The Bahamian government is actively encouraging external investment in the Bahamas. Accordingly, Bahamian law firms advise foreign investors on numerous matters including the acquisition of real estate, property for resort development purposes, or a second or retirement home; the residency and immigration requirements to meet the foreign person’s objectives; investment guidelines, various pieces of legislation concerning incentives, concessions and encouragement to foreign investment; application and licensing procedures and the formation of the Investment plan for the project; and tax advantages.
Real Property
There are two categories of property in The Bahamas: real and personal, otherwise commonly defined as immovable and movable. Immovable property consists of things which cannot be moved, such as land itself. In addition, land includes other items such as buildings, minerals, and other things which are affixed to or constructed into land which are not so easily removed. On the other hand, movable property consists of items which are easily moved, such as personal property like clothing, automobiles, money, food, furniture, stocks, debts and the like.
In a conveyance, real property may be referred to as hereditaments, or property that can be inherited. Inherited property can be corporeal, meaning tangible as in lands and buildings, or incorporeal, meaning rights such as patents or copyrights. Generally, all forms of property can be inherited.
The nature of property is such that it is possible to own shared land together with others, where each member owns a portion or percentage. Such persons are often called tenants. There are two types of tenants, joint tenants or tenants in common. Joint tenancy is characterised by the “four unities” which are unity of possession, unity of interest, unity of title, and unity of time. Its foundation is based upon the “right of survivorship”. This dictates that on the death of one joint tenant, his interest must pass to the other joint tenant or tenants. In a tenancy in common, when one tenant dies, his heir takes his share and it does not pass to the other surviving tenants.
Estates
The doctrine of estates is concerned with the length of time for which land is held. There are two principal categories of estate: freehold and less than freehold, i.e. leasehold. The duration for holding a freehold estate is uncertain, while that for an estate less than freehold is one for a period, the duration of which is fixed or capable of being fixed, e.g. a lease for five years.
The four types of freehold estates are:
a.
|
The fee simple;
|
b.
|
The fee tail;
|
c.
|
The life estate;
|
d.
|
The estate during someone else’s life.
|
The fee simple is the largest estate the investor can have in terms of duration. It is potentially infinite, and is as near to absolute ownership and can be achieved. The word “fee” means the land is inheritability and the word “simple” means that the right to inherit is unrestricted. The fee simple lasts virtually forever, in that it continues as long as the investor/owner has “heirs” left to inherit.
A fee tail is less than a fee simple and lasts only for as long as the investor/owner or any of his lineal descendants live.
The life estate arises when there is a grant of an estate to a person for his life.
The other estate is created where the right to the estate exists for the duration of someone else’s life.
The rights of a fee simple owner include:
i.
|
Natural rights;
|
ii.
|
Rights of alienation which allow the investor/owner to dispose of his land as he chooses, either by deed or will;
|
iii.
|
Rights of enjoyment generally of everything on, beneath, or above and attached to the land; and
|
iv.
|
Others.
|
Easements
There is another category of rights which falls under the term easement. Easements are limited rights to make use of or to do something on property owned by another. These may also be inherited. The essentials of an easement are that there must be a dominant and a servient tenement. This means that there must be one piece of land which carries the benefit, and another which carries the burden. For example, the benefit is given to a piece of land (the dominant tenement) where there is a right to go across the other piece of land (the servient tenement) in order to access the dominant tenement. The right is to benefit the dominant tenement or a business carried on there. The dominant and servient tenements must not be occupied and owned by the same person, and the easement must be capable of forming the subject to a grant. These rights are classified as incorporeal hereditaments.
Restrictive Covenants
Covenants frequently affect the use and enjoyment of freehold property. An owner/investor or developer may enter into a covenant or promise by a deed whereby he undertakes to another person that he will or will not carry out specific activity on his land. The covenant may be either positive (i.e. to construct or maintain a building) or negative, not to carry on business on a residential parcel of land. In deeds involving land in gated communities, and subdivisions, restrictive covenants are common. Investors usually promise to abide by a list of covenants for the benefit of all owners/investors in land in those communities.
Where a covenant can be enforced by and against successive owners or purchasers of the land, it is said to be affixed to the land.
A restrictive covenant is permanently discharged where the dominant land (i.e. the land which is benefiting) and the servient land (i.e. the land which has the burden of the covenant) come into common ownership.
Exceptions and Reservations
Certain exceptions and reservations over property may also be granted by an investor to another person. For example, a lot owner may grant to a developer of a subdivision the right to lay wires or pipes along a strip of his land to supply water or electricity to other owners of the subdivision.
Encumbrances
Notwithstanding that the fee simple title gives absolute ownership to the investor, yet he may be prohibited from disposing of the land freely because it may be subject to encumbrances.
Encumbrances are interests which are adverse to the particular property. The most important encumbrances are mortgages, leases, judgments, property taxes, and condominium fees.
A mortgage is essentially a pledge of land as security for the repayment of a loan. The investor/owner cannot give a good title to a purchaser unless the mortgage is paid off or satisfied.
A lease is an interest or estate in land given for a defined period of time. The landlord/owner gives to the tenant, for a specified rent, a right of exclusive possession of the property. If the investor/owner wishes to sell the property, he must bring the lease to an end unless the purchaser is willing to accept the property with the lease.
Oftentimes, the investor/owner may be sued and the claimant enters a judgment against him, or the Court orders costs or other damages against him. In these circumstances, these judgments or orders against the investor/owner are attached to his property. He cannot pass a clear title to a purchaser of his property unless those judgments and orders are paid off and removed from the court records.
Real property taxes which are outstanding are encumbrances to land. The investor/owner must pay these off before he could pass good title to a purchaser as outstanding real property taxes will form a first charge over the property to which it applies.
Condominium units are also encumbered with maintenance and other fees which remain outstanding at a point of sale.
Taking Title to Real Property
Many investors prefer to take title to their real property investments in their own names. It is not uncommon, however, for investors to incorporate companies to hold real property on their behalf.
In The Bahamas, the corporate entities which are used to take title to property are the domestic corporation and the international business corporation. Each has its own unique purpose and legal requirements, and these are discussed elsewhere in this website.
The Agreement for Sale
Like many other countries, the laws of The Bahamas govern contracts for the sale of real estate. They are provided for by Section 3 of the Conveyancing and Law of Property Act, Chapter 38. Such contracts by Section 4 of the Statute of Fraud, Chapter 154 are required to be in writing, otherwise, no legal proceedings can be taken in respect thereof. It is perhaps necessary to emphasize that while many contracts which are made verbally are enforceable, no agreement for the sale of land can be enforced unless it is in writing.
Therefore, the investor would be well advised to read and understand the contents of the contract which are usually set out in three parts:
1.
|
The particulars of sale;
|
2.
|
The conditions of sale; and
|
3.
|
A memorandum to meet the requirements of the said Conveyancing and Law of Property Act.
|
The Particulars of Sale
The Particulars of Sale show:
a.
|
The parties involved in the sales agreement;
|
b.
|
The physical description of the property which may include an attached property plan as part of the description;
|
c.
|
The description of the estate or interest of the Vendor in the land, usually assumed and stated as a fee simple (outright ownership) in possession free from encumbrances;
|
e.
|
The document must state whether the property is freehold or leasehold;
|
f.
|
The benefits passing with the land, such as easements and restrictive covenants which are for the benefit of the land being sold; and
|
g.
|
The burdens affecting the land such as restrictive covenants, easements, leases, exceptions and reservations.
|
The Conditions of Sale
The Conditions of Sale are the second part of the Agreement for Sale. The special conditions commonly related to this section are:
a.
|
The date of completion when the conveyance executed by the Vendor is exchanged with the Purchaser for all purchase monies;
|
b.
|
The purchase price to be paid on or before the completion, the deposit to be paid usually upon signing the agreement, and the payment of the balance at completion;
|
c.
|
The deposit which is usually ten percent (10%) of the purchase price paid over to the Vendor’s attorney to be held in escrow (money held conditionally) until the Purchaser’s attorney is satisfied that all the Vendor’s obligations under the contract are met;
|
d.
|
The root of title as stipulated in Section 3 (4) of the Conveyancing and Law of Property Act requires the land title to be searched for a good root of title over a period of thirty years. This consists of the conveyances of the property from one person to another for valuable consideration over that thirty year period. The period may be shortened by commencing with a Crown Grant or lease, or a Certificate of Title issued pursuant to the Quieting Titles Act; and
|
e.
|
The conditions of sale must state the capacity in which the Vendor is selling, that is, as the beneficial owner, a trustee or mortgagee.
|
Standard Conditions
The third part of the Agreement of Sale consists of Standard Conditions. These standard conditions are provided for by the Conveyancing and Law of Property Act. They include:
| a. |
The giving of vacant possession to the Purchaser by the Vendor at completion;
|
b.
|
The production of an Abstract of Title, if required. The Abstract of Title is a schedule list of relevant back title documents which confirm the ownership right of the Vendor going back to a good root of title. The abstract may be waived, but the Vendor must still produce the back title information;
|
c.
|
Requisitions on Title are also required. The contract provides for a specified period of days within which the Purchaser’s attorney can raise questions on the documents and information provided by the Vendor’s attorney. He also poses questions which may result from his own searches in the Registry of Deeds and Documents, the Cause List where judgments, orders and rulings, if any, are recorded against the Vendor or his predecessors in title, and the Companies and/or Probate Registries. The Vendor’s attorney is also given an opportunity and time frame within which to respond. The contract usually provides for remedies if material requisitions are not satisfactorily answered after the stated period;
|
d.
|
There is usually a provision for the Purchaser not to take possession until completion;
|
e.
|
Sundry expenses and obligations attached to the land, such as real property taxes, utility charges and other contractual arrangements which must be paid in full to completion date are accounted for;
|
f.
|
The contract may provide for notices to complete to be given by either party in cases where the other fails to meet his obligations at the times stated in the contract; and
|
g.
|
The agreement may provide for real estate commissions to be paid to the realtor.
|
Preparation Sales
of agreements are usually prepared by attorneys, but in many instances, the real estate agents provide their own. It is important to remember that once a contract is executed, the parties involved will be bound by its terms, and it does not excuse the performance of any provision if a party has not been advised by an attorney, or if a party states that he did not understand what he signed.
The Conveyance
When property is acquired, the purchaser/investor is given a conveyance, which is sometimes referred to as a deed, or sometimes as an Indenture, as evidence of ownership. A conveyance is a document which legally transfers ownership from one party to another. It gives details of the actual transfer. It is divided into various parts:
1. Date
2. Parties
3. Recitals
4. Testatum
5. Receipt
6. Operative Words
7. Description of Property
8. Easements et al
9. Habendum
10. Testimonium
11. Affidavit of Due Execution
2. Parties
3. Recitals
4. Testatum
5. Receipt
6. Operative Words
7. Description of Property
8. Easements et al
9. Habendum
10. Testimonium
11. Affidavit of Due Execution
| a. |
A Conveyance commences with a date even though it takes effect from the date it is actually delivered to the purchaser.
| ||||||||
b.
|
The Parties include the full names, street addresses, and occupations of the Vendor and the Purchaser for purposes of identity.
| ||||||||
c.
|
The Recitals are the narrative and introductory recitals which indicate whether or not the Vendor owns the property free and clear from encumbrances. If there are encumbrances or restrictions, these are usually indentified. The purchase price is stated in a certain currency.
| ||||||||
d.
|
The Testatum, Latin for “known on good evidence”. This commences with the words “Now this conveyance witnesseth”.
| ||||||||
e.
|
The Receipt clause confirms the payment from the purchaser and the receipt by the Vendor of the purchase price, which is also referred to as the Consideration.
| ||||||||
f.
|
By Operative Words, the Vendor conveys as beneficial owner to the Purchaser the named property. The phrase “as beneficial owner” is very important and in a conveyance for valuable consideration implies that:
<><>
| ||||||||
g.
|
The Description of Property is a written brief description of the land which is generally placed in a schedule with a land surveyor’s plan exhibited to the conveyance.
| ||||||||
h.
|
Easements, such as rights of way over some other property, which are to be granted, are inserted in the conveyance, as well as references to restrictive covenants (solemn agreements that are binding on all parties) to which the property is subject and any exceptions and reservations in favor of the Vendor.
| ||||||||
i.
|
The Habendum basically specifies the owner’s rights as well as how those rights are limited. It may also specify time frame or certain prohibited activities. It usually commences with the expression, “To Hold” and continues “unto and to the use of the Purchaser, his heirs personal representatives and assigns in fee simple”. Where the Purchaser is a company, the expression is, “To Hold unto and to the use of the Purchaser, its successors in title and assigns in fee simple”.
| ||||||||
j.
|
The tenth item on the conveyance is the Testimonium clause. This clause indicates the proof, evidence, and witness and in layman’s terms “seals the deal”. The clause may state that, “In WITNESS whereof the Vendor and Purchaser have hereunto set their respective hands and seals”. Only in cases where the Purchaser enters into a covenant with the Vendor, e.g. to observe restrictive covenants, is his name mentioned in the Testimonium, and he does not execute the conveyance.
| ||||||||
k.
|
Finally, an Affidavit of Due Execution is executed. An affidavit, (in Latin literally means “trust affirm”), is a written declaration made on oath before somebody authorized to administer oaths. The affidavit is sworn by the witness to the signing of the conveyance by each party and such affidavit will have to be annexed to the conveyance.
|
The above notes describe a simplified form of a conveyance. Depending upon the situation involved, many conveyances can become quite complicated. For example, there may be more than one Purchaser or Vendor, and the Vendor may be acting in the capacity of a mortgagee or personal representative.
So far, the investor has found a property to invest in, and has entered into an Agreement of Sale; and the attorneys have drawn up the conveyance. The next step in the process is to stamp then record the conveyance.
Stamping and Recording
As a matter of raising government revenue most deeds and documents are required to be stamped in accordance with the Stamp Act. The Stamp Act also makes provision for stamp duty exemption for first-time home buyers and transfers of home mortgages between licensed lending institutions
The stamp duty rates currently are as follows:
| Amount | Rates |
| Up to $20,000 | 4% |
| Over $20,000-$50,000 | 6% |
| Over $50,000-$100,000 | 8% |
| Over 100,000-$250,000 | 10% |
| Over $250,000 | 12% |
Upon stamping, the Registration of Records (Amendment) Act 1989 provides for deeds, documents and property grants to be recorded. Any deed which is first lodged and accepted for record in the Registry has priority and preference over other deeds and documents for the same property notwithstanding the latter was executed before the said deed was lodged for recording.
The further purpose of recording is to provide notice to the world of all transactions pertaining to the property.
Investing in Condominiums
Condominiums, which are very popular forms of investments, are governed by the Law of Property and Conveyancing (Condominium) Act, Ch. 139. They are acquired as second or vacation homes usually by foreign investors.
The Act makes it possible to own the fee simple of a unit while certain areas like paths and laundries are owned in common. Moreover provision has to be made for the passage of water pipes, electrical and air conditioning conduits, and similar services, through the privately owned individual units. The common areas are managed by a Management Company which is operated by the unit owners.
The unit owner holds an undivided share of the common property in proportion to the value of his unit, and the latter determines the extent of his voting rights in the Management Company.
The Act requires that there be drawings and plans (section 5), and the Company must have bye-laws (sections 14 and 15).
The cost of the maintenance of the common property is met by the unit holders in proportion to their entitlement.
The basic document is the Declaration by which property is subjected to the provisions of the Act, and section 4 sets out the contents of this instrument. These include a description of the property and its precise location, a schedule presenting the unit entitlement of each unit, a description of the common property, the bye-laws applicable to the property, a statement of the rules and restrictions covering the use of and transfer of the units, and other relevant matters.
The International Persons Landholding Act
This Act requires non-Bahamian investors in property to apply to the Secretary of the Investments Board for a permit or to register the purchase or the acquisition.
Certain purchases do not require a permit. They are:
a.
|
The acquisition of an interest in a condominium; and
|
b.
|
Property vacant or otherwise to be used by the investor as a single dwelling or for the construction of such a dwelling. However, the property must be less than five contiguous acres.
|
Also, property acquired by a non-Bahamian by devise requires no permit. However, in all cases where a permit is not required, the acquisition document must be lodged with the Investment Board for a Certificate of Registration.
In all other cases, i.e. where land is required for development purposes, an application with relevant details must be forwarded to the Investments Board for approval in advance. The Board is headed by the Prime Minister.
Other Property Considerations
The foreign investor in real property should be aware of other legal provisions affecting real property in The Bahamas.
Real Property Taxes
The Real Property Tax Act requires that an annual real property tax is payable to the Government on all lands in The Bahamas. The present rates are:
| Property (Market Value) | % of Assessed Value |
| Vacant land (Owned by Non-Bahamians) | |
| First $3,000 | $30 |
| $3,000-$100,000 | 1% |
| More than $100,000 | 1 ½ % |
| Owner Occupied Property (Residential)* | |
| Up to $25,000 | Exempt |
| $250,000-$500,000 | ¾ %-1% |
| More than $500,000 | 1 ½ % |
| Other Property/Commercial | |
| First $500,000 | 1% |
| More than $500,000 | 2% |
| *Subject to change |
The Real Property Tax Act provides for the tax to be a prior change upon any land, and so it is important to ensure that such a tax is paid current at the date of completion of the purchase. Certain transactions are exempt from the provisions of the Act.
Time Shares and Fractionals
The development and operations of these types of property are governed by The Bahamas Vacation Plan and Time Sharing Act, 1999. Certain incentives are available but the projects are strictly regulated.
Subdivisions and Gated Communities
These are also subject to special statutory provisions for the protection of the public.
Environmental Provisions
In many cases environmental impact assessment studies must be prepared and submitted to Government before a resort or industrial project can be considered.
Exchange Control Regulations
For the protection of the investor, he must apply to the Central Bank of The Bahamas to register his investments as approved, in advance of completing his acquisition. By so doing, he is assured of repatriating his capital when he sells at some time in the future.
Building and Construction
The foreign investor will be well advised to seek assistance in reviewing building contracts, and those involving, architects, engineers, surveyors, and appraisers.
Legal Assistance
In light of the many transactions involved in the property purchase and development processes, the investor is encouraged to engage the services of a Bahamian real estate attorney to assist him.
This post is for your information only and nothing contained in this postis intended to constitute a legal opinion. If you require any detailed advice you should contact a Bahamian real estate attorney. You can contact a Bahamian property lawyer by clicking here.
No comments:
Post a Comment