Non-Judicial

The non-judicial process allows for the voluntary delivery of the property by the debtor, which is formalised through a transactional agreement and payment in kind establishing the debt balance upon delivery of the property and authorising the transfer of the property, be it the one subject to the debt or a different property, in favour of the creditor.

Judicial

The judicial process is more expensive and time-consuming. Creditors resort to the real estate seizure process in the following ways:

1. Ordinary seizures: A document confirming the debt is necessary (ie, promissory note or court order) (article 673 et seq of the Code of Civil Procedure). The peculiarities of this process are as follows:

• After the creditor has notified the debtor of a payment order and a 90-day period has elapsed, the seizure may be registered before the real estate authority (Title Registry), thereby blocking the property, meaning that the debtor or any other creditor cannot register real estate transactions on that property.

• There is very little possibility to hinder or stop a real estate seizure. The law provides for limited and specific situations in which the court is obliged to suspend one.
• Within an estimated period of two to four months after the registration of the seizure, the property is awarded to the creditor or sold at a public auction.
• All liens that may have existed on the property prior to the registration of the seizure are cancelled, with some exceptions, and its transfer is made in favour of the successful awardee or successful bidder, free of liens.
• The awardee, upon presenting the judgment issued by the court, which is not subject to appeal, may request the assistance of law enforcement from the prosecutor of the property location to evict any occupant who may be living there (approximately one to six months).
• The court’s decisions on seizure cannot be appealed.

2. Foreclosures regulated by Law No. 6186 of 1963 (reserved for agricultural credit associations and mortgage secured loans):

• After the debtor has been notified and a 20-day period has elapsed, the seizure may be registered before the Title Registry, and from that moment on transactions on the property will be blocked.
• All the other characteristics explained above that apply to an ordinary seizure also apply.
• If the sale of the property did not produce sufficient value to settle the debt, the creditor may register as an unsecured creditor and, consequently, will be authorised to pursue other assets of the debtor until the debt is fully collected.

3. Foreclosures regulated by Law No. 189-11 (reserved for banks and trust companies and mortgage secured loans):

• After the debtor has been notified and a 20-day period has elapsed, the seizure may be registered before the Title Registry, and from that moment on the property will be blocked.
• All other characteristics explained above apply to an ordinary seizure.
• The creditor has the power to choose the date of the sale within the legal deadlines.

If a property owner pledges their equity as a collateral, a lender can foreclose on that equity in case of default. However, when there are co-owners, it is unlikely for the creditor to physically materialise that foreclosure on the property since a plan approved by the Title Registry is required and the property must be divided. The creditor could reach an agreement with the co-owner; if not, they must petition the court for the partition of the property.

In practice, mortgage loans are only granted if all the owners agree to the guarantee.

In mortgage contracts in the Dominican Republic, it is common to include clauses that authorise the creditor to terminate the contract in the event of non-payment of an instalment or even a fraction thereof, without the need to grant additional terms to give the debtor a notice of default.

When a debtor fails to meet a payment obligation, the creditor generally grants the debtor an additional period that varies according to that financial entity’s policies.

This concession given by the creditor is not contemplated in the Dominican legislation; rather, it results from the creditor seeking to recover the credit in cash and not incur the legal expenses of execution usually associated with communicating through emails, text messages and phone calls and, as a last resort, demand for payment via a court bailiff.

In the Dominican Republic, the rights of redemption are not clearly stated but may be derived from the following:

Dominican Civil Code:

• The debt may be paid by the guarantor or a third party (article 1236).
• A court may grant payment of the debt in instalments and suspend the execution of the real estate guarantee with a six-month grace period (article 1244 et seq).
• The debtor may offer the payment via a bailiff’s act, should the creditor refuse to accept payment (article 1257).

Code of Civil Procedure:

• The surplus amount after a public auction may be requested by the debtor (Law No. 6186, article 688).
• The debtor may interrupt the seizure process by settling the debt or making payment agreements.

Law No. 6186:

• The debtor may settle the debt at time.
• Thew debtor may challenge the procedure on the grounds of unlawful acts and breaching the law.
• The surplus amount after a public auction may be requested by the debtor.

Law No. 189-11:

• The debtor may pay off the debt within 15 days before the foreclosure begins.
• The debtor may receive the surplus from the sale.
• The debtor may submit legal objections to the seizure within the established deadlines.

When the property is acquired by a bidder at a public auction, nothing prevents the debtor from negotiating purchase from that bidder.

A creditor could pursue the co-owned property of his or her debtor but will be unable to execute the seizure due to the lack of a plan defining its size and location.

The creditor may pursue action against the debtor’s assets in multiple proceedings in the following ways:

• A creditor may pursue other actions over the debtor’s assets at the same time as a seizure, provided that the creditor has a judicial mortgage in his or her favour, obtained when the credit is backed by a judgment or a promissory note.
• Pursuant to the provisions of the Dominican Civil Code (article 2130) and Law No. 6186, if, after the sale of the property at a public auction, there remains an outstanding balance of the debt, then the creditor becomes an unsecured creditor with respect to that difference and may pursue the remainder of the debtor’s assets, as well as his or her future assets (article 192).

Conventional Mortgage

The law does not allow the creditor to simultaneously execute other personal actions against the debtor, since the creditor’s actions are limited to the properties that were set up as collateral.

Right of Redemption

A debtor who is the subject of a seizure has the right to claim the return of the surplus of the value obtained, once the debt with the creditor has been settled (article 1235 Dominican Civil Code).

Non-Judicial

A non-judicial process may take two to four months including paying tax, registering the amicable agreement and issuing a title in favour of the creditor.

Judicial

The time frame of a judicial process is estimated as follows:

• Ordinary seizures: 1 to 3 years.
• Seizures regulated by Law No. 6186: Between 8 months and 1 year.
• Seizures under Law No. 189-11: Between 6 months and 1 year.

In a real estate seizure, the formula for calculating the debt is:

Capital + interest + legal fees and expenses = debt

If, after sale at a public auction, the securities received are insufficient to cover the debt, the creditor may apply the amount from the sale, first to legal fees and expenses, then to interest, and finally to the capital.

Both Law No. 6186 and the Dominican Civil Code grant the creditor the power to become an unsecured creditor, meaning the creditor has the ability to continue to pursue the debtor’s assets until the total collection of the debt, but no longer has the right of preference over other creditors.

The most common entities for joint ventures are:

• Limited liability company (SRL): An owner’s liability is limited to the capital it contributes to the company, with a minimum of two members.
• Public limited company (SA): Shares are freely traded, and at least two shareholders are required.
• Simplified joint-stock company (SAS): This is a flexible business model with less restrictive regulations, with a minimum of two shareholders.

A joint venture requires the collaboration of the partners on a specific project. Commonly, one partner may contribute with assets such as capital or land and another with know-how. Specific projects may include, for example, renewable energy projects, tourism projects, etc.

Persons with ownership interests in a real estate joint venture must act in accordance with the constitution, laws and regulations of the country and in good faith, prioritising the best interests of the joint venture.

Considering the real estate legal system, there are three types of mechanisms to seek remedy against owners who violate those duties:

• Registry actions (Law No. 108-05): Preventive warnings may be registered against the title to make any conflict related to the property enforceable against third parties intending to register a promissory note, mortgages and caveats.
• Judicial proceedings: These may be referrals seeking to stop an act that is clearly illegal or that would cause irreversible damage, consisting of any of the following claims: a constitutional rights action; a real estate lawsuit; or a civil or commercial lawsuit.

• Arbitration: If the remedies sought pertain to commercial or civil matters, the parties may agree to local or international arbitration.

Conflicts that relate to decision-making within the joint venture, when there is no amicable agreement for their solution, and provided that they do not affect the property rights of a property (limit them, restrict them, modify them or create burdens), are resolved in one of three ways:

• Contractually: in accordance with the process established in the joint venture agreement;
• Judicially: if the joint venture agreement did not include a provision for the resolution of the conflict in question; or
• By arbitration: as established in the joint venture agreement.

Any conflict that is not resolved amicably and that involves the modification, limitation or creation of a burden on a real estate right will have to be resolved judicially before the courts of the real estate jurisdiction.

Automatic entry of judgment is not possible since court orders are preceded by a legal action initiated by a person before a court and its enforceability would not be immediate, except for referral and protection of constitutional rights, which are immediately enforceable.

Otherwise, court orders on non-urgent claims may only be executed when they are not subject to appeal and their suspension has not been ordered on the basis of an appeal in cassation, which is the last resort before the courts.

Provisional Measures

When applicable, provisional measures are available to preserve the rights associated with real estate, the most frequent being:

• Provisional filing: This is a warning to all parties interested in acquiring, mortgaging or transacting with the property that the title of the property is registered before the authority and is subject to a legal conflict.
• Injunctive relief: This is a request made to the civil court to register a provisional judicial mortgage to guarantee the payment of a sum that is subject to validation by a court. If favourable, it is registered and renewed every three months until a document is obtained that allows it to be transformed into a definitive judicial mortgage. This mortgage has a similar effect to a preventive annotation, but it is not conclusive against a creditor who has registered a promissory note, a conventional mortgage or a definitive judicial mortgage before this date.

The methods of termination of the joint venture will be contained in a dissolution clause in the contract, be it by the will of the partners, or at the end of a set period, or in the event of poor business performance such as low returns on equity, failure to capture market share, etc.

In the event that a new company has been established to channel the operation of the joint venture, the company is dissolved as per the stipulations in the bylaws or in the partnership agreement. Once the company has been dissolved, the liquidation period will start, except in the case of a total merger or spin-off or any other form of global transfer of assets and liabilities.

The real estate guarantees are:

• Antichresis: The debtor gives the use of a property to the creditor as a guarantee of payment of a debt, characterised by the following:
1. The creditor may benefit from the fruits or income produced by the property.
2. It must be registered before the Title Registry.
3. The creditor has the responsibility to care for and maintain the property.
• Mortgages: The Dominican Civil Code defines mortgages as in rem rights over real estate that are affected by the fulfilment of an obligation. These are classified as follows: legal (credit based on law); judicial (by judgment); or conventional (based on an agreement). A mortgage can be constituted if the real estate is commercialisable, which means that it can be legally subjected to any transaction.
• Guarantee trust: The debtor transfers the property to a trust to guarantee that he or she will not default on his or her obligations. Once the financial commitment has been settled, the property may return to the debtor’s estate (Law No. 189-11).

In unsecured loan contracts, creditors usually do not prohibit the debtor from making transactions with his or her assets. However, it is customary in practice that it constitutes a violation of the contract and the debtor loses the right to pay within the agreed term, and the creditor may demand the balance before its due date.

If the debtor engages in fraudulent conduct or bad faith acts aimed at becoming insolvent so that the creditor cannot pursue his or her assets, the debtor may be subject to civil, commercial or criminal actions, depending on the circumstances and the acts committed by the debtor.

Key Elements for Enforcing or Defending the Execution of Real Estate Guarantees

• Conduct due diligence on the property to confirm that it belongs to the potential debtor, that it is located in the place shown, that it has the dimensions stipulated in the title, and that it is free of liens or environmental, mining, energy or any other encumbrances that in some way limit or restrict the right of ownership.
• Secure the credit with a formal document establishing the mortgage guarantee.
• Register this act with the real estate authority (Title Registry), so that it can be imposed on any other person who intends to carry out a transaction with the property.
• Clearly specify in the contract the term for the balance, the interest, the method of payment, the identity of the property, and the conditions under which the creditor would be entitled to execute a seizure.
• Ensure that the documentation submitted to the court reflects the legal or contractual basis for the debt.

General Rules for Mortgages

• The contract must clearly establish the property subject to the guarantee, the amount of the loan and the rank of the mortgage.
• The mortgage affects the entire property and cannot be divided.
• Only the person registered as the owner of the property can consent to the mortgage.
• The mortgage is only registered if the act that constitutes it is formalised in the Dominican Republic before a notary public or before an official of equal rank (consul).

Waivers of Defence

The Dominican Civil Code establishes that legally formed agreements have the force of law between the contracting parties (article 1134); however, the validity of the clauses on waiver of rights established in a contract will be subject to legal review, if these are contrary to the law in the sense that they violate a fundamental right or a public order rule.

In the Dominican Republic, real estate seizure governed by Law No. 189-11 is considered expedited compared to other seizures, and is reserved for banks and trust companies legally established in the Dominican Republic. Pursuant to Article 149, it only applies when the mortgage guarantee has been granted in a conventional manner. The creditor can only pursue the properties that were used as collateral through a mortgage loan contract.

Although it is an expedited process compared to others, it limits creditors by their type (banking and fiduciary sector) and does not allow the pursuit of other assets of a debtor who has already agreed to use one or more properties as a guarantee of payment.

The real estate jurisdiction has exclusive jurisdiction to resolve conflicts regarding the right of ownership or its accessories (article 3 Law No. 108-05, confirmed by the Supreme Court of Justice).

However, in matters of commercial or contractual disagreement involving a property, if the cause of the dispute has no relation to land ownership rights, then arbitration is appropriate.

See 6.1 Prevalence of Arbitration Clauses.

See 6.1 Prevalence of Arbitration Clauses.

The most frequent and efficient provisional measures are the following:

• Provisional filing: The purpose of this is to warn the public that there is a dispute pertaining the property, so that any person who carries out a transaction will have to face the consequences of that dispute.
• Provisional judicial mortgage: This is the most popular measure used by unsecured creditors. It is valid for three months, after which it is necessary to register its renewal, otherwise it loses its status.
• Legal mortgage for married women: This is a reservation for married women to prevent their husbands from selling or mortgaging the property without their consent.
• Mortgage by promissory note: This is a mortgage whose registration does not require the authorisation or acceptance of the debtor, when it results from a promissory note in which the debtor committed his or her personal assets to the creditor.
• Condominium privilege: When one of the members fails to pay maintenance, the condominium may register this lien for the amount owed and initiate a real estate seizure.
• Tax privilege: The State may register a lien on the debtor’s real estate based on unpaid tax, taking preference over any other registered creditor that exists.
• Seizures: On the occasion of a criminal investigation by the public prosecutor, the State may register “seizures”, which consist of blocking a property so that it may not be the object of real estate transactions until it is released by the public prosecutor or by a court order.
• Judicial administration: This measure restricts and/or limits the use of a property until a conflict is resolved or a situation that motivated the request for this measure is overcome.

The registration of a provisional measure is made by request from the creditor, by court order or by an act signed by the debtor prior to failure to pay, as follows:

• Cautionary note: This is registered at the request of the creditor presenting a certification of an ongoing litigation issued by the court.
• Provisional judicial mortgage: This can be registered after obtaining a judgment (not final) or a judicial authorisation, recognising that there is a debt or potential debt.
• Legal mortgage for married women: This is requested by the wife and must be accompanied by the marriage certificate.
• Mortgage by promissory note: This is requested by the creditor, requiring only the promissory note signed by the debtor.
• Condominium privilege: This is requested by the group of owners of the condominium with the minutes of the condominium meeting that authorised such registration.
• Tax privilege: This is requested by the State via the tax office.
• Seizures: This is requested by the public prosecutor, authorised by the court. Due to the nature of the order (crime or offence), the debtor becomes aware of the court order when it is executed.
• Judicial administration: This is requested by the creditor, with judicial authorisation.

The inappropriate use of provisional measures is understood as the registration of liens based on documents that appear to be valid but in reality do not comply with the essential legal conditions for their validity, or when an abusive use of these has occurred.

The consequences of inappropriate use of provisional measures can be summarised as follows:

• The Title Registry can refuse registration of the measure.
• In the event that the measure is registered, it can be invalidated by an annulment ordered by a court.
• It may involve the civil liability of the creditor, who is susceptible to a judicial conviction in compensation for the benefit of the debtor.

It should be noted that the current legislation establishes provisional measures that do not require a court authorisation, although those that do require a court authorisation are limited, namely provisional judicial mortgages, judicial administrations and seizures.

Courts usually accept requests for provisional measures, provided that they have sufficient legal basis, which includes the documentation that, according to the applicable regulations, is essential to accept this type of request.

Once the application is filed, the process until the court issues a decision usually takes between two and four months, or days in the case of seizures.

Everything relating to liability for damages is regulated by the Dominican Civil Code, since the real estate regulations do not include provisions or sanctions for reparable or non-reparable damages. Although there is the possibility of requesting that compensation for damages be considered reckless in a real estate lawsuit, the reality is that real estate courts do not usually accept these requests.

All damage must be repaired. The affected party has the possibility of going to the civil or commercial courts to claim compensation by demonstrating a direct link between the cause and the damage.

The concept of “mechanic’s liens” does not exist as such in real estate regulations, but instead any person who has a credit which the debtor in writing has accepted their commitment to pay, has the possibility of requesting and obtaining any of the charges (provisional measures) that have been described in 7.1 Types of Provisional Remedies in Real Estate Disputes.

In the Dominican Republic, the closest concept is that of real estate development trusts, specifically those for low-cost housing, which have the dual purpose of countering the housing shortage and making the mortgage market more flexible.

Real estate seizures affecting properties acquired under a trust are the responsibility of civil courts and are governed by Law No. 189-11. This law regulates the process of executing the guarantee in the event of non-compliance by the debtor, establishing simpler and faster procedures compared to the seizure process provided for in the Civil Procedure Code.

Law No. 189-11 allows the creditor to recover the debt within a relatively short period (approximately six months) through the proceeds of the sale of the property at a public auction or, if there are no interested parties, through the transfer of the property to his or her estate.

Claims seeking the termination or execution of a contract are filed before the Civil Court, which will analyse the content of the document to identify whether the terms and conditions governing the agreed transaction have been met.

If the content of the contract is ambiguous, the judge will have the task of interpreting the will of the parties at the time of formalising the agreement. Finally, by means of a ruling, the court will establish the result of its review, determining the consequences in accordance with the terms and conditions of the contract.

Public interest has a significant impact on research and strategies that involve real estate projects, as well as the consideration of foreign and national investment.

In the Dominican Republic, it is unlikely that the State will carry out expropriations on properties established in trusts for low-cost housing, and even more so if there are already buildings on those properties. Although property rights are a fundamental right, when a property must fulfil a social function that benefits the community, the public interest prevails over the private interest of the owner, which is the case in expropriation cases.

Generally, the State declares properties of public utility for agricultural and energy projects, expansion of public roads, construction of irrigation canals, and installation of antennas for energy transmission, among others. These projects are not usually located in urban areas, where low-cost housing trusts are commonly developed.

In recent years, the State has adopted the practice of acquiring from the owner only the amount of land on the property necessary for the work, instead of expropriating the entire property as used to happen.