Acquisition of Residential Property by Non-Bermudians: A Brief Summary

Denis de Frias · October 6^th, 2006

There is a relatively small market of Bermuda real estate available for purchase by non-Bermudians. With respect to residential properties, the non-Bermudian may only purchase the higher valued properties at the upper end of the residential property market. These properties are specifically determined by their minimum Annual Rental Value (“ARV”), which is a formula used by the Bermuda Land Valuation Department for calculating Land Tax. The minimum ARV for properties available to non-Bermudians are determined by the Ministry of Labour, Home Affairs & Public Safety and is published in policy guidelines issued by the Ministry from time to time. The current minimum ARV for the acquisition of freehold residential property by a non-Bermudian is BD$126,000.00, thus making available approximately 270 freehold homes available to non-Bermudian purchasers. The current minimum ARV for the acquisition of leasehold town houses and condominiums by a non-Bermudian is BD$28,800.00. Undeveloped or vacant lots of land cannot be purchased by non-Bermudians.

Licence to Acquire Bermuda Property

For a non-Bermudian to purchase a residential property above the minimum ARV set by the Ministry, they must first obtain a “Licence to Acquire” from the Minister of Labour, Home Affairs & Public Safety. Accordingly, the Sale and Purchase Agreement entered into by the potential non-Bermudian purchaser of the property and the vendor must include a provision making the agreement subject to the non-Bermudian purchaser first obtaining a Licence to Acquire. The application for the Licence to Acquire is filed under regulations outlined in the policy guidelines issued by the Ministry. Currently the applicant must provide at least two character references and a financial reference in order for the Ministry to determine that the applicant is a desirable Bermuda Property owner. The application process may take from anywhere between two to four months.

Each Licence to Acquire contains the following standard restrictions on the use of the particular property by the non-Bermudian:

1. It is for private residential use by the licensee and his household only;
2. The property may not be sub-divided by the non-Bermudian licensee; and
3. Any rentals require the consent of the Ministry of Labour, Home Affairs & Public Safety and generally speaking permission will only be granted for lettings to bona fide working residents of Bermuda for periods of up to 12 months when the licensee non-Bermudian owner is not visiting the Island. Lettings to tourists in competition with local hotels and guest houses are generally not encouraged. Where permitted, in the case of freehold properties being rented to bona fide visitors a 5% tax on the rental income is payable to the Government.

Licence to Acquire Fee

Upon collection of the approved Licence, there is a significant fee payable by the non-Bermudian applicant to the Bermuda Government. The calculation of the fee is also determined by the policy guidelines of the Ministry. The current Licence fee for the acquisition of a freehold property is 22% of the purchase price of the property. The current Licence fee for the acquisition of a leasehold town house or condominium is 15% of the purchase price of the property.

Conveyance Stamp Duty

It must be noted that additional Bermuda Government stamp duty is payable on the Deed of Transfer of the property within thirty (30) days of completion of the purchase. These stamp duty costs are usually shared between the Purchaser and the Vendor. The rates for Government Stamp Duties on conveyances are based upon an escalating percentage of value as follows:

• 2.5% on the first $100,000.00;
• 3% on the next $400,000.00;
• 4% on the next $500,000.00;
• 5% on the next $500,000.00; and
• 6% on the balance over $1,500,000.00