LEGAL GUIDE TO BUYING PROPERTY

Introduction

This is a simplified guide to the process of buying a property in the Turks and Caicos Islands. While all reasonable endeavours are taken to ensure that it is correct at the time of print it does not purport to be an exhaustive analysis of the relevant laws as may be applicable to you.  We trust that it will; however, provide you with sufficient background information on the law in the Turks and Caicos Islands to help you in your purchase or sale and will lead you to seek specific legal advice and guidance from us regarding your circumstances.

If you are looking to purchase a property in the Turks and Caicos Islands it is imperative that you give adequate consideration to the tax position in your home jurisdiction as there may be tax implications depending upon your personal circumstances.

Finding your property

You may already have identified the property that is right for you. If not, we can put you in touch with the local agents from within our network of contacts to assist you in your search.

When looking for a property there are several alternatives here in the Turks and Caicos, be it raw land upon which to build your new property; a villa; or a condominium unit. Thought should, also, be had as to rental or re-sale potential.

Once you have found a property and an offer has been accepted by the seller, it is often requested, by the agent, that you sign a formal offer. We would strongly recommend that such an offer is forwarded to us for approval before the same is signed as this may be legally binding and often omits many of the protections we would typically negotiate as part of the transaction.

Funding

If you need to raise funds for the purchase you can either mortgage your first home or take out a mortgage on your Turks and Caicos property.  There are pros and cons to each of these and this depends upon your preferences and circumstances.

Lenders may lend up to 60% of the purchase price. Life assurance can be a condition of the mortgage. It is advisable to apply for a mortgage at the outset to prevent any delay in completion of your purchase.

You will need to ensure that you are fully aware of the terms of the mortgage, which we can discuss with you.

Currency

The currency in the Turks and Caicos Island is the United States Dollar ($) and all properties are transacted in this currency. Your local bank will be able to assist you in any required currency exchange.

Special types of purchase

Building your own property

The purchase of raw land, in the manner set out in this guide, under “The purchase process” below.

Once the land has been purchased then it is usual for a purchaser to appoint an architect and to obtain detailed planning permission. Detailed planning permission permits the development subject to any conditions.  Once the application for planning has been submitted the Planning Ordinance states that the director of planning shall inform the applicant within 60 days of receipt. However, in practice this can take longer.

A building permit is also required prior to the commencement of any construction.

Following receipt of detailed planning approval and a building permit then a contractor can be appointed.

Again, we can put you in touch with local architects and contractors from within our network of contacts to assist you in your project.

Development in the Turks and Caicos Islands is also subject to the building code, a copy of which can be found on the Turks and Caicos Government website.

Condominium

This is based upon the U.S. condominium concept, whereby a purchaser buys the freehold of a strata lot (condo/unit) being the internal surface area of wall, floor and ceiling of a residential unit located within a larger development.

In any strata (condo) development, it is usual for many of the residential units to be sold prior to completion of construction on the basis of a sale and purchase agreement concluded between the prospective purchaser and the developer.  All the relevant details of the development and the unit to be sold are set out in the agreement.  Such an agreement normally provides for a down payment or deposit and may provide for installment payments thereafter at various defined stages of completion against the architect’s certification.

If the condo has already been constructed then the purchase of a unit shall be in the same manner as set out under “The purchase process” below.

The strata plan delineates the boundaries of the strata parcel, the location of the buildings and identifies each unit.  It also sets out the unit entitlement which determines the proportion payable, by the purchaser, of the strata fees levied by the Strata Corporation.

The condo shall be governed by a set of by-laws, which sets out the restrictions on use of the unit and provides for the governance of the Strata Corporation.

The Strata Corporation is a statutory body, which holds the common property in the strata development, on behalf of the unit owners.  In addition, the Strata Corporation is responsible for the maintenance and insurance of the buildings within the development (excluding the units) and the maintenance and repair of the common property.

Villa

The purchase of a villa on a piece of land, in the manner set out in this guide, under “The purchase process”.

The purchase process

The purchase process has two main stages.

The first is the purchase and sale agreement (also known as the contract). This is drawn up, usually by the seller’s attorney.  The attorneys, in tandem with their respective clients, then negotiate and agree the form of agreement. Once the agreement is in final form, it is signed by both parties and exchanged.

If you are buying an existing property then it is advisable to get a survey of the property before the agreement is agreed and signed –we can put you in touch with surveyors and property experts.

The second stage involves the completion of the transaction, and the signing of a deed of transfer, which once registered at the Land Registry, transfers ownership of the property to the purchaser.  At completion, the full amount of the purchase price and all other disbursements are paid.

Deposit

At the same time as exchange of the agreement (the first stage) the purchaser pays over the deposit, typically 10% of the purchase price.  The sales agreement will usually state that the deposit is held by the seller’s attorney, in escrow, until a given period after closing (usually 14 days after completion).

The agreement will typically have default provisions allowing for either party to serve a notice of default on the other and to terminate the agreement if the default concerns have not been remedied in the specified grace period and for the deposit to be forfeited to the seller or returned to the purchaser.

Before Exchange

Prior to exchange of the agreement, the purchaser’s attorney shall investigate the title to the property to establish if there are any easements, rights or restrictions which may affect the use and enjoyment of the property.

The Turks and Caicos Islands have a registered land system and all matters affecting the property are noted on the title register. The purchaser’s attorney shall obtain an up-to-date copy of the register and will report to you on those matters.

The purchaser’s attorney shall also obtain an up-to-date block plan, showing the extent and boundaries of the property.

Completion

Closing of the transaction occurs on the date specified as the date for closing in the agreement. At the closing, the seller’s attorney delivers all the required closing documents duly executed by the seller, against receipt of the balance of the purchase price.

Promptly after closing, the purchaser’s attorney submits the deed of transfer and any related documents to the TCI Land Registry, accompanied by the requisite fee (and stamp duty payable). The period for registration is usually around 2 weeks, but this can be longer.

Timescale

Typically a real estate transaction can take between 4 – 6 weeks.

Insurance

If you purchase a villa it is advisable for the property to be insured, at completion (the agreement will usually provide that risk does not pass until then). The insurance coverage should cover, in addition to the usual risks, damage incurred by a hurricane. If you intend to rent the property then liability insurance to cover damage to the villa by a third party and any injury to a third party should be taken out.

If you purchase raw land there is no need to insure at completion but when the house build has completed. Your contractor should have adequate insurance for the duration of the build and it is advisable to discuss this with your architect and contractor.

If you purchase a condo, the Strata Corporation will have property insurance; however, if you are seeking to rent the unit it is advisable to take out liability insurance to cover damage to the unit by a third party and any injury to a third party.

We can put you in touch with local insurers from within our network of contacts to assist you.

Utilities

If you have purchased a villa, then it is up to you to arrange connection of utilities such as electricity, water and telephone.  If you have purchased a condo then the Strata Corporation shall deal with this on your behalf.

You may also like to consider opening a TCI bank account, particularly if you are seeking to rent the property.

Furniture

It is usual in a property transaction for the furniture to be included in the sale. As such it is important for an inventory to be provided by the seller to the purchaser which is then attached to the agreement.  It is usual for a proportion of the purchase price to be attributed to the furniture. If the sum attributed cannot be evidenced, by the seller, by receipts from the original purchase, then it may be advisable that a valuation of the furniture is undertaken because stamp duty is not payable on the fee attributed to the furniture.

Tax

Besides stamp duty, there are no other taxes applicable to a property transaction.

The stamp duty is tiered according to value. The current stamp duty rates are below, but these are frequently subject to change:

$25,000- $250,000 – 6.5%

$250,001 – $500,000 – 8%

$500,001 and above – 10%

Lower rates apply to transactions outside Providenciales and its cays.

If a mortgage is taken out, then 1% stamp duty is payable on the amount of the loan.

Please contact us for the up-to-date stamp duty rates.

Legal expenses

Each party is responsible for its own attorney’s legal costs and expenses incurred in relation to the transfer of the property. Typically these costs are 1% of the purchase price plus a further amount of approximately 0.5% of the purchase price if you are taking a mortgage. Such costs are paid at completion.

In addition, some disbursements are also incurred and charged to the purchaser, for example: Land Registry fees, obtaining copy documents and incorporation of a corporate entity (if applicable).

Borrowers will also pay the bank’s legal fees (typically 1% of the loan amount) and a 1% bank commitment fee.

Agency Commission

Agents’ fees are typically the expense of the seller.  Agents’ fees are usually between 6% (developed property) – 10% (raw land) of the purchase price.

Property Rental

If you are expecting to rent out the villa, then a business licence is required. We can advise you in this regard.

In addition, you will have to register the property with the revenue authorities with regard to the accommodation tax, which again we can assist you with.  This cost is typically passed to the rental guest as part of the rental fee, but it is for the owner of the property to account to the Government for such a fee. The fee is currently 12%.

If you have purchased a condo then these items will usually be dealt with by the rental programme manager.

Article by Karen Willis

Guide to buying property in Turks and Caicos Islands – Download a copy here

*The information provided in this article does not constitute legal advice and is not intended by the authors or Misick & Stanbrook to do so. Before relying on any information or opinion in this article you ought first to obtain advice on your particular circumstances from your Misick & Stanbrook professional.