Tag Archives: Property Lawyer Cayman Islands
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
With the reopening of the real estate and construction sectors of Cayman’s economy, potential customers are most likely purchasing within a strata community. HSM Property Attorney Oscar DaCosta equips buyers with everything they need to know when it comes to strata properties in the Cayman Islands.
A Strata Title is a form of ownership of multilevel apartment buildings, condominiums or horizontal buildings, townhomes with shared areas or common grounds. The “strata” being the strata lot which is your apartment, condo or townhome in the community is governed by the strict rules and regulations found in the Strata Bye-Laws. These bye-laws are either by statute or most commonly found with condominium or townhome developments, drafted to include specific requirements that are unique to the development in which you may wish to purchase.
The strata usually covers the general maintenance of the grounds and exterior buildings, common areas as well as any amenities within the community (pools, gyms, tennis courts). Insurance is also included and some strata’s may include a basic cable package as well. These costs are covered by the owners who pay a regular sum to the strata either monthly or quarterly in advance.
The bye-laws are registered as “the Proprietors Strata Plan No. X”. The bye-laws always state that an executive committee is to be formed and an Annual General meeting held each year with the owners (Proprietors) of the Strata Lot. The Executive can also call meetings in addition to the Annual General meeting known as an Extra Ordinary General meeting if they see fit. A quorum must be met in order to hold these meetings and to vote on any proposed amendments to be made in regard to the strata and bye-laws. However, this is probably the only thing that all strata’s have in common.
Strata bye-laws state the obligations of the Proprietor and of the Strata Corporation (Executive Committee). Some strata bye-laws have obligations on the Proprietor in regards to conducting business from their strata lot (unit) regarding working from home. Thus if you propose to conduct business from your strata unit, permission would have to be sought from the Executive Committee in order to do so. With working from home being the new normal because of the current shelter in place regulations, and some persons wishing to continue to do so even after their offices have reopened, they may need to seek clarification from their strata as to not be in contravention of the strata.
Potential buyers may also be looking to purchase in developments for investment property. Some strata’s include in their bye-laws, the minimum length of term one can lease their strata lot (unit) to a tenant. Most do not allow for leasing the unit for less than 31 days and others require a minimum lease of 6 months. So, if a purchaser is thinking of investing in a property with an eye to list their property on short stay vacations sites such as Airbnb, VRBO and the like, they should definitely review the strata bye-laws of their favoured development to ensure they can do so.
Many are pet lovers as well. So, when looking at potential property in a strata community, the bye-laws would speak to this. Some strata’s do not allow pets at all, others may limit the number of pets, as well as limiting the pet to a specific size and weight. Some strata’s also state that the pet may only be a cat or a dog, therefore if you wanted to own a bird or other type of animal they may not be allowed and special approval would need to be sought from the Strata Committee. Funnily enough, in my research for this article there was no mention of fish as pets in any of the bye-laws researched.
The bye-laws also hold all the restrictions within the community and rules from parking spots, washing of motor vehicles and the parking of boats if not in a waterfront community. Also stating what type of window dressings may be used and colour of same. What can be placed on porches or balconies and what cannot.
Stating the above, my research also found that some strata communities will seek to interview a potential owner of a property in order to authorize the purchase of a unit in that particular strata, including reference letters addressed to the strata.
In summation, a strata is usually well maintained and equipped, rather easy to live in (as all the usual maintenance of the grounds and common areas and exterior repair of buildings is included) within the confines of the bye-laws. However, you should always read the bye-laws before making the decision to purchase as the rules vary between the developments, and some of the restrictions might not suit your lifestyle.
HSM’s team of property attorneys are well-versed in these types of contracts and can assist buyers as well as developers with drafting and understanding strata bye-laws. This article provides a general overview and we encourage you to reach out to an attorney for appropriate legal advice that is unique to your circumstances.
The Cayman Islands are widely known for being a tax-neutral jurisdiction. This means that there are no income, inheritance, sales, corporation, capital gains or withholding taxes in Cayman.
As such, newcomers or first time buyers are often confused by the requirement to pay ‘stamp duty’ on real estate transactions. We are often met with the question “but I thought there was no property tax in Cayman?”
What is Stamp Duty and what is it payable on?
Stamp duty is a charge that is levied on a number of specified instruments[1] at a prescribed rate, for the revenue of the Islands.[2] It is usually payable by the transferee (i.e. the purchaser or tenant) and must typically be paid within 45 days of the execution of the relevant documents to that transaction (e.g. the Transfer of Land, Charge documents, or Lease Agreement).
The amount of stamp duty payable may be fixed (fixed duty) or may vary in accordance with the value of the consideration passing under the instrument (ad valorem duty).
Real estate documents which attract stamp duty include, but are not limited to:
| · Administration | · Deeds | · Probate |
| · Assignments of Contracts | · Discharge of Interest | · Purchase Agreements |
| · Assignment of Leases | · Easements | · Release of Interest |
| · Bills of Sale | · Exchanges | · Sale of Land |
| · Charges | · Leases | · Transfer of Land |
| · Contracts for Sale | · Mortgages | · Withdrawal of Caution |
| · Conveyance | · Power of Attorney |
Additionally, subject to certain exceptions, [3] ad valorem stamp duty is payable on the following real estate transactions:
Conveyances or transfers[4] of any immovable property (freehold or leasehold):
Ad valorem stamp duty is payable on conveyances of property, Transfers of Land, Sales of Land or on any document[5] which has the effect of legally passing the freehold or absolute title in land, property or condominium from one entity to another.
The stamp duty payable on such instruments is assessed by the Valuation and Estates Office and is payable on the consideration (purchase price) or market value[6] of the property, whichever is higher.
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, inter alia, the following circumstances:
- (i) First time Caymanian purchasers;
- (ii) Transfers through Natural Love and Affection
- (iii) Pre-construction/ Developments;
- (iv) Transfers through the death of an owner, or subsequent divestment of estate;
- (v) Transfers from a landholding company to a shareholder owning at least 45% of the shares (or vice versa.
Leases
Stamp duty is payable on all written documents which convey or transfer a proprietary interest, including a leasehold interest (whether registerable at Lands and Survey or not) of a particular parcel or parcels of land. It is irrelevant whether the document itself is entitled “tenancy”, “lease”, “agreement” or indeed “licences” or “licences to occupy” if the true nature of the document conveys or transfers a proprietary interest.
The current rates of stamp duty payable on a lease or lease agreement are:
- (i) For terms less than 1 year: 5% of the total rent payable;
- (ii) For terms lasting 1 year or more, but not exceeding 5 years: 5% of the average annual rent;[7]
- (iii) For terms exceeding 5 years, but not exceeding 10 years: 10% of the average annual rent;
- (iv) For terms exceeding 10 years, but not exceeding 30 years: 20% of the average annual rent.
For terms exceeding 30 years, the duty is the same as on a Transfer of Land based on the full market value of the real estate or interest in it. If the rent in the lease is considered to be less than market value, for the purposes of calculating the stamp duty, the average annual rent will be declared at the market value having regard to any premium charged.
It is worth noting that verbal agreements providing exclusive possession of a property do not attract stamp duty. However, it is often said that verbal contracts are “not worth the paper they are written on” because of the inherent risks associated with a lack of written evidence, particularly where disputes between the landlord and tenant arise
Mortgages over immovable property (i.e. real estate)
For a traditional mortgage or charge over a property including debentures, equitable mortgages or legal mortgages, the rate of stamp duty payable is dependent on the amount of money advanced (or sum secured) and the type of mortgage granted as follows:
- (i) where the sum secured does not exceed CI$300,000, 1% of the money advanced; or
- (ii) where the sum secured exceeds CI$300,000 (whether initially or after a further advance), 1.5% of the money advanced.
Insurance Policies
When purchasing property, most purchasers will attain property insurance, for which the stamp duty payable is 2% of the cost of the new or renewed property insurance premiums.
Additionally, the majority of lending institutions will require assignment of life insurance/assurance equal to or exceeding the value of the amount borrowed. For life insurance policies, the stamp duty payable is:
- (i) CI$25 for policies not exceeding CI$1,000; or
- (ii) The greater of CI$25 or 0.01% of the amount insured, up to a maximum of CI$200, for policies exceeding CI$1,000.
Caymanians and Stamp Duty Waiver Eligibility
(Updated September 2023)
The Cayman Islands Ministry of Finance and Economic Development (“MoF”) updated stamp duty concessions for Caymanians as follows:
Individual First Purchase
Raw land:
- no stamp duty up to CI$250,000
- stamp duty will be assessed on the property value difference above CI$250,000 but less than $350,000 at 3.75%.
Developed residential property or home:
- no stamp duty up to CI$550,000
- stamp duty will be assessed on the property value difference above CI$550,000 but less than CI$650,000 at 3.75%.
Group (2-10 Caymanians) First Purchase
Raw land:
- no stamp duty up to CI$450,000
- stamp duty will be assessed on the property value difference above CI$450,000 but less than CI$550,000 at 3.75%.
Developed residential property or home:
- no stamp duty up to CI$600,000
- stamp duty will be assessed on the property value difference above CI$600,000 but less than CI$700,000 at 3.75%
Individual Second Purchase
Raw land:
- stamp duty will be assessed at 3.75% up to CI$300,000.
Developed residential property or home:
- stamp duty will be assessed at 3.75% up to CI$600,000.
Group (2-10 Caymanians) Second Purchase
Raw land:
- stamp duty will be assessed at 3.75% on property value up to CI$550,000.
Developed residential property or home:
- stamp duty will be assessed at 3.75% on property value up to CI$700,000.
Other
Subject to limited exceptions, ad valorem share transfer tax is payable on the transfer or issue of equity capital in a land holding corporation at the rate of 7.5% of the proportionate value of the entire land holding. A land holding corporation includes a partnership, foreign corporation, chartered corporation, mutual fund or incorporated company (but not a corporation sole or charitable corporation) holding any legal or beneficial interest (excluding interests created pursuant to bona fide security instruments) in landed property in the Cayman Islands (or interest in another land holding corporation). Landed property includes freehold interests in Cayman Islands real property and any leasehold interest where the original term exceeded 30 years.
Most other instruments and documents are subject to a fixed rate of stamp duty in comparatively nominal amounts. Registrable instruments are also subject to relatively immaterial registration fees.
Subject to limited exceptions, real estate used for paid tourist accommodation attracts tax at 13% of the amount charged to each tourist.
There are no other domestic taxes or municipal rates currently payable on the occupation, acquisition, ownership or disposal of Cayman Islands real property or income deriving therefrom.
Penalties for failing to pay stamp duty?
Importantly, the Schedule to the Stamp Duty Law (2019 Revision) provides for heavy fines and even potential criminal liability for persons found to have failed to pay the relevant stamp duty on an instrument upon which duty is payable.
Have questions?
Please contact the property team at HSM directly at property@hsmoffice.com.
Footnotes
[1] These instruments are specified in the Schedule to the Stamp Duty Law (2019 Revision) (the ‘SDL’).
[2] Importantly, duties chargeable under section 1 of the Stamp Duty Law (2019 Revision) are recoverable as civil debts at the suit of the Commissioner. The Minister of Finance is the Commissioner but has delegated responsibility to Lands and Survey for the Assessment and Collection of Stamp Duty on all documents relating to immovable property.
[3] Subject to certain exceptions at the discretion of the Minister of Finance.
[4] See the Schedule to the SDL for definition of “conveyance or transfer”.
[5] This includes any instrument transferring an interest in land, whether prepared pursuant to the Registered Land Law (2018 Revision), Registered Land Rules (2018 Revision) or otherwise.
[6] Pursuant to para (3) of the Schedule to the SDL, the market value of any property is the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.
[7] Notably, any lease reserving a term of 2 years or more must be in the prescribed form (Lands & Survey Form RL8).
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