Guide to acquire residential property in Bermuda by Non-Bermudians License fees: Application fee is currently BD$1,097.00 and is payable when form is submitted. If the application is granted, this fee will be credited towards the license fee payable on the purchase price. License fee is 22% of the value of the freehold property and 15% for leasehold and must be received by the Minister before the license is issued and the license is required prior to the closing of any transaction. When only the application fee is payable: In a case where it is a gift, inheritance or a non-Bermudian acquiring property jointly with his/her Bermudian spouse. Applicants will be required to supply a banker’s reference and two personal references from persons who have known them for at least three years. The referees need not be Bermudian, but where they are not, the application should make a statement as to why Bermudian referees are not being used. Referees must be of a sufficient standing in their own community to be satisfactory to the Minister, whether they are Bermudian or non-Bermudian. An exempted company is not allowed to acquire and hold residential property in Bermuda except land by way of lease or tenancy agreement for a term not exceeding 21 years in order to provide accommodation for its officers and employees. This is granted at the discretion of the Minister of Finance. Purchase of multi-unit properties: In very exceptional cases. Consideration may be favorably given, but this will be purely on the merits of the particular case submitted and subject to at least one of the units having an ARV of $153,000. Non-Bermudians are not normally allowed to sub-divide land and will only be permitted to purchase a second property on condition that the first property is disposed of within 12 months and the license issued for the acquisition of the second property will be issued on that basis. Letting: Permission must be obtained from the Minister. Permission is not normally given unless it exceeds the minimum ARV for acquisition by non-Bermudians and the letting period is not for than 12 months in the first instance. Where a property’s ARV is below the current minimum ARV, permission may be granted for a total of six months in any 12 month period. Where a house is rented to a non-Bermudian visitor a Government tax is levied at the rate of 5% of the rent paid or $50.00 whichever is greater. This is to eliminate unfair competition with hotels and guest houses that have to pay hotel occupancy tax. There is no tax on rentals to Bermudian or to bona fide residents of Bermuda. Undeveloped residential land: land acquired by specific gift in a will or otherwise inherited must in normal circumstances be vested in a private individual or individuals, and within 3 years of death of a lifetime beneficiary, the property must vest in or be sold to a Bermudian or a non-Bermudian who has acquired a license for the purpose. _______________________________________________________________________ A. APPLICATION FOR LICENSEThe application for a License to the Minister by a non-Bermudian to acquire property must be in the prescribed form and should be accompanied by a written statement, normally given by the selling agent, that Bermudians have been given a fair opportunity to acquire the property and evidencing the fact that the property has been advertised on the local market. Applicants will be required to supply a banker's reference and two personal references from persons who have known them for at least three years. Thereferees need not be Bermudian, but where they are not, the application should make a statement as to why Bermudian referees are not being used. Referees must be of a sufficient standing in their own community to be satisfactory to the Minister, whether they are Bermudian or non- Bermudian, and should not be relatives of the applicant. Subject to the perusal and acceptance of the application by the Minister, a License will be issued which will contain the following conditions: A. that the property is used for the private residential use of the License-holder and his household only;
B. that, in general, the property remains as purchased without alteration of any type unless specific permission is obtained from the Minister and, in particular:
That the property shall not be internally divided nor developed in such a way so as to add to the number of potential dwelling units without the permission of the Minister. That the property may not be let as a whole nor may any part of it be let or sublet separately from the remainder without the specific permission of the Minister; and That in the event the ownership of the property changes after the coming into effect of the License, the property shall be conveyed as a single unit and not sub-divided. In addition to the above, each License may contain its own specific conditions depending upon the circumstances.B. LICENSE FEES The application fee for all Licenses is currently $1,152.00, which is payable when the application form is submitted. When a license to purchase is granted, the application fee will be credited towards the License fee payable on the purchase price. If the License is refused the application fee is not refundable. In respect of purchases, once approval has been given, the fee for the grant of a license is 22% of the value of the property for freehold properties and 15% for leasehold condominium properties. These percentages are applied to the value (usually the purchase price) of the land and buildings in each case. In assessing such value, the Minister may take into account inducements provided to the purchaser by the vendor. The fee must be received by the Minister before the License is issued and the License is required prior to the closing of any transaction. Only the application fee is payable on a proposed gift of property, or where it is inherited, or in the case of a non-Bermudian acquiring the property jointly with his or herBermudian spouse. C. THE MECHANICS OF A PURCHASE (non-Bermudian) A non-Bermudian having chosen a property within one of the permitted categories will be invited to sign a sale and purchase agreement ("Agreement "). This will normally be prepared by the seller's attorney or by the selling agent, but should not be signed by the purchaser until he has had the opportunity of having the terms and conditions explained to him by an attorney of his choice. The purchaser will not be bound by any discussions or verbal agreements made directly with the seller or with the seller's agent, but only by the Agreement suitably signed and accompanied by a deposit of 10% of the purchase price. An Agreement which includes a non-Bermudian will be conditional upon certain events, the principal of these being the grant of a License to acquire the particular property. An attorney will be able to advise the prospective purchaser as to any other specific conditions which should or should not be inserted in the Agreement to protect the purchaser's interest in the given circumstances. For example, the Agreement may be made conditional upon the purchaser obtaining financing if a mortgage is required and a formal offer letter is awaited. The Agreement can provide for the payment of the purchase price to be made in either Bermuda or United States dollars depending on the terms negotiated and agreed upon between seller and purchaser.The matter of costs will also be referred to in the Agreement. It is usual in Bermuda for the costs of the Agreement, the preparation of the deed of transfer and the stamp duty to be divided equally between the seller and purchaser. The parties generally bear their own costs of negotiation. Page 11 comprises a schedule setting out the basic legal costs and License fees involved in a purchase. Other fees and disbursements will apply depending upon the complexity of the transaction Stamp duty is also payable on the conveyance or assignment of lease by reference to the purchase price. Where applicable, the mortgage deed also bears stamp duty by reference to the amount of the advance being made. In Bermuda, it is possible although it is becoming less common, for the seller and purchaser to be represented by the same firm of attorneys or even the same attorney within a specific firm, but this is provided both clients. Closing Costs You may encounter prices listed as 'gross' or 'net'. The 'gross' price is the historical standard in Bermuda and implies that the vendor will pay the agents' commission plus half of the stamp duty and half of the conveyancing cost. The purchaser pays the other half of the stamp duty and conveyancing cost. Some vendors prefer to stipulate in their pricing that the purchaser pay the agent(s) and/or all of the stamp duty and conveyancing cost. These variations are referred to as 'net' (or sometimes 'net net'). Rule of Thumb: on a 'gross' price, you will overestimate your own costs if you add an additional 2.5% (plus the License Fee, if you are not Bermudian); on a 'net' price, 10% will comfortably overestimate added costs (plus the License Fee, if you are not Bermudian). Commission The standard sales commission in Bermuda is 5%. This is established by the Real Estate Division of the Bermuda Chamber of Commerce. This is normally paid by the Vendor, but the purchaser sometimes elects to assume this cost as part of the negotiating process. Stamp Duty Stamp Duties are charged on a sliding scale: 2.5% of the first $100,000; 3% of the next $400,000; 4% of the next $500,000; 5% of everything over $1,000,000 plus 6% of everything above $1.5 million. These are normally divided between Vendor and Purchaser, but the split may be negotiated. Conveyancing and other misc. legal fees Conveyancing costs are on a decreasing sliding-scale. By the time the price reaches $500,000, it amounts to less than 1% of the price; it's 0.7% on $1 million. The extra fees tend to run to the hundreds of dollars, so they don't add too much to the overall cost. These costs, when standard, are normally split, but the allocation can be negotiated. (If extra legal fees are incurred by either party for any reason, he will normally bear these himself). License Fee - for overseas purchasers only: Houses = 22% Condos = 15% |