REAL ESTATE TRANSACTIONS IN THE BAHAMAS
The purchase or sale of real estate in the Bahamas requires the assistance of a local attorney. Transactions typically take three to six months to complete, sometimes less depending on the circumstances.
For non-Bahamian purchasers there are regulatory applications to be made either before or after completion of the purchase, depending on the nature of the purchase. The Bahamas Investment Authority, which is a department in the Ministry of Finance, monitors all non-Bahamian investment in real estate in the Bahamas, and there are related regulatory attendances.
The following is an overview of a local real estate transaction:
- CONTRACT (locally referred to as the “Agreement for Sale”) – The terms are agreed and the Deposit must be provided to the Vendor’s attorney when the Agreement for Sale is executed by the Purchaser.
- TITLE SEARCH – This is a review of the legal title to the property to determine whether the title to the property is good and marketable. Alexiou, Knowles & Co., has an in-house microfiche library which we use for our title searches.
- REGULATORY APPROVALS – Non-Bahamian purchasers of real estate are subject to certain regulatory approvals. In certain circumstances these approvals are required as a condition precedent to completion of the purchase. In other circumstances, the regulatory approvals would be obtained post-completion.
- REQUISITIONS – During the title review period the Purchaser’s attorney is entitled to raise requisitions in connection with the title to the property. The Vendor’s attorney has a window of time in which to respond to the requisitions.
- DOCUMENTATION – The Purchaser’s attorney will prepare a legal opinion on title, and request that the Vendor’s attorney provides the deed of conveyance for execution.
- COMPLETION – The funds are provided by the Purchaser and the legal title is transferred.
- POST-COMPLETION – The Purchaser’s attorney attends to paying the requisite taxes on the deed of conveyance, recording the conveyance in the Registry of Records, and making applicable regulatory applications.
The primary completion costs associated with real estate purchases and sales (in addition to purchase price) are stamp duty, Value Added Tax (VAT), legal fees, and the realtor’s commission.
Typically the Vendor and the Purchaser each pay for a part of these costs. This is referred to as a “gross” sale. In a gross sale, the Vendor pays the realtor’s commission, half of the VAT/stamp duty, and his own legal fees. The Purchaser pays half of the VAT/stamp duty, and his own legal fees.
In a “net” sale, the Purchaser pays all of the completion costs, i.e., the entire VAT/stamp duty, the realtor’s commission, and legal fees for both the Vendor and the Purchaser.
The legal fees for real estate transactions are typically a percentage of the value of the real estate. The Bahamas Bar Association suggested scale fee for acting for one side in a transaction is 2.5% plus VAT. For higher priced property this percentage may be reduced.
The realtor’s commission is typically 6% of the sale price in the case of developed property, and 10% of the sale price in the case of vacant land, plus VAT.
In addition to the above-mentioned costs, there are costs for recording documents, for obtaining appraisals (which are frequently required) and application fees for any regulatory applications. These costs are relatively nominal.
BAHAMAS STAMP DUTY RATES
All real estate transactions in the Bahamas are subject to the payment of Government Stamp Duty pursuant to the Stamp Act, as amended from time to time.
At present the stamp duty is 2.5% of the purchase price of the property.
The stamp duty rate is traditionally calculated based on the purchase price of the property. Purchasers are frequently asked to provide a current appraisal at the time the conveyance is presented for payment of stamp duty, to support the valuation of the property, and the Public Treasury has the discretion to adjust the amount of stamp duty payable if they determine the market value of the property to be different than the stated amount.
VALUE ADDED TAX
Value Added Tax was introduced in The Commonwealth of The Bahamas on 1st January, 2015. VAT is charged on goods and services at a rate of 7.5%. Legal fees are taxable, and real property transfers are also taxable.
Every transfer of real estate valued over $100,000, is exigible to VAT at a rate of 7.5% of the purchase price.
Effectively, sellers and purchasers of property must be prepared to pay taxes in the amount of 10% total on the purchase price, or appraised value of the property. There are certain exemptions available, which are granted at the discretion of the Public Treasury upon application.
Real property taxes can also have a big impact on real estate transactions in The Bahamas as unpaid taxes are a statutory first charge on the property. Click here to learn more about real property tax.
The information provided herein is not comprehensive and is not intended to be a substitute for legal advice and services. Please contact one of our real estate attorneys for legal assistance.