between two (or more!) of us. The reader will be pleased to learn that all is well with my land title. However it should be noted that quite apart from being street smart about the sort of things which could go wrong, we purchased our land in an area 97% owned by rich Dominicans. We were thus treated with the same sense of honor as they were. It also helped that we had known the lawyer for some time and that the realtor’s office was just down the corridor from my husband’s office in the British Consulate. Potential buyers who seek to purchase before they move to the DR will not have the same advantages.
Usually, plots of land for sale in development areas, marketed via time honored channels, will belong to the company selling. Note the use of ‘usually’…..this is not foolproof! However, the further away you venture from ‘tourist’ areas, the potential of other hazards increases. If the seller is not a commercial company but a Dominican family, for example, they may truly believe that they have clear and undisputed title to the land. Until they decide to sell it. At which point competing ‘claims’ may well surface - a distant cousin who claims part of the land is his inheritance from a great grandparent long deceased, for example. This would tie the potential purchaser up for years in legal tribunals and be costly in legal fees; far better to avoid situations like this from the outset.
The two solutions to all of these issues are having a good lawyer working in your best interests and title insurance. Technically speaking the DR Government provides title insurance, in common with many Latin American countries. The Land Registry law established an indemnity fund from which to settle claims made as a result of the Registrar’s error. In practice, whilst the law regarding the fund was established, no money was ever put into the fund! This gap in provision is now being addressed commercially by two insurance companies - Stewart Title and First American Title Insurance. There are many purchasers of land in the DR who would not dream of carrying out such an undertaking without title insurance. This was not operational in the DR when we bought our land on which to build, so I cannot speak from personal experience. All I would suggest checking is whether title insurance with these companies affords the insured the protection of the US parent company and its assets, or whether protection is limited to the assets of the DR subsidiaries of these companies, because the differences could be considerable.
Assuming the land is the sellers to sell, the purchaser has the funds and the price is agreed, the lawyer will then draw up a contract of sale and the transaction will take place. The lawyer should also arrange for the transfer of title to the name of the purchaser - this usually takes about 6 weeks in Puerto Plata but other parts of the Dominican Republic may vary. Transfer taxes are currently 3% of sale price plus a 1.3% stamp tax for documents but can be avoided by the purchaser setting up a corporation. The first property we purchased here 10 years ago we put on a private corporation (the cost of setting up the corporation was about the same as the total of transfer taxes). In those days this was not so much to avoid taxes as for the added protection a corporation offered in the event of the ‘foreigner’ falling foul of the authorities (real or perceived!) - a corporation would have remained the owner of the property regardless of its president being accused of some nefarious deed.
Nowadays, there is far less need for such protections. In fact a putting the property on a private corporation is no longer such a good idea. In 2006 the Fiscal Reform Act introduced taxation on the assets of defunct companies. Most companies which carry a property alone are non-trading companies which heretofore were exempt from company taxation. Since this is no longer the case it is wise to seek legal advice on this matter. There can be no ‘one prescription fits all’ since individual circumstances will vary.
It is a common practice in the DR for the sum the purchaser pays for the land to be ‘reduced’ when it appears in the contract of sale - this is a well established method of evasion of part of the transfer taxes. Thus the purchaser has one sum on the Contract and a separate receipt for a higher sum, viz. what he actually paid. Tax authorities have now set a minimum value for property in most localities in order to counteract this practice, but the minimum value will still be less than the commercial value or what the purchaser has actually paid. This is an issue of tax fraud, a matter which the current Government is becoming increasingly keen to combat and if the purchasers intention is to resell the property in the near future, they should be aware that capital gains are taxed at 25%, so that undervaluation on the initial contract could end up meaning a greater tax liability at the point of future sale.
So, now you have your land, what are you going to build on it? You may, of course, choose to leave it empty for a while - you will still be liable for annual taxes on it - or you may wish to set about the task of drawing up plans for building. In Part 2 of this article I will cover how to go about looking for an architect and a builder. Yes, I know this means waiting until next month, but it is all good training for life in the Dominican Republic, where everything takes time………………………
Ginnie Bedggood - Bedggood_bush@hotmail.com
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