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Financial Information for Residential Property Buyers


Rent controls favors tenants

June 08, 2006

It is very difficult to evict tenants as they have the right to stay as long as they pay rent. It is advisable to rent to foreigners to minimize this problem.

Rents: Can landlord and tenant freely agree rents in Dominican Republic?

There is a universal rent control in Dominican Republic with maximum monthly rent fixed at 1% of the value of the rental property. The tenant can request the Rent Control Authority to reduce the rent if it exceeds the allowed maximum.

Dominican Republic real estate for sale

If the landlord wishes to increase the rent, a permit must be filed and approved by the authorities, subject to appeal to a special commission. This is a lengthy process where the landlord ends up receiving the old rent for the next months or even years.

The rental contract, however, may contain a clause increasing the rent periodically, based on the cost-of-living increases of fixed percentages agreed upon by the parties, subject to the maximum rent allowed.

It is advised that an escalation clause should be included in the contract to deter the tenants from extending the lease. An escalation clause says that if the tenant wishes to stay after the lease contract expires; the rent will be increased remarkably. However, legally this is not allowed.

Deposits

A month's rent in advance and a security deposit of two to five months is commonly required prior to rental. There is no maximum allowable amount for deposits. Some landlords use a fiador (a Dominican or a long-time resident) to guarantee the payment of rents. In case the tenant is unable to pay, the fiador will be liable. However, it may not be easy for the tenant to find a guarantor. When this difficulty arises, a six month deposit is obtained from the tenant before the rental commences to protect the landlord's interests.

The law mandates that the security deposit should be paid into Banco Agricola and returned without interest after an amount for repairs has been deducted. In reality, nobody puts security deposits in banks and very few landlords return the deposit. Most of the time, the tenant uses the deposit to pay the last months of the tenancy.

Dominican Republic luxury housesWhat rights do landlords and tenants have in Dominican Republic, especially as to duration of contract, and eviction?

Rental agreements in the Dominican Republic normally last for three to six months. However, even if the contract already expired the tenant can continue living in the unit as long as he pays the rent.

Tenant rights are highly protected in the Dominican Republic. You can only evict a tenant on six grounds:

  1. failure to pay rent,
  2. misuse of the property,
  3. subletting (if prohibited by contract),
  4. changing the structure of the premises,
  5. reparation or reconstruction and if the owner will inhabit the property for at least two years.

It is not easy to evict a tenant when you decide to use the property for personal reasons. A hearing must be conducted and the tenant is usually given months, or even years, to look for an alternative dwelling that (s)he can afford.

If the landlord refuses to accept the rent, the tenant can simply deposit the amount Banco Agricola. The bank will hold the amount for the landlord and the tenant can stay in perpetuity.

It should be noted that there must be two Contracts of Lease: one in English and one in Spanish. If any misunderstanding arises, the Spanish contract takes precedence.

EVICTION FOR NON-PAYMENT OF RENT

Duration until completion of service of process 30
Duration of trial 90
Duration of enforcement 90
Total Days to Evict Tenant 210
Courts: The Lex Mundi Project

How effective is the Dominican legal system?

The laws are useless. Landlords can use force, coercion, intimidation and any other method to evict tenants as long as the tenant is not physically harmed. If the tenant is injured, charges can be filed against the landlord. However, evicting tenants, which is handled by the Justice of the Peace, is still the biggest problem of landlords. Eviction for failure to pay rent usually take five months or more. Eviction on other grounds is more cumbersome and difficult, since there is a mandatory administrative phase before the landlord can obtain the judicial eviction order from the Justice of the Peace. In the administrative phase, tenants are granted time to look for alternative dwelling, minimum of six months but usually a year or more. Applications for rent increase are likewise cumbersome.

Landlords prefer to rent to foreigners to minimize, but not totally eliminate, the risk of overstaying

Legislation

Residential rentals in the Dominican Republic are governed by Articles 1714 to 1762 of the Civil Code (general principles of the rental contract); Decree #4807 of 1959, Law #38 of 1966 and Law #481 of 1973 (rent control and protection of the rights of the tenant); and Law #4314 of 1955 (mandatory deposits in Agricultural Bank).

Brief History: Recent changes in Dominican landlord and tenant law

Tenancy law in the Dominican Republic has been unchanged for decades. Economic difficulties in the 1950's provided the background for the enactment of Decree #4807 which established the system still in place of overprotection of tenants' rights.

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