Purchasing property in The Bahamas could be a confusing task, especially for first time home buyers and non-residents who are unaware of the number of fees associated with real estate transactions. To clarify the process we have provided a basic guideline to demonstrate the steps involved in the sale or purchase of real estate together with estimated costs involved one may expect from a service provider involved in the process in The Bahamas
Legal Fees: Minimum of 2.5% of Consideration
Legal practitioners are subject to the provisions Bahamas Bar (Code of Professional Conduct) Regulations, and who are allowed to charge fees for legal services that are determined by several factors such as the nature and complexity of the transaction, value of consideration, etc. Since the 1980s regulators have pegged standard attorney fees have stood at 2.5% of the consideration exchanged, but rates may increase or decrease at the discretion of the attorney. You may find legal fees to be higher than the recommended rate, especially when encountering unforeseen encumbrances affecting its title which require the attorney to perform other forms of legal services. Fees for legal services are usually paid at some point before or at the time consideration is exchanged, all of which should be demonstrated as part of the terms and conditions of a Letter of Engagement.
On its surface, many individuals often regard real estate transactions to be a simple matter of exchanging paperwork and payment, but are unaware of the possible infractions that may affect the title of the property. Your attorney’s responsibility is to draft a Sales Agreement, Indenture of Conveyance, and other deeds associated with the transaction, investigate the title of the property and address any problems that may affect the sale of the property, administrate escrow payments, government taxes and other expenses, and see to the exchange of consideration to the parties involved. Therefore we can not express the importance of retaining counsel in any real estate transaction to avoid devastating repercussions.
Real Estate Agent Commission (Optional Service)
Real Estate Agent Commission Fees: Minimum of 6% of Consideration for Developed Property;
10% of Consideration for Undeveloped Property
Real Estate Agents are useful in advertising available properties for lease or sale and are skilled in the appraisal of properties and overall management of lease holds and property maintenance. For Vendors, Real Estate Agents can assist with the vetting of prospective clients and accompanying clients to the property, while Purchasers can benefit from agent services by locating an appropriate property suitable for acquisition while facilitating an efficient sale. Real Estate Agents are governed by the Bahamas Real Estate Commission (BREA)who have established “Minimum Rates” Sales Commissions which verify the minimum rate of commissions charged per transaction. All Agents are required to be registered members with BREA and whose membership are required to be in good standing in order to provide agent services.
Opinion of Title
Cause List & Title Search Fees: $350.00 minimum*
As part of standard practice, attorneys are required to advise clients of the state of the property’s title and the various issues affecting its ability to acquire unfettered title to property free and clear of encumbrances which may include (but not limited to), an incomplete chain of legal ownership of the property, unsettled court matters to which the Vendor stands as a party, and outstanding taxes, utility bills and other fees charged to the property. Cause List & Title Searches are an imperative part of land acquisition that takes on a compliance based approach, which requires the full and unbiased cooperation by the Vendor party to ensure clear title, which involves full disclosure of title deeds in his possession, and any outstanding taxes and fees imposed on the property, all of which are vetted by the Purchaser’s attorneys. Even the Vendor’s attorneys ought to conduct a title search as a matter of compliance in order to deter acts of fraud and other issues that may affect the transaction.
Fees for title searches may vary according to the nature, complexity, and value of the transaction itself, however under normal circumstances we find that a minimum of $350.00 should be expected as an additional expense involved in the costs of legal representation.
Payment of Deposit
Deposit: 5% – 10%
Often times in real estate transactions a Sales Agreement will require the payment of a deposit by the Purchaser representing a portion of the total consideration prior to the complete transfer of the property. Standard Sales Agreements require deposits to be paid to the Vendor’s attorney and held in escrow for the purpose of removing the property from the market until the property title is verified and full consideration is paid for a period of time as determined by the Agreement. The ability to with hold or return deposits by the Vendor are also determined by the terms and conditions of the Sales Agreement which should be reviewed by your attorney before its execution. The amount of deposit remains at the discretion of the Vendor, however standard agreements require a deposit of 5% – 10% of the consideration paid for the property.
Appraisal Services: $750.00 minimum*
As found in the role of Cause List and Title Searches, Real Estate Appraisals holds a major role in real property transactions, particularly in the assessment of the property by the Inland Revenue Department in determining the amount of payment of Real Property Tax (RPT) applied to the property. Similar in other jurisdictions, property appraisals should be carried out by knowledgeable real estate professionals who provide a detailed assessment of the property while calculating it marketable value based on factors such as the location of the property, square footage, and overall conditions of the property including the absence or presence of special features such as swimming pools, high end appliances, and lighting. In a standard real estate transaction parties may agree to split the costs of an appraisal, and in circumstances where a Real Estate Agent is retained, the Agent may prepare an appraisal as part of its services. The cost of property appraisals are determined at the discretion of the Agent, although experience has shown a standard minimum of $500.00 for properties located in the same island as the Agent.
Sales Agreement (Optional Service)
Drafting of Sales Agreement: $500.00 minimum*
Sales Agreements are normally included in standard legal fees, but in occasions where a Vendor wishes to be prepared for potential purchasers, he may instruct an attorney to prepare a standard Agreement containing the preferred terms and conditions such as the provision of proof of ownership, identifying the time frame for the completion of the transfer, the amount of deposit required to be submitted by the Purchaser, and identifies the party responsible for the payment of government fees. The cost of drafting Sales Agreements may vary and determined by several factors such as the nature and complexity of the transaction, value of consideration, etc., and according to the experience level of the attorney. Considering the minimal value of properties in the Bahamas and the time involved in the drafting of the sales agreement, client consultation, etc., we would suggest a minimal fee of $500.00 as suitable under the circumstances.
Surveyor Services (Optional Service)
Land Survey: $500.00 minimum*
Most land purchases often include a map attached to a Sales Agreement in order to provide a proper description of the subject property including a detailed measurement of the boundaries and location in the Bahamas. However in the event that a large plot of land is divided into smaller lots, or proximate lots are adjoined to form a larger parcel of land, it is likely that a Surveyor will be needed to draft a map of the property to be acquired.
Registration Certificate for Non – Residents Buyers
Application fee: $250.00 for owner occupied property/undeveloped comprising less than two acres
$500.00 for commercial property comprising two or more adjoining acres
Non residents and Permanent Residents seeking to acquire an interest in land or a condominium in The Bahamas to be used as owner occupied property comprising less than two adjoining acres are required to apply to the Bahamas Investment Authority to register the purchase, and will receive a Certificate of Registration upon approval. For non-residents acquiring an interest in either undeveloped land, property comprising of two ore more adjoining acres, or where the intended use is not as an owner occupied property, a Permit to Acquire Property is required.
GOVERNMENT FEES & TAXES
Since the introduction of Value Added Tax in 2015, major adjustments to the payment of government taxes and fees in real estate transactions that demands strict adherence to the new tax regime. Under standard transactions, the attorneys representing the Purchaser are left to satisfy tax obligations in order to retain clear title for the property.
Stamp Duty & VAT
Stamp Duty: 2.5% on property valued $100,000.00 and under
10% on property valued over $100,000.00
VAT: 12% on services relating to the transaction
All property transactions are VAT exempt
Stamp duty are payable to the Bahamas Government upon the transfer of property from one entity to another. The amount of stamp duty charged is based on the cost of the property and in most cases, both the Vendor and the Purchaser may agree to equally contribute to payment for the stamp duty charged. Stamp Duty is charged at a flat rate of 2.5% on all conveyances or real property property valued less than $100,000.00, and a rate of 10% where consideration exceeds $100,000.00. Stamp duty fees will be charged for other deeds, such as affidavits. These will usually cost in or around $4.00. All property transactions are now exempt from VAT, however services conducted in relation to the transaction (i.e legal fees, real estate commissions, etc.,) are subject to the 12% VAT rate.
Recording Fees: $4.50 per page
Recording fees are payable to the Bahamas Government once the conveyance documents and other deeds are ready to be recorded in the registry. Fees are charged per page, and normally make up the minority of fees charged.
Real Property Tax
In addition to the use of appraisals to determine the rate of stamp duty, property appraisals are also required to assess the rate of Real Property Tax (RPT) which is conducted by the Chief Valuation Officer upon filing a Declaration of Real Property with the Department of Inland Revenue. Once assessed property owners are expected to pay the following rates:
Real Property Tax exemption apply under the following circumstances:
*Fees mentioned in this article should be regarded as an suggested estimate and made without prejudice to the dedicated professionals who may suggest estimated fees that are lower or higher than the advised minimum, and whose advice should be consulted.