A real estate escrow account protects your money during a presale: a trustee manages the funds until the developer fulfills the terms of your project.
What is a real estate trust?
In short, a real estate trust is a contract governed by Law 189-11 on the Development of the Mortgage and Trust Market, under which a project developer (the settlor) transfers the land and the funds contributed by the buyers to a trustee (a financial institution authorized to administer trusts) to manage them on behalf of the buyers (the beneficiaries) for the duration of construction. The trustee releases the funds to the developer only when the agreed-upon conditions are met: verified construction progress, permits in order, and milestones in the agreed-upon schedule. If the project is delayed or the developer defaults, the funds remain protected within the trust’s assets, separate from the developer’s assets. That’s why this structure is so widely used for presales in Punta Cana, Bávaro, and Cap Cana: it reduces the risk of losing your money on a project that doesn’t yet exist.
Trust vs. Real Estate Trust: They Are Not the Same Thing
The term “trust” is broader than it seems. In the Dominican Republic, there are several types: guarantee trusts, public offering trusts, testamentary trusts, and—the one we’re discussing here— real estate trusts (also known as development or construction trusts). They all share the same legal basis (Law 189-11), but each one protects something different. If you’re looking for general information about “fideicomiso” and come across content about banks, inheritances, or loan guarantees, don’t be confused: in the context of buying off-plan, what you’re specifically interested in is the real estate trust that manages the funds for your project.
How does a real estate trust work under Law 189-11?
The mechanism follows a simple logic, even though its name sounds complex. Here’s how it works in practice:
- The developer (trustor) establishes the trust and transfers the project land to a separate estate, distinct from its other assets.
- A trustee (a bank or trust company authorized to operate under Law 189-11) manages those funds and receives the payments made by buyers during the presale.
- The trustee releases the funds to the developer in stages, based on certified progress of the work, rather than in a single lump sum upon signing.
- Once the project is completed and the terms of the contract are met, the trust transfers ownership to the buyer, and the title is registered.
This arrangement prevents pre-sale funds from being used for expenses unrelated to the project or to cover other projects by the same developer—one of the most common risks when purchasing without this safeguard.
One thing many buyers don’t know: the certification of construction progress is not usually performed by the developer itself, but by an independent supervisor or engineer designated in the trust agreement. That third party visits the construction site, assesses the actual percentage of progress, and reports to the trustee before any disbursement is authorized. It is this chain of verification (trustee, independent supervisor, schedule) that ensures the trust serves as genuine protection and not merely a legal formality in the contract.
What a Serious Real Estate Trust Agreement Should Include
Not all trust agreements offer the same level of protection. Before signing, make sure the agreement includes, at a minimum, the following elements:
- Clear identification of the trustee and proof that the trustee is authorized to administer trusts under Law 189-11.
- A schedule for the release of funds tied to the percentage of project completion, verified by a supervisor independent of the developer.
- A clearly defined procedure for what happens if the project is halted or the developer defaults, including how buyers' money is protected or refunded.
- The clause requiring the transfer of title to the buyer once the terms of the contract have been fulfilled.
- The buyer’s (trustee’s) right to request periodic reports on the status of the trust and the progress of the construction work.
If any of these points are not included in the contract they present to you, ask about them before signing. A well-structured real estate trust should be able to explain each of these elements to you clearly and unambiguously.
Why a Trust Protects Your Money in Pre-Sales and New Construction Projects
Buying off-plan means paying for something that doesn't physically exist yet. A real estate escrow account reduces that risk in several specific ways:
- The funds are kept separate from the developer's assets, so a financial problem at the company does not directly put your money at risk.
- The developer receives payment only based on the actual progress of the construction project, as verified by the trustee, not based on what is promised in the sales brochure.
- In the event of a dispute or breach, the trust provides a clear legal framework regarding who owns the funds while the matter is being resolved.
- The process of delivering and transferring ownership is documented within the trust itself, which provides for the final transfer.
None of these safeguards completely eliminate the risk (no presale investment is risk-free), but they do significantly reduce your exposure compared to buying directly from the developer without a third party involved.
Buying with a Trust vs. Without a Trust: The Real Difference
This table summarizes the practical difference between buying into a project that uses a real estate trust and one that does not:
| Concept | No trust | Through a real estate trust |
|---|---|---|
| Who manages your payments? | The developer directly | An authorized trustee who is a third party to the developer |
| When does the developer receive the money? | At the time of payment | According to the certified construction progress report |
| What happens to your money if the project is halted? | In the developer's portfolio | Protected within the trust's separate estate |
| Legal Basis | There is no specific law governing the protection of funds | Law 189-11 on the Development of the Mortgage and Trust Market |
| What You Should Ask Before Signing | Reservation Agreement and Informal Updates | Trust Agreement and Trustee Reports |
This comparison does not mean that every project without an escrow account is risky (there are reputable developers who finance projects with their own capital and fulfill their obligations without one), but it does mean that, without an escrow account, you are more dependent on the developer’s reputation and financial stability, without a third party to verify how the funds are used.
Once the project is completed and the trust has fulfilled its purpose, the next step is to ensure that your property title is properly registered, a process governed by Law 108-05 on Real Estate Registration.
What to Ask Your Broker or Developer Before Signing
Before signing a pre-sale reservation contract, there are specific questions you should ask—and a reputable broker should be able to answer them straightforwardly:
- Does the project operate under a real estate trust established in accordance with Law 189-11?
- Which trust company manages the funds, and is it authorized to operate as such?
- How often are funds released to the developer, and under what conditions regarding the progress of the work?
- Can I request progress reports or status reports on the trust during construction?
- What happens to my money if the project falls behind the agreed-upon schedule?
If the broker or developer cannot clearly answer these questions, or refuses to show you the trust agreement, this is a red flag that you should take seriously before committing your money.
Why this matters even more if you shop online
If you’re buying from the United States, Canada, or Europe and can’t visit the construction site every month, you have no way of verifying with your own eyes whether the construction progress matches what you’re being told. The real estate trust provides something that partially replaces that direct oversight: a third party that does verify the progress before releasing each payment.
For example, if you’re evaluating a presale project like Palm View Golf & Apartments at Coral Golf Resort, ask directly whether the funds are managed in a trust before signing any reservation contract—that’s exactly the kind of verification we do with you before committing your money.
The good news is that much of this verification can be done remotely, without traveling to Punta Cana. You can request the following by mail: the trust certificate or articles of incorporation, the trustee’s name and contact information, the fund release schedule, and recent construction progress reports with photos or videos certified by the independent supervisor. If a developer or broker is reluctant to share this basic documentation before you make a reservation, take it as a sign to ask more questions, not fewer.
What happens if the developer doesn't complete the project?
It depends on the terms of the trust established for that specific project. In general, the trust assets (land and available funds) are protected and can be used to complete the project with another developer, refund buyers as agreed, or be resolved in accordance with the terms of the trust agreement. That is why it is so important to read that agreement—not just the reservation contract for your unit—before signing.
If you're still deciding which area or project to invest in, our guide on how to invest in Punta Cana covers additional criteria that are worth reviewing along with this.
Is the trust the same as the Confotur rating?
No, and this is a common misunderstanding. The real estate trust protects the use of your funds during construction, under Law 189-11. The Confotur designation, on the other hand, is a tax benefit granted by Law 158-01 on the Promotion of Tourism Development, which exempts taxes such as the real estate transfer tax or the IPI on projects approved by MITUR. A project may have both, just one, or neither; these are independent mechanisms that should be verified separately before signing. If you want to understand the tax benefit in more detail, we’ve already covered that topic in our guide on what Confotur is and how much it actually saves you.
Common Mistakes When Evaluating a Real Estate Trust
These are the mistakes we see most often among foreign buyers arriving in Punta Cana, Bávaro, or Cap Cana:
- Assuming that “trust” and “real estate trust” are interchangeable without verifying which one applies to the project.
- Not requesting the trust agreement in writing, and settling for only the unit reservation agreement.
- Confusing the existence of a trust with a guarantee of returns—a trust safeguards the fund management process; it does not promise profits.
- Do not ask who the trustee is or verify that he or she is authorized to administer trusts.
- Sign without reviewing the conditions under which funds are released to the developer.
Frequently Asked Questions About Real Estate Trusts in the Dominican Republic
What is a real estate trust, in a nutshell?
It is the contract, governed by Law 189-11, through which a trustee manages the funds and land of a presale project on behalf of the buyers, releasing the funds to the developer based on the actual progress of the construction work.
Do all presale projects in Punta Cana have an escrow account?
No. It depends on each developer. Some reputable projects are financed with their own capital without this arrangement, but it’s always worth asking and verifying how buyers’ funds are protected in each case.
Does a real estate trust guarantee that I won't lose money?
It does not guarantee a return on investment or eliminate all risk. What it does is safeguard the funds throughout the construction period by separating them from the developer’s assets and making their release contingent on the actual progress of the project.
Who manages a real estate trust in the Dominican Republic?
A trustee (typically a bank or a trust company authorized to operate under Law 189-11) manages the trust’s funds and assets, acting as a third party independent of the developer.
What is the difference between a trust and a title deed?
These are different stages. The escrow account protects your funds during construction; the title deed, governed by Law 108-05 on Real Estate Registration, is the document that certifies that the property is legally yours once the purchase is complete.
At Garrigó Real Estate, we're with you every step of the way, from choosing a project to the transfer of title.
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