do business in the Dominican Republic - Pellerano & Herrera

DOING BUSINESS INTHE DOMINICAN REPUBLICCOLLATERALSThe Civil Code, the Commercial Code, the Land Registration Law and other speciallaws regulate the granting of mortgages and liens.a) MortgagesIn general, any kind of real property right may be mortgaged, whether ownership,use or exploitation rights. Fixtures are deemed to be real property and assuch can also be mortgaged. Mortgages on future real property are not valid, butcreditors' interests extend to improvements made to the property after the mortgageis granted.The secured obligation must be valid, and its nullity would also invalidate themortgage. The secured obligation may however be eventual or conditional, inwhich case the mortgage would also be so. Furthermore, mortgages may begranted as security for future obligations, such as financial instruments like creditlines and credit cards.For the mortgage to be valid and binding upon third parties the debtor must havea duly registered title. Persons with conditional property rights may grant mortgagesunder the same conditions that affect their rights.Mortgages must be registered at the Registry of Titles of the place where theproperty is located by filing the mortgage agreement and the PropertyCertificate.The Registry makes a note of the mortgage on the Property Certificateand issues a Mortgage Certificate on behalf of the creditor.The date of registrationis the date of filing, although the material issue of the certificates takes placea few weeks later.The following taxes must be paid upon registration:5/1,000 of the loan amount;12% of (i);Internal Revenue Stamps of RD$8.00 for the first RD$2,000 and RD$2.00 forevery 1,000 or fraction; andStamps under Law 80-99, calculated in the same manner as for real propertytransfers.The registration gives the creditor priority rights over all other creditors whohave not registered their security interest on the property before him.In this casethe creditor will be entitled to be paid first from the proceeds of the sale of theproperty, with the sole exception of privileged creditors (employees, tax office,legal fees, etc.).Any creditor with a mortgage may initiate a procedure to seize the property,being bound to comply with certain publicity and notice requirements in orderto allow other creditors to join the process.All registered creditors must be notified,but whoever registered his security interest first recovers first.The creditormay, by virtue of a “persecution right” granted by the law, seize the property inthe hands of third parties who may have gained title after the mortgage was registered.118