Escrow is not legally mandatory under Dominican law; however, it is strongly recommended and widely regarded as best practice, particularly in transactions involving foreign buyers.
In the case of a resale transaction involving a third party and a property that is already built, the use of some form of escrow is always recommended. Even when the asset is completed and physically delivered, escrow provides a controlled mechanism to ensure that title conditions, tax clearances, condominium fees, and closing deliverables are properly verified and satisfied before a portion of the funds are released.
There are scenarios in which funds may be transferred directly to a developer, which is common practice only in pre-construction when the developer has been properly vetted through due diligence and has a solid legal, financial, and operational track record. This approach is typically reserved for well-established developers and projects with a proven history.
In some cases, transactions are structured through trusts (fideicomisos). In the Dominican Republic, this mechanism is most commonly used for low-income housing projects, as mandated or incentivized by law. That said, certain high-end and institutional projects may also use fideicomisos as an added layer of structure and protection, depending on the nature of the development and financing model, but it is not common.
Regardless of the payment structure—whether escrow, direct payment to a developer, or a trust—the most critical element is always proper due diligence on the seller or developer, combined with a well-drafted and secure purchase agreement.
An escrow arrangement introduces a neutral third party responsible for holding and disbursing funds only once clearly defined contractual conditions are met. This significantly reduces risk, especially for buyers unfamiliar with local enforcement mechanisms. Without escrow, buyers may be exposed to unnecessary risk, including the release of funds before due diligence is completed or before contractual obligations are fulfilled.
Properly structured escrow agreements clearly establish release conditions, timelines, representations, warranties, and remedies in the event of breach.
At AlterLegal, escrow is a standard risk-mitigation tool that we recommend in most transactions—even when it is not legally required—always tailored to the risk profile of the transaction.
