Barbados Property List
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by Creig Kinch, Senior Associate, Clarke Gittens Farmer
- the process of purchasing property (which may differ from that in the overseas purchaser’s home country);
- financing the purchase and Exchange Control Authority regulations pertaining to financing;
- taxes and duties related to the purchase; and
- the benefits of purchasing the property through an offshore company.
The process of purchasing property
Whether dealing with any one of the two systems of title in Barbados, unregistered or registered, there are three main steps in the process of purchasing property. They are:
- the pre-contract negotiations;
- the agreement for sale; and
- the conveyance and completion.
The pre-contract negotiations
During the pre-contract negotiations, the vendor and the purchaser negotiate and settle the terms of the sale and purchase including the purchase price, the size of the deposit required and the time frame for completion. During negotiations the purchaser should mark all correspondence between the purchaser and the vendor as “subject to contract” to avoid inadvertently creating a contract at this stage. If the purchaser’s attorney is not involved in the pre-contract negotiations, the purchaser should share all of the terms of the settled negotiations with his or her attorney.
The agreement for sale
Following the pre-contract negotiations, the parties normally proceed to document the terms of the sale and purchase in a formal written document called an agreement for sale. This agreement is usually prepared by the vendor’s attorney and sent to the purchaser’s attorney. The agreement should contain a full description of the property to be sold, the liabilities subject to which it is held like restrictive covenants or encumbrances and any special terms agreed upon by the parties. Where either the vendor or the purchaser resides outside of Barbados, the agreement for sale should be made subject to receipt of Exchange Control Authority approval for the sale and purchase.
It is the responsibility of the purchaser’s attorney to approve the agreement subject to any desired amendments. Once both parties are satisfied with the terms of the agreement they execute it in duplicate and the purchaser pays the deposit to the vendor’s attorney. The vendor’s attorney normally holds the deposit as stakeholder for both parties to deal with it in different ways. For example, where the purchaser breaks the contract, the deposit is paid to the vendor and where the vendor breaks the contract, the deposit is returned to the purchaser. The purchaser’s attorney normally retains one copy of the agreement while the vendor’s attorney retains the other copy.
The conveyance and completion
Once the agreement for sale has been executed, the vendor’s attorney prepares a draft conveyance or transfer of the property. The vendor’s attorney sends the draft to the purchaser’s attorney for review together with copies of the title deeds (if not sent before). On receipt of the title deeds and the draft conveyance or transfer, the purchaser’s attorney investigates title and reviews the draft conveyance or transfer and makes any necessary amendments. The purchaser’s attorney then prepares questions about the property called requisitions which are sent to the vendor’s attorney for his or her reply.
If the purchaser is obtaining a mortgage or charge, the purchaser’s attorney will send copies of the prior title deeds and draft conveyance or transfer to the lender’s attorney for his or her comment as well. The lender’s attorney investigates title, prepares the mortgage or charge and sends requisitions to the purchaser’s attorney for his or her reply.
Where either the vendor or the purchaser resides outside of Barbados an application has to be made to the Exchange Control Authority for the transfer of the property. This application is made by either the vendor’s attorney or the purchaser’s attorney in accordance with the terms of the agreement for sale.
When the conveyance or transfer is settled, the vendor’s attorney finalises it and sends it to the purchaser’s attorney for execution by the purchaser. If the purchaser is on island at the time of execution his or her signature can be witnessed by his or her attorney-at-law. Where the purchaser executes the conveyance or transfer overseas in a Commonwealth country his or her signature should be witnessed by any one of the following:
- a diplomatic or consular representative for Barbados;
- a Judge of any superior court;
- a Justice of the Peace or Commissioner for Oaths empowered to administer oaths or declarations;
- a mayor of any city or corporation; or
- a Notary Public.
Where the conveyance or transfer is executed in a non-Commonwealth country it should be witnessed by any one of the following:
- a diplomatic or consular representative for Barbados;
- a Judge of a superior court; or
- a Notary Public.
Once the relevant parties have:
- completed their title investigations,
- received satisfactory replies to their requisitions,
- received approval for the transfer from the Exchange Control Authority,
and the line marks have been pointed out to the purchaser or his or her agent, the fully executed conveyance or transfer together with all other documents which constitute title to the property are exchanged for the balance of the purchase price.
Financing and Exchange Control Authority Regulations pertaining to financing
An overseas purchaser should discuss with his or her attorney how he or she plans on financing the purchase of the property as Exchange Control Authority approval may be required.
A purchaser can either bring in funds to finance the purchase or seek a mortgage from a local bank or an external bank licensed to carry on banking business in Barbados.
Where the purchaser is bringing in funds to purchase the property, this money should be registered with the Exchange Control Authority prior to the application for Exchange Control permission for the transfer of the property. Where the purchaser re-sells the property the Exchange Control Authority will require evidence of registration of the funds used initially to purchase the property before it grants permission to remit the proceeds from resale outside of Barbados. The Exchange Control Authority will permit a sum equivalent to what the purchaser registered to be remitted on resale. The exportation of the excess sale proceeds will be subject to regulation from the Exchange Control Authority and permission may not be granted for same to be taken out as a lump sum but rather in increments over time.
Where the non-resident purchaser is obtaining a mortgage, Exchange Control Authority permission may be required for the loan and/or mortgage depending on the purchaser’s nationality. Where the purchaser is a Barbadian national residing outside of Barbados, the purchaser will not require Exchange Control Authority permission for the loan but will require permission for the mortgage. Where the purchaser is non-resident and non-Barbadian, Exchange Control permission is required for both the loan and the mortgage. In our experience, this permission is not generally easily obtained by a non resident non-Barbadian.
Taxes and duties related to the purchase
On a sale and purchase there are a number of taxes which are payable by the parties. The following table shows the most common taxes and duties which are payable, how they are calculated and by whom they are payable.
Click the link to view this table: Taxes and duties related to the purchase
On completion of the sale and purchase, the new owner is responsible for the payment of the land taxes, which are due yearly. Unpaid land taxes are a charge on the property and the Land Tax Department can sell properties with land tax arrears.
The benefits of purchasing the property through an offshore company
Property transfer tax and stamp duty are payable on the sale or transfer of real estate and shares in Barbados. As a result, non-nationals and non-residents often opt to own property in Barbados through a company incorporated in another jurisdiction. When they are ready to dispose of the property the sale is effected by selling the shares of the company offshore. Such a sale does not attract Barbados property transfer tax and stamp duty because the sale does not take place in Barbados.
The advice of an attorney qualified to practise in the jurisdiction in which you wish to incorporate the company should be obtained to determine:
- whether a company incorporated in that jurisdiction can be used for the purpose of owning real estate in Barbados;
- the steps and legal requirements for setting up the company in that jurisdiction;
- the fees and charges for setting up the company in that jurisdiction.
Once the company is incorporated, its registration must be maintained and the necessary license fees, if required, should be paid to ensure that the company is not struck off the register.
Before a company incorporated outside of Barbados can own property locally, it must first be registered in Barbados as an external company. Annual returns must be filed at the Corporate Registry together with the prescribed fee to maintain an external company. Failure to file these returns and pay the fee can lead to interest and penalties being charged as well as the company being struck off the register.