Buying off-plan safely: what to check before you sign

Buying off-plan means buying something that does not exist yet. You pay today, in installments, for an apartment that will be handed over in one, two or three years. In return, you usually get a better price than for a finished unit and the chance to pay little by little.

It is one of the most common ways to invest in the Dominican Republic, especially in Santo Domingo, Punta Cana and Santiago. It is also where checking before you sign matters most. Here is what I review with my clients.

Who is building

Before you fall in love with the floor plans, get to know the company:

• What have they delivered before? Ask for the list of finished projects and, if you can, visit one. A developer with projects delivered on time is the best guarantee.
• Who are the owners? Look up the company and its partners. News and other buyers' reviews say a lot.
• Is there real progress? An empty lot is not the same as a building with its structure up.

The permits

A serious project has its permits before it sells. Ask for a copy of:

• The construction license from the Ministry of Housing and Buildings.
• The no-objection letter from the municipality.
• The environmental permit, when the project needs one.
• The title certificate for the land, in the name of the developer or the trust.

If the seller does not have them or makes excuses not to show them, that is a sign to stop.

The trust: your money protected

Many projects use a trust (fideicomiso), regulated by Law 189-11. It works like this: the land and the buyers' money are placed with a trust company, which may use them only to build the project. The developer cannot use your payments for anything else.

For you, that means more security. If the project has a trust:

• Your payments go into the trust's account, never into anyone's personal account.
• Ask for the name of the trust company and check that it exists and is authorized.
• Ask for the trust adhesion agreement, the document that makes you part of it.

Not every good project uses a trust, but when one does, it is a point in its favor.

The payment plan

Payment usually comes in three stages:

1. Reservation. An amount to hold the unit while the contract is prepared.
2. Down payment in installments. During construction, often between 20% and 30% of the price, paid monthly or by construction milestones.
3. Balance on delivery. The rest is paid when you receive the unit, often with a bank loan.

If you will finance the balance, talk to the bank from the start. You want to know today whether you will be able to cover that final payment in two years. You can estimate the payment with the mortgage calculator.

The contract

This is where it helps most to have someone read carefully. Check that the contract states in writing:

• The delivery date and what happens if it is late: a penalty for the developer or the option to get your money back.
• What the unit includes: square meters, finishes, kitchen, air conditioning, parking and laundry area. If it is not written down, it is not included.
• What happens if you withdraw: you almost always lose part of what you paid. Know how much before you sign.
• Maintenance fees and who pays them until delivery.
• When and how you receive the title in your name.

When you receive the unit

On delivery day, do not sign anything without inspecting the apartment calmly. Test doors, windows, faucets, outlets and drains. Write down any issue in the delivery record and ask for a deadline to fix it.

Then come the balance payment, the transfer tax and the title registration. In the article on what it really costs to buy a home I explain those costs.

In short

Buying off-plan can be a very good decision if you choose the developer well, confirm the permits, pay into the right account and sign a clear contract. As a lawyer by training, I review these documents with my clients before they hand over the first peso. If you have a project in mind, let us talk.