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Buying property in the Dominican Republic: scams and pitfalls

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risks pitfalls buying real estate The Dominican Republic

Everything you need to know is included in our The Dominican Republic Property Pack

The Dominican Republic's growth potential and beautiful coastlines are drawing the interest of foreign real estate investors.

But it's worth noting that navigating the property market here can be a bit of a complex journey, especially for those who aren't local residents. There are plenty of potential hurdles and hidden pitfalls along the way that could easily catch you off guard if you're not careful.

Both our property-buying clientele and our local partners have raised several common concerns with us. We've listed them all in our Dominican Republic Property Pack.

We’re going to take a closer look at a few of these in this article.

Is it safe or risky to invest in real estate in the Dominican Republic?

Safety concerns are paramount when venturing into any foreign property market.

The Punta Cana region, immensely popular among foreign buyers, has witnessed its share of property scams.

An infamous incident involved Canadian investors purchasing beachfront properties, only to later discover they were built on protected lands. The government subsequently razed these properties, leaving the investors bereft of their investment.

The legal landscape of property ownership in the Dominican Republic presents its own challenges. The country has a historical problem with overlapping land titles, as seen in the Bahia de Las Aguilas region. Disputes over a massive 450 square kilometers of land persisted for decades because multiple parties held conflicting titles. It was only recently, in the 2010s, that the government sought to untangle this intricate web.

When compared to other nations, the Dominican Republic does offer a fair degree of transparency in its real estate sector. However, it might not match the streamlined processes familiar to those from North American or European backgrounds.

For example, the USA's standardized Multiple Listing Services (MLS) system simplifies property searches and price comparisons. The absence of such centralized platforms in the Dominican Republic makes it crucial to collaborate with reliable local advisors.

Resolving property disputes in the Dominican Republic can be likened to its laid-back Caribbean tempo: lengthy and requiring patience. An illustrative case involved an American couple in the Samana Peninsula. After buying what they believed was their dream plot, they were soon confronted by another party claiming ownership based on an overlapping title. This legal tango extended over three tedious years.

The government's stance on the property market is somewhat ambivalent. On one hand, the 2007 "Law on Mortgage Market Development and Trusts" sought to bolster the property market. This legislation aimed to shield buyers by instituting better regulation of real estate agents and developers. On the other hand, certain restrictions, like the prohibition of foreigners owning land within 10 kilometers of the border without special permissions, can complicate matters.

Cultural dynamics play a pivotal role in property transactions. One such custom is the "San Isidro" or "mordida", which essentially translates to a 'tip' or bribe. While not restricted solely to property dealings, an awareness of these cultural nuances can pave the way for smoother negotiations.

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Avoid these pitfalls when purchasing property in the Dominican Republic

The concept of "Deslindado"

When purchasing residential property in the Dominican Republic, one unique pitfall you might not be aware of, particularly as a foreigner, is the issue related to "Deslindado" properties.

In the Dominican Republic, not all properties are properly surveyed and registered in the same way as in many other countries. The process of "Deslindado," which means having the property officially surveyed and its boundaries legally defined and registered, is crucial.

Here's the context. Many properties in the Dominican Republic are not deslindado. This means their exact boundaries might not be legally defined.

When you buy such a property, you risk future boundary disputes with neighbors or discovering that the property is smaller than what you were led to believe.

This issue is relatively common, especially in rural areas or in properties that have not changed hands for many years. To avoid this pitfall, you should ensure that the property you are interested in is deslindado.

You can do this by asking for the property's "Certificado de Título" (Title Certificate) and confirming its status with a local attorney or at the Registro de Titulos (Title Registry).

The risks related to “Posesión”

Another unique pitfall to be aware of when buying residential property in the Dominican Republic, especially as a foreigner, is the concept of "Posesión," which relates to squatter's rights.

This is particularly relevant if you are looking at purchasing land that appears unused or vacant.

In the Dominican Republic, if someone occupies a property for a certain period without the owner's objection, they can gain legal rights to that property. This is a concept deeply rooted in Dominican law and culture, known as "Posesión."

It means that if you purchase a property that has been occupied by someone else (even without a formal lease or agreement), that person might have acquired some legal rights to the property.

The context in which this mistake might happen is when buying properties that are not clearly inhabited or seem abandoned. This situation is more frequent in rural areas but can also occur in urban settings.

To avoid this pitfall, you should conduct thorough due diligence.

This includes physically inspecting the property, inquiring with neighbors, and consulting with a local attorney. Confirm whether the property has been subject to any adverse possession claims or if there are any individuals who might assert such claims.

Also, ensure that the property's title is clear of any annotations or claims related to "Posesión."

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"Conflicto de Terrenos" or land disputes

A further unique and often overlooked pitfall when buying residential property in the Dominican Republic is the risk associated with "Conflicto de Terrenos" or land disputes, particularly linked to inherited properties.

This issue is deeply rooted in the local culture and legal system and might not be immediately obvious to a foreign buyer like yourself.

In the Dominican Republic, it's common for properties to be passed down through generations without formal legal proceedings. This can lead to situations where multiple family members have an informal claim to the same piece of land, known as "Conflicto de Terrenos."

When you buy a property that is part of an inheritance, there is a risk that unresolved family disputes or undisclosed heirs might surface later, challenging your ownership.

This situation is more prevalent in rural areas or in older properties that have been in families for generations. The risk is that after purchasing a property, you might find yourself entangled in a legal battle with family members who claim they have rights to the property.

To navigate this, you should conduct comprehensive due diligence.

Ensure the seller has clear and uncontested legal ownership, and all heirs (if any) have formally relinquished their rights. This process often involves more than just reviewing the title.

It may require investigating the family history of the property and consulting with a local attorney well-versed in Dominican inheritance laws.

"Zonas de Alto Riesgo" or high-risk zones

Another specific and less-known pitfall when buying residential property in the Dominican Republic, especially as a foreign buyer, is the potential issue related to "Zonas de Alto Riesgo" or high-risk zones.

This is particularly important in the context of natural disasters and environmental risks.

In the Dominican Republic, certain areas are prone to natural hazards like flooding, landslides, or hurricanes. These areas, known as "Zonas de Alto Riesgo," might not be immediately identifiable to someone unfamiliar with the local geography and environmental patterns.

Buying property in these zones can lead to significant challenges, including property damage, difficulties with insurance, and even issues with resale value.

This risk is more prevalent in coastal regions and certain rural areas, but can also be found in urban settings where development has occurred without proper regard for environmental factors.

As a foreign buyer, you might not be aware of these risks or the history of natural events in a given area.

To mitigate this risk, it's crucial to research the environmental history and risks associated with any property you're considering. This can involve consulting with local environmental experts, reviewing government-issued maps or reports on high-risk zones, and inquiring about the history of natural disasters in the area.

Additionally, discussing these concerns with a local attorney or real estate agent who understands the nuances of Dominican environmental risks can be invaluable.

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"Comunidad de Bienes" or joint property ownership

Yet another unique and often overlooked issue when buying residential property in the Dominican Republic is related to "Comunidad de Bienes" or joint property ownership, particularly in condominiums or residential complexes.

This concept is deeply ingrained in the Dominican legal system and can present unique challenges to foreign buyers like yourself.

In the Dominican Republic, properties within a condominium or residential complex are often governed by a "Comunidad de Bienes" arrangement. This means that while you own your specific unit, you also have shared ownership and responsibility for common areas and facilities.

Issues can arise if the condominium or complex does not have a well-established or effectively managed homeowners' association (HOA).

This situation becomes more complicated if there are disagreements among owners about maintenance, improvements, or management of common areas.

As a foreign buyer, you might not be familiar with the local legal implications of joint property ownership and the dynamics of HOA governance in the Dominican Republic.

To avoid potential pitfalls, you should thoroughly investigate the HOA or equivalent body governing the property. This includes understanding their financial health, maintenance plans, and any ongoing disputes or litigation.

It's also important to review the condominium's regulations ("Reglamento de Condominio") to understand your rights and responsibilities as an owner.

"Ley de Costas" or the Coastal Law

Another unique aspect to consider when buying residential property in the Dominican Republic, particularly relevant to foreign buyers like yourself, is the impact of "Ley de Costas" or the Coastal Law.

This law governs the use and ownership of coastal and beachfront properties, which are often sought after by foreign investors.

The Ley de Costas establishes a public domain zone along the coastline, typically up to 60 meters from the high tide line, where private property ownership is restricted. This means that even if you purchase a beachfront property, the actual beach and a significant portion of the land adjacent to it might not be privately owned, and you might have limited control over it.

This situation is particularly relevant in coastal areas that are popular tourist destinations. As a foreign buyer, you might not be fully aware of the implications of this law on property rights and usage.

There is a risk of buying a property under the assumption that it includes beachfront access or ownership, only to find out that this area falls under public domain.

To navigate this, you should ensure that the property's legal boundaries are clearly defined and understand how the Ley de Costas affects these boundaries.

It is advisable to consult with a local attorney or real estate expert who can provide detailed information about the property's legal status concerning the coastline regulations.

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"Avalúo Catastral" or cadastral appraisal

An additional specific consideration for you as a foreign buyer of residential property in the Dominican Republic is the issue of "Avalúo Catastral" or cadastral appraisal.

This is a valuation system used by the government to determine property taxes, and it can have unique implications for your investment.

In the Dominican Republic, the "Avalúo Catastral" is the official valuation of a property according to government records. This value is often different from the market value and can be this official valuation rather than the market value.

This discrepancy can lead to unexpected financial implications for you as a property owner.

Here's where it becomes particularly relevant for you as a foreign buyer: If you're not aware of how the "Avalúo Catastral" is determined and its implications, you might underestimate the ongoing costs associated with owning the property.

Moreover, if there is a reevaluation of property values by the government, which can happen periodically, you could face a sudden and significant increase in property taxes.

This situation is more common in areas where property values are rapidly appreciating, but the official valuations have not yet caught up. As a foreign buyer, understanding the dynamics of the Dominican property tax system is crucial.

To avoid surprises, you should inquire about the current "Avalúo Catastral" of the property and how it compares to the market value.

You should also seek information about when the next government reevaluation is expected and how it might affect your property taxes. Consulting with a local tax attorney or a real estate expert can provide valuable insights into these aspects.

"Derecho de Paso" or right of way

Another unique and important consideration when buying residential property in the Dominican Republic, especially as a foreign buyer, is the issue of "Derecho de Paso" or right of way.

This concept involves access rights that may be granted over a property to reach another property or public area, and it can significantly impact your use and enjoyment of the property.

In the Dominican Republic, it's not uncommon for properties, especially in rural or semi-rural areas, to have established "Derecho de Paso" that allow neighbors or others to traverse part of the property to access their own properties or public roads.

This right of way is often established by tradition or necessity and may not be immediately apparent from property records or a casual inspection.

The challenge for you as a foreign buyer is that these rights of way are not always formally recorded, and you might purchase a property unaware of these existing access rights.

Discovering that others have the legal right to use part of your property can be surprising and may affect your plans for privacy, development, or even security.

To avoid this pitfall, it's essential to conduct a thorough investigation before purchasing. This should include a physical inspection of the property and inquiries with neighbors and local authorities. Additionally, consulting with a local attorney or a real estate agent familiar with the area can help uncover any unrecorded "Derecho de Paso" that might affect the property.

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"Zonas Protegidas" or protected zones

A further unique and potentially challenging aspect for you as a foreign buyer of residential property in the Dominican Republic is understanding and dealing with the "Zonas Protegidas" or protected zones.

These are areas designated by the government for environmental conservation or historical preservation, and they come with specific regulations and restrictions that can impact property ownership.

In the Dominican Republic, protected zones can include areas near national parks, reserves, historical sites, or ecologically sensitive regions. If the property you are interested in falls within or close to a "Zona Protegida," there may be restrictions on development, renovations, and land use that are not immediately apparent.

This becomes particularly relevant if you are considering purchasing property for development or significant remodeling.

The restrictions in these zones can be extensive, potentially affecting everything from the types of materials you can use to the height of buildings, and even the colors or architectural styles that are permitted.

To navigate this issue, you should conduct a thorough investigation into whether the property falls within a protected zone and what specific regulations and restrictions apply.

This research can involve consulting with local environmental agencies, historical preservation societies, and, importantly, a local attorney who is experienced in dealing with properties in "Zonas Protegidas."

By being aware of the existence of protected zones and the potential implications on property rights and usage, you can make a more informed decision and plan accordingly to avoid legal issues and ensure your property investment aligns with your expectations and the local regulations in the Dominican Republic.

"Derecho de Superficie" or surface rights

Another specific consideration for you as a foreign buyer of residential property in the Dominican Republic is the concept of "Derecho de Superficie" or surface rights.

This legal concept can significantly impact your property rights and is particularly relevant in the context of land leases and developments.

"Derecho de Superficie" in the Dominican Republic refers to a situation where one person owns the land (the landowner) while another person has the right to build on or use the surface of that land (the surface right holder). This arrangement is more common in commercial developments but can also apply to residential properties, especially in developments or areas where land ownership is separate from building ownership.

For you as a foreign buyer, the challenge is that you might purchase a building or a structure without owning the land on which it stands.

In such cases, your property rights are limited to the structure itself, and you may have ongoing obligations to the landowner, such as paying rent or maintaining certain conditions. Moreover, the tenure of your rights to the property may be dependent on the terms of the surface rights agreement, which can vary greatly.

To address this issue, you need to carefully review the property’s legal documents to understand the nature of the ownership.

Verify whether you are buying both the land and the structure or just the structure with surface rights. It’s crucial to understand the terms of any surface rights agreement, including duration, renewal conditions, and financial obligations.

Consulting with a local attorney experienced in Dominican real estate law is essential to navigate this complex area.

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