Tag Archives: Property Law Cayman

Why should you hire a property attorney in the Cayman Islands? Most people would not dream of entering a courtroom without a lawyer. Yet, many forget that legal situations are not confined to the courtroom. Whilst most people will hire a lawyer to help with legal problems which have already arisen, most forget that ‘prevention is better than the cure’.

Purchasing a home is one of the most significant financial investments an individual will make during their lifetime. Selling a home also has its own unique challenges and requires an understanding of a broad range of factors.

Whether you are buying or selling real estate, hiring a property attorney offers you protection against the unexpected, and will ensure that the transaction will go as smoothly and as stress-free as possible. Hiring a property attorney can help buyers and sellers navigate and negotiate the transaction for the best possible outcome. Attorneys can nip problems in the bud before they become a problem, saving you time, energy and money in the long run by protecting you against any costly pitfalls.

I have a real estate agent. Do I still need an attorney?
The Cayman Islands has many experienced and knowledgeable real estate agencies that can work with your bank, developer and attorney when you are buying or selling property. The Cayman Islands Real Estate Brokers Association (CIREBA)[1] has a standard Offer to Purchase contract (basic form) which is often used by real estate agents.

Whilst these are often signed before the property attorney is instructed, it is always a good idea to have an attorney look over any contract you are planning to sign before you sign it…“sign in haste and repent at leisure”. Your real estate agent can offer good advice, however; they are not as well-versed in the law and they are not contract experts; having an attorney involved can only help. An attorney can ensure that all the proper wording is included in the contract to protect you in any situation that could arise.

Even if you already have a signed Offer to Purchase or have exchanged contracts, an attorney can provide you with valuable advice throughout the transaction. Parties often believe that using form contracts and documents will prevent legal issues from occurring, however, given the complexities of the law, and the multitude of issues that might arise over the course of the transaction, it is always a good idea to have legal representation.

What does a real estate attorney do?
Once the selling price and terms have been established by the parties, a real estate attorney can either assist in preparing the Sale and Purchase Agreement, or in reviewing the contract and all other relevant documents. Thereafter, they can assist you with negotiations and making any necessary adjustments to the terms of the deal to accurately reflect the agreement reached between the parties and ensure the terms and conditions are consistent with the other terms of the agreement and the relevant law. Your attorney will also prepare all required closing documents, provide you with a completion statement breaking down your financial obligations and will attend your closing along with your real estate agent and possibly a representative from your lender to ensure it goes smoothly.

That all sounds great, but do you actually need one?
We typically see buyers and sellers hiring an attorney where:

Buyers are:

  • living outside the Cayman Islands;
  • buying a property that is for sale by the bank (i.e. a foreclosure);
  • buying a property that is part of an estate sale;
  • buying a commercial property;
  • buying a property that could potentially have some structural issues;
  • buying a property where there will be multiple owners or
  • buying a property using a company or buying from a company.

Sellers are:

  • selling property that is in some state of distress;
  • they are the heir or executor of the property owner;
  • selling a house where another owner does not agree to its sale or
  • selling a property subject to a caution, lien or other security interest.

However, even if none of the above scenarios apply, you should still hire a real estate attorney. Why?

1. Your attorney has no personal interest in the outcome of the transaction other than making sure you are taken care of. All other parties assisting you in the transaction may have a financial interest in the outcome (e.g. real estate agents wish to earn their commission).

2. Your attorney will review and modify the contract and all relevant documents to ensure your needs are met and your interests are protected, helping you avoid complications or unforeseen situations. Having a qualified expert available to explain the terms of the contract and/or propose modifications to it is in your best interest, especially when purchasing a pre-construction or development property.

3. If there is an issue with your deal, what are your legal obligations if you back out of the contract? Can you get your deposit back? Will you owe the other party any money for changing your mind? A real estate attorney has the experience and training to handle these types of issues and problems. They can explain the repercussions of backing out of the contract and set out all your options so you are fully informed before making a decision.

4. Negotiations can be difficult to navigate and there can be many other parties involved in your purchase or sale. Your attorney acts as an intermediary, working with your mortgage loan officer, the real estate agents and strata managers (where applicable) and can expertly negotiate with the other party’s attorney to make sure that the transaction runs smoothly from start to finish and is closed without unnecessary delays.

5. Your attorney will also prepare and/or review all documents, including the land register, mortgage loan, conveyancing and other closing/strata documents (where applicable) to ensure there are no unpleasant surprises. Even minor mistakes in these documents can create big issues and significantly delay your transaction. It can be very difficult to correct errors after a real estate transaction is closed and unless these complex documents are reviewed closely by a legal expert, it’s easy to overlook errors.

6. What happens if the property has an illegal structure, termites, lead paint, asbestos, or other potentially hazardous conditions? What if the property you are trying to purchase is involved in a legal dispute? Certain conditions need to be clearly defined and met to ensure you know exactly what you are getting into for your purchase. Your attorney can help you draft these conditions to help you avoid making a poor investment and properly advise you before you get locked into an unconditional contract so that you don’t end up unknowingly buying a home or property with costly defects.

7. Your attorney will investigate complex issues such as whether the seller is the registered proprietor and has the ability to sell the property. Legal problems can arise if, for example, the seller is partial-owner of the property, and attempts to sell without getting approval from the other owner. Your attorney will carefully review the land register, making sure there are no errors in the legal description and explaining the effects of easements, restrictions and zoning laws. They will also review any relevant documents, so that you can avoid many other potential problems including border disputes, strata disputes etc.

8. Real estate attorneys can be essential when you are considering the financial impact of the proposed financial transaction. They are well versed in advising on closing costs and the timing and distribution of such payments that can sometimes come as a surprise, derailing a purchase. Factors such as insurance, valuations, inspections, strata fees and upcoming strata assessments or stamp duty re-assessments need to be properly considered. Our property team will prepare your completion statement ahead of closing and review all relevant documents so you know exactly what to expect at closing and subsequently.

If the other parties involved have their own attorneys and you do not, you will be at a disadvantage. For all these reasons and more, hiring a real estate attorney is well worth the cost for the peace of mind that comes with having an experienced professional on your side throughout the transaction, and knowing that, once closed, you received everything you were entitled to during the process with no surprises.

[1] A Cayman Islands corporate body that regulates real estate agents

Property Attorney Cayman Islands

Purchasing property in the Cayman Islands is attractive, not only for the luxurious beaches and high standard of living but the buying process is acclaimed for its structure and variety of opportunities.

HSM’s property lawyers in the Cayman Islands breakdown the fees that buyers can expect.

There are no property taxes in the Cayman Islands but property buyers do pay stamp duty. Generally, stamp duty is payable at a rate of 7.5% on the market value of property, whether undeveloped ‘raw’ land or developed land with buildings on it. However, concessions or waivers may be available in the following circumstances:

a) First time Caymanian Purchasers

Where a purchaser is Caymanian,[1] reduced stamp duty rates may be available for the purchase of an existing residential dwelling, or raw land for the construction of a residential dwelling[2]. This concession is not automatic; an application must be made to the Minister of Finance. If approved, the following reduced rates apply for one Caymanian first-time purchaser: [3]

  • (i) 0% for bare land purchases with a market value of up to CI$150,000 and for houses, apartments or other dwelling purchases with a market value of up to CI$400,000, for owner occupation; and
  • (ii) 2% for bare land purchases with a market value of more than CI$150,000 but not exceeding CI$200,000 and for houses, apartments or other dwelling purchases with a Market Value of more than CI$400,000 but not exceeding CI$500,000, for owner occupation.

The following reduced rates apply for two or more[4] Caymanian first time purchasers:

  • (i) 0% for bare land purchases with a market value of up to CI$300,000 and for houses, apartments or other dwelling purchases with a market value of up to CI$500,000, for owner occupation; and
  • (ii) 2% for bare land purchases with a market value of more than CI$300,000 but not exceeding CI$350,000 and for houses, apartments or other dwelling purchases with a Market Value of more than CI$500,000 but not exceeding CI$600,000, for owner occupation.

The usual 7.5% applies to purchases exceeding the above limits.

b) Transfers through Natural Love and Affection

For transactions which take place through Natural Love and Affection (i.e. no consideration, financial or otherwise, passes between the parties), a fixed stamp duty rate of CI$50[5] applies. Property may pass for natural love and affection between:

  • Husband and Wife;
  • Parent and Child;
  • Brother and Sister (as long as they share a parent); and
  • Grandparent and Grandchild.

It is also possible for property to pass for natural love and affection between extended family members in a single transaction, as long as evidence of the relationship chain can be demonstrated and the parties are living.  In such cases, the Stamp Duty is payable separately for each link in the relationship chain.

c) Linked Transactions/ Pre-construction/ Developments

Historically, many developers have minimized the stamp duty payable by their clients by structuring their contracts in two interdependent parts: an agreement for the sale of raw land on which the building will be constructed; and a development or construction agreement to be carried out by the developer or a related company.

Accordingly, the stamp duty is assessed on the value of the raw land only, without taking into account the value of the building the developer has agreed to construct on, provided that the agreement for sale is presented to the Lands and Survey Department for assessment before the building commences.

Changes on the horizon?

In October 2018, the Stamp Duty (Amendment) Bill 2018 (the ‘Bill’) was published. The Bill proposed that as of 1 January 2019 such transactions would be considered ‘linked property transactions’, and stamp duty would be assessed on the aggregate value of the two agreements.

What has actually changed?

However, when the Stamp Duty (Amendment) Law 2018 came into force on 19 December 2018, the draft legislation had been significantly altered with respect to ‘linked property transactions’, allowing developers with planning permission in place by 30 June 2019 a year to take advantage of the pre-existing regime for stamp duty on ‘linked property transactions’, provided they enter into their contracts before 31 December 2019. Accordingly, stamp duty will be assessed on the value of the land purchase agreement only and not on the value of the construction agreement as well.

This has allowed developers more time to prepare for the impact of the new regime and is a welcome delay for both developers and purchasers with residential development projects already underway.

What about after 31 December 2019?

The Law provides that, after 31 December 2019, in a Linked Property Transaction worth CI$300,000 or less, the stamp duty payable is 3% of the total value of the linked property transaction.[6]

In a Linked Property Transaction worth more than CI$300,000 the total 7.5% stamp duty is payable as follows:[7]

  • (i) 75% of the total value of the linked transaction, payable within 45 days of the purchaser having signed an Agreement for Sale and Purchase (‘Agreement’); and
  • (ii) 75% of the total value of the linked transaction, payable within 45 days of the purchaser having signed a Transfer of Land (‘Transfer’).

d) Transfers through the death of an owner, or subsequent divestment of estate

No stamp duty is payable on transactions that are effected as a result of the death of a proprietor/ owner of a land, where the land is being inherited either directly, or otherwise dealt with by way of the Administrator of the Estate.

e) Transfers between Companies and Shareholders

For transfers from a landholding company to a shareholder owning at least 45% of the shares (or vice versa), an abatement of stamp duty may also be available.[8]

f) Other

Several other categories of transfers may also be exempt from stamp duty, including:

  • transfers to a receiver;[9]
  • transfers executed by a cooperative society;[10] and
  • certain dealings in bankruptcy.[11]

Footnotes

[1] As defined under the Immigration (Transition) Law, 2018 and only if they can provide supporting documentation.

[2] This only applies when the land or property is for the applicant’s first owner occupied dwelling.

[3] This applies to all areas except parcels located in excepted Blocks – see the Schedule to the Stamp Duty Law (2019 Revision) for a list.

[4] But no more than 10.

[5] For extended family members, the Stamp Duty fee applies separately to each ‘link’ in the relationship chain.

[6] CONVEYANCE OR TRANSFER of any immovable property within a development scheme and forming part of a linked property transaction, para (1) Schedule, Stamp Duty Law (2019 Revision)

[7] CONVEYANCE OR TRANSFER of any immovable property within a development scheme and forming part of a linked property transaction, paras. (2), (3) and (4) Schedule, Stamp Duty Law (2019 Revision)

[8] CONVEYANCE OR TRANSFER, para (3), Schedule, Stamp Duty Law (2019 Revision)

[9] CONVEYANCE OR TRANSFER, para (5), Schedule, Stamp Duty Law (2019 Revision)

[10] s.67 Cooperative Societies Law (2001 Revision)

[11] s.166 Bankruptcy Law (1997 Revision)


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