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.
Completion Costs
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.
Realtor’s commissions are 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 10% 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.
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 10%. Legal fees are taxable, and real property transfers are also taxable.
The VAT payable on a real estate transfer / Conveyance depends on whether the title is being transferred to:
- a “Bahamian” (i) a citizen of The Bahamas or a permanent resident with the unconditional right to work or (ii) a company in which 100% percent of the shares are beneficially owned by Bahamians and not directly or indirectly controlled by non-Bahamians); or
- a “Foreign Person” (i) an individual who is not a citizen of The Bahamas or a Permanent Resident with the unconditional right to work; or (ii) a company incorporated in The Bahamas where any of its shares or other capital is legally or beneficially owned by a person who is not a Bahamian – or is controlled by a person who is not a Bahamian
The applicable rates are as follows:
- TO A BAHAMIAN (Where holding property not for a business):
– 5% where the value does not exceed $100,000;
– 4% where the value exceeds $100,000 but does not exceed $300,000;
– 6% where the value exceeds $300,000 but does not exceed $500,000;
– 8% where the value exceeds $500,000 but does not exceed $700,000;
– 9% where the value exceeds $700,000 but does not exceed $1,000,000;
– 10% where the value is over $1,000,000.
- TO A 100% BAHAMIAN OWNED COMPANY (not carrying on a business)
– Same rates as indicated above for a Bahamian
- TO A 100% BAHAMIAN OWNED COMPANY (that is carrying on a business)
– 10% of the value
- NON-BAHAMIAN and NON-BAHAMIAN-OWNED COMPANY
– 10% of the value.
NOTE: That “value” will be treated by the Department of Inland Revenue” as the higher of the agreed purchase price of the value for which the property is current assessed for real property tax purposes wit the Department of Inland Revenue.
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.