Real estate
Property purchase in Cayman
The legal and practical considerations for prospective property purchasers in the Cayman Islands
Sonia Starvis, partner and property and local practise group head, Walkers law group.
There are many practical and legal considerations when buying real estate in the Cayman Islands, and these will vary from one transaction to the next, depending on the type of property you are buying, the purpose for which you are buying the property and whether the property is freehold or leasehold.
Buyers of condominiums should always consider the nature of the title offered, which will either be freehold or leasehold.
Most condominiums in the Cayman Islands enjoy freehold strata title, although there are some strata developments which have leasehold title, such as the Residences at the Ritz Carlton.
A buyer of a condominium with leasehold title should always check the term of the lease, as if the remainder of the term of the lease is short, this may reduce the value and the marketability of the condominium.They should also review the registered by-laws for the development before closing, as these by laws will bind the buyer post closing. Enquires should also be made regarding the outgoings for the condominium, such as maintenance fees and strata insurance premiums, how often these are billed and whether there are any special assessments.
Other practical considerations are how the cost of the utilities, such as water, electricity, sewage, garbage, cable/satellite television, are billed and/or metered, and what other services are billed through the strata corporation, such as air conditioning maintenance services.Enquiries should also be made as to what other amenities are included, for example, car parking spaces, garage and storage lockers, docks and docking rights.
While in some cases, it may be obvious which parking spaces are assigned to a particular condominium, this is not always the case and in some strata developments, car parking spaces have their own separate titles. Accordingly, a buyer must ensure that it receives a transfer of that title, in addition to the title to the condominium.
If the condominium participates in a rental pool, then the buyer should review the rental pool agreement and establish who manages the rental pool.A buyer of raw land should consider what planning permission is required. Other important considerations are the zoning of the land, to ensure that the land is zoned for the intended development, and whether the land is subject to any building scheme covenants, such as covenants to complete the development within a specified time frame and restrictions on use.
It would also be prudent to instruct a local surveyor to carry out appropriate surveys and tests, such as a fixed boundary survey or soil tests.In addition to the investigation of title as mentioned above, buyers of houses should instruct a surveyor to carry out a structural survey of the property. If a canal front home is being purchased, then the buyer will need to ensure that all necessary rights are in place to access the property over the adjoining waterway.
Buyers of any of the above types of property will need to consider how they are going to finance their property acquisition. There are a number of banks on the Island that offer both residential and commercial real estate acquisition financing.
Banks usually require a legal charge to be registered against the property being bought as security for the debt owed by the buyer to the bank. Stamp duty is payable on all legal charges of real estate, and the amount of the tax payable will depend on the sum secured by the legal charge. Stamp duty is also payable on all transfers of land, save for certain very limited exemptions.
Banks also usually require a valuation for the property to be prepared and they may also require their interest (as mortgagee) to be noted on any policy of insurance effected by the buyer in respect of the property being purchased. Another important consideration for many buyers is whether they should buy the property in their personal name, in the name of a company or through a trust arrangement. There are many different factors which may influence a buyer's decision, such as estate planning and tax issues and the buyer's lawyer will be able to advise the buyer on the most appropriate vehicle.Local licensing is another important consideration for buyers of real estate in Cayman. Buyers of residential income producing property for investment purposes may be required to be licensed and buyers of commercial property for let will need to be licensed to own such property.As is clear from the above, there are a number of legal and practical issues which may arise on the purchase of real estate in Cayman and accordingly a prudent buyer should take his or her lawyer's advice on the proposed purchase before entering into an agreement to purchase any such property.
