The legal fundamentals of purchasing property in The Bahamas

The purchase of real property is one of the most important investments that a person will make in his lifetime. The general legal principles which underscore the sale and purchase of real property are generally governed by the Conveyancing and Law of Property Act 1909 (“the Act”), depending upon the type of property and the nature of the purchase.

In the interest of clarity, it should be noted that there are other pieces of legislation which also govern the sale and purchase of property in The Bahamas, as well as established Bahamian case law and English Common Law however, for the purposes of this memorandum, the principles outlined in the Act will be highlighted.

The sale and purchase of property is initiated by a contract (or agreement) for sale between the vendor (seller) and purchaser. The agreement for sale outlines the terms and conditions of the sale of the property which includes, but is not limited to, the purchase price, deposit amount, the completion date (normally one to three months from the date of the agreement of sale), the obligation(s) of the vendor to prove “good and marketable title”, the undertakings by the attorneys for the vendor and purchaser, and the consequences to the vendor for failure to prove good title or to the purchaser for failure to obtain financing or to complete the transaction within a specified time period.

The deposit amount which is normally ten percent (10%) of the total purchase price is often paid to the vendor’s attorney at the date of execution of the agreement for sale and held in escrow pending completion of the transaction. After execution of the agreement for sale and the receipt of original and/or copies of the vendor’s title documents, the purchaser’s attorney investigates the title to the property by conducting a title search of the property and Supreme Court cause list (judgment) search of the previous owners of the property including the vendor.

Under the Act, a purchaser of land is not entitled to require title to be deduced for a period of more than thirty (30) years or for a period extending further back than a grant or lease by the Crown or a certificate of title granted by the court in accordance with the provisions of the Quieting Titles Act, whichever period may be shorter. The purchaser’s attorney may raise requisitions (questions or enquiries) on title with the vendor and/or the vendor’s attorney, after investigating title to the property, particularly requisitions on possible defects in title.

However, it should be noted that the agreement for sale normally provides for a specified time period (e.g. fourteen (14) days from receipt of the title documents) for requisitions on title to be made by the purchaser’s attorney, after investigating title. In addition to certain requisitions on title itself, the purchaser’s attorney may raise questions on the requisite government and subdivision approvals, outstanding real property tax assessments and utilities (where applicable), the survey of the property, and any pertinent easements, rights of way, and/or restrictive covenants.

Upon the requisitions on title being satisfactorily answered, the purchaser’s attorney will prepare a report or opinion on title for the purchaser and/or the relevant lending institution (along with the appropriate mortgage document). The draft conveyance of the property (and any supplemental documents), normally prepared by the vendor’s attorney, may also be reviewed at the time of reviewing and requisitioning the title and cause list searches by the purchaser’s attorney, or subsequent to such requisitions.

The conveyance will include the names and addresses of the parties, any pertinent references to earlier title documents, a detailed description of the property, any restrictive covenants, easements, and/or rights of way, a plan of the property, the appropriate affidavits of citizenship and witness, and other relevant information applicable to the specific conveyance. Once appropriately amended and approved, the conveyance is finalized by the vendor’s attorney and executed by the vendor and purchaser whose signatures are witnessed.

A completion statement is prepared by the vendor’s attorney and the balance of the purchase price is paid by the purchaser/purchaser’s attorney (less the vendor’s portion of stamp duty and any apportionment for rates, real property assessments, and utilities, where applicable). The legal fees, which may range from 1 ½ to 2 ½, are paid on or before completion by the vendor and purchaser to their individual attorneys.

Commissions to real estate agents are also paid at this time. Requests are made to utility companies to return deposits to the vendor and all utilities and real property tax assessments are placed in the purchaser’s name.

The conveyance (with the appropriate affidavits and pertinent documents) is sent for stamping at the Public Treasury. The stamp duty to be paid on a conveyance, which is normally split between the vendor and purchaser, is based upon the market value of the property. Under the Stamp (Amendment) (No. 2)Act, 2008, application for exemption from stamp duty on the acquisition and mortgage of property may be made, for and on behalf of, first time owners of a dwelling house, valued at $500,000.00 or less. After stamping, the title document is sent for recording at the Registry of Deeds and Documents, for a nominal recording fee (which is generally based on the number of pages of each document, subject to certain exceptions).

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