Mello Jones & Martin · Barristers and Attorneys

Guide to Purchasing Residential Property in Bermuda

Denis de Frias and Simon Davis · July 1st, 2008

The sale of property in Bermuda can be a relatively straightforward transaction, however, there are nuances to each transaction that require professionals who are trained in the intricacies of financing and conveying Bermuda property to guide the way.

General Purchasing Requirements

Title

Title to land is freehold or leasehold with each property having its own packet of deeds. In the case of “condominium” developments, title to units is usually by long lease out of a landlord company that holds the freehold title of the Condominium development.

Structural Survey

Due to the soundness of local construction methods and a general lack of subsidence problems, purchasers rarely obtain structural surveys before purchase. This is nevertheless an advisable step, particularly where the site maybe steeply sloped, where termite or other wood infestations may have occurred or where electrical and/or plumbing installations may be ancient.

Boundary Survey

It is advisable to have the purchaser of a property require the vendor to re-stake the boundaries to ensure that there are no encroachments or other discrepancies.

Planning

It is essential that a search be conducted to ensure that there have been no developments on the property without planning permission. Checks should also be made as to the use of zonings and subdivision controls. A standard planning search usually takes four weeks to be processed.

Mortgage

A mortgage conveys title from the borrower to the lender subject to the right to a reconveyance of title back to the borrower on the repayment of the loan. The borrower should ascertain the incidence of administration fees charged by the lender and also ensure that the property is insured prior to distribution of the mortgage advance.

Title Searches

These searches are carried out by the purchaser’s lawyer reviewing each deed in the particular packet of title deeds. He/she also searches at the Registry General and Supreme Court to check on outstanding mortgages and judgments against the vendor and predecessors in title.

Taxes

Land taxes are payable twice a year in equal installments. These taxes are apportioned on completion of the transaction.

Leases

Unless agreed that vacant possession is to be given, the purchaser takes the property subject to existing tenancies. The rent is apportioned and any security deposit transferred to the purchaser on completion.

Rent Control

When considering the purchase of a property which contains one or more units which are subject to the Rent Increases (Domestic Premises) Control Act 1978, the purchaser should be satisfied that:

  • The registered rent (registered with the Rent Commissioner’s Office) is not less than the actual rent being charged to the tenant;
  • There have been no increases in rent other than in accordance with the Act;
  • There have been no rents collected from tenants in excess of the registered rent for at least two years before the date of completion of the sale of the property.

Acquisition by Non-Bermudians

The rules and regulations governing the acquisition and development of real property by non-Bermudians are laid down by the Bermuda Immigration and Protection Act 1956 as subsequently amended. In most cases Non-Bermudians may only buy property that is currently held under licence by other non-Bermudians, and that property must also meet the other criteria of the land policy, as detailed below:

  1. Freehold houses with a current minimum annual rental value of BD$153,000 per annum as defined by the Land Valuation Department; or
  2. Condominiums having a minimum annual rental value of BD$32,400 per annum as defined by the Land Valuation Department, and as approved for the sale to non-Bermudians by the Department of Immigration.

Non-Bermudians must apply to the Ministry of Labour Home Affairs & Housing for a “licence to acquire” the particular property; supplying character and financial references to enable the Ministry to determine that the applicant will be a desirable property owner and resident of Bermuda. The approval process can take between four to six months and there is a significant fee payable on the collection of the licence — see below.

Upon confirmation of the grant of a licence to acquire, the applicant can then proceed to complete the purchase of the particular property. The sale and purchase agreement will have the grant of the licence by the Government as a condition to completion.

For freehold properties, the licence fee is 25% of the purchase price of the property and, for condominiums, a fee of 18% of the purchase price of the property is payable to the Government on collection of the licence.

Each licence contains 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 developed or altered so as to add a unit that is capable of being assessed as a residential valuation unit;
  3. The property may not be sub-divided by the non-Bermudian licensee; and
  4. Any rentals require the consent of the Ministry of Labour, Home Affairs & Housing and generally speaking permission will only be granted for lettings to bona fide working residents of the island for periods of up to 12 months when the non-Bermudian owner is not here. 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.

Other points:

  • Undeveloped land cannot be purchased by non-Bermudians.
  • Non-Bermudian lenders require the permission of the Ministry of Finance to take mortgage security on any land in Bermuda.
  • Non-Bermudians may inherit or be gifted properties subject to a licence being obtained by the devisee or donee and provided the annual rental value is over the above limit.
  • The non-Bermudian spouse of a Bermudian may, subject to receipt of a licence, own land jointly with his/her spouse.
  • The licence fee for a voluntary conveyance or on acquisition by inheritance or acquisition by a non-Bermudian spouse (as above) is the relatively nominal amount of $1,335.00.