SANTO DOMINGO. Engineer Rafael Durán, of SBDS Investments, and Willie Méndez, CEO of Decanaan Real Estate, agreed yesterday that one of the main challenges of the fiduciary model in the Dominican Republic is to reach a realistic equilibrium point that guarantees the operability of the projects.
During their speech at the conference “Adjusting the Sails of the Real Estate Business”organized by ProEstate, both professionals highlighted the need for this balance to take into account the real costs of construction, the minimum level of sales and the flow of income from the trust, in order to avoid delays in payments and conflicts with agents, suppliers and purchasers.
“The break-even point varies depending on the project's target audience and costs. There's no magic number. If you don't reach that minimum threshold that guarantees full project coverage, the trust shouldn't move forward,” Durán pointed out, while urging developers to abandon practices such as starting sales without active collection accounts or approved licenses.
Willie Méndez, a veteran real estate advisor with extensive experience in the field, complemented the view by pointing out that most complaints about delays in commission payments do not fall on the trust companies, but on the lack of clarity or diligence on the part of some developers.
“The trustee is just an administrator. The money belongs to the developer, and if there are no funds available, if there are no clear payment orders, or if the invoice has errors, the system freezes,” he explained. “Sometimes we want the trustee to function like just another office for the project, and that’s not how it works. It’s an entity that operates under specific procedures and has precise responsibilities,” he clarified.
During the meeting, common concerns were shared, mainly the delay in the delivery of commissions, even when projects have already reached considerable pre-sales.
Méndez emphasized that the relationship between developers and agents must be one of constant communication and transparency from the outset. He also stressed the need for agents to have a thorough understanding of the project details, permit approval timelines, and the trust's internal processes.
“You can’t sell blindly. There are permits, licenses, and certifications that take eight, ten, even twelve months, especially in tourist areas. If there isn’t clear information, expectations regarding delivery and payment are dashed,” he added.
Durán and the formula for a healthy trust
In a presentation entitled “How to structure large projects using the trust structure”, engineer Rafael Durán presented a complete overview of the fiduciary process, highlighting the five critical elements that ensure a trust operates safely and sustainably:
- Project license approved
- Minimum sales level achieved, calculated by the trustee.
- Interim loan approved and signed.
- Low-cost certification, if applicable.
- Land transferred to the trust.
The businessman emphasized that without fulfilling those five points, no financial movement should be initiated from the trust, since money deposited in personal or promoter accounts represents a risk for both clients and agents.
“I prefer to wait a little longer and sleep soundly. If the money goes directly into the trust account, there are no excuses. It can be returned, it can be traced. But if it comes from outside, everything gets complicated,” he warned.
The engineer also explained that the developer's initial contribution must be significant, between 25% and 35% of the total project cost, and that the interim loan is the developer's responsibility, not the trustee's. "Many people here believe that simply reserving a plot of land means they already have a trust set up. That's not the case. It has to be structured responsibly," he stated.
In his talk, Durán highlighted the central role of real estate agents in this ecosystem, whom he considered "the most important axis of the business.".
“You are the ones who bring in the clients, who generate the sales, who ensure that the project moves forward. You are the first ones that buyers will look for when there is a delay. That is why you need to know exactly how the whole process is going.”.
