What you need to know about buying property in Barbados

A BRIEF GUIDE TO BUYING PROPERTY IN BARBADOS

RESTRICTIONS

There are no restrictions on foreigners purchasing property in Barbados, but non-residents need to ensure that all the funds for property purchase are derived from external sources. It is wise to have all your financial arrangements (mortgage, deposit) in place prior to entering into a purchase.

ATTORNEY

The first thing you need to do is to instruct a registered local lawyer who will do everything that is required to enable you to complete a purchase. The lawyer's fees are based on a sliding scale between 1.5-2% of the sale price and are subject to 15% VAT. The buyer and seller are responsible for their own legal fees. The normally accepted period for purchasing a property in Barbados is about 3 months, but it can take a lot longer and is not usually shorter than this.

Property changes hands by conveyance of title, evidence by the recording of the deeds and certified survey plans at the Land Registry. This is all handled by your attorney. He/she will check the Purchase Agreement as drawn up by the vendor's lawyer before you sign and put down the standard 10% deposit. The vendor then signs this agreement and his attorney holds the deposit in an escrow account. If you drop out of the purchase after the deposit has been sent to the vendor?s attorney you will forfeit the deposit.

Your attorney searches the register to establish title and that the property or land is free from any charges or encumbrances. The vendor's attorney draws up the conveyance, which is checked by your attorney before you sign it and you are then required to pay the balance of the funds. The conveyance then goes back to the vendor's lawyer where it is signed by the vendor and the sale is completed. In the case of some new builds after the 10% reservation deposit there will be a series of stage payments made through the construction period typically amounting to the remaining 85%, with a 5% retention held for completion of the snagging of the property.

Property ownership can be in an individual's name, through a local or foreign company, a trust or other entity. In the case of a non-Barbadian it is quite common to make a purchase through a newly-formed offshore company outside Barbados that is registered to do business on the island.

Your attorney and your lender should be instructed to register any funds brought in from overseas to be registered with the Exchange Control Division of the Central Bank of Barbados to facilitate repatriation of these funds at a later date should you sell the property or land. If the property is owned by an offshore company, then this is not relevant as all of the transferring of funds is done overseas.

TAX

ANNUAL PROPERTY TAX

An annual tax is levied on the improved value of the property, which is revised every three year by the Land Tax Valuation Department. Ask your lawyer to get a copy of the latest Land Tax invoice.

1. Residential

(a) On the improved value up to $190,000 - 0.0%
(b) On the excess greater than $190,000 but not exceeding $500,000 - 0.10%
(c ) On the excess of the improved value greater than $500,000 but not exceeding $1,250,000 - 0.45%
(d) On the excess of the improved value greater than $1,250,000 - 0.75%
(e) The Tax Cap on residential remains at $60,000

2. Non Residential

On the improved value of every parcel of land on which there is a building other than a residence - 0.50%

3. Un-improved Land*

On the site value of each parcel of unimproved land - 0.60%

*NB There is no change to the rate on site values.

Rebates and Discounts

I. Agricultural, Pensioner and Hotels will be calculated on 50% of the tax demanded and not on the site or improved values. Villas will be calculated on 75% of the tax demanded.

II. Rebates should only be granted within the year for which they are due. This is a pre-requisite of the accrual accounting system.

III. Declaration Forms must be submitted in order to qualify for the rebate.

IV. With the exception of the Pensions Rebate the discounts will be applied at the time of payment only.

V. For those properties where income generation is a requirement of the rebate e.g. the Agricultural Rebate, a tax clearance certificate from the Commissioner of Inland Revenue and/or VAT Division would be required.

Stamp Duty

1% paid by the Vendor.

Property Transfer Tax

The rate of Property Transfer Tax is currently 2.5% with effect from the 1st April 2007. Property Transfer Tax is paid by the VENDOR on transactions involving the conveying or transfer of land/or land and dwellinghouse.

The tax is calculated on the fair market value of the land/or land and dwellinghouse being conveyed or transferred, which value could be the consideration in the Conveyance/Transfer OR the value as shown on the Current LAND TAX Bill.

Where the transaction is land only, property transfer tax is payable on the full amount. However if the transaction includes a dwellinghouse the first $150,000.00 is exempt from the tax with effect from the 1st April, 2008.

Property Transfer Tax can be exempted by Order of the High Court or by the Ministry of Finance after application has been made to the Court or the Minister of Finance. The tax is also exempt by order made under the Family Law Act.

No fixed sum, will depend on the value of the property and when it is sold.

Capital Gains, Inheritance and Gift Tax

There is no capital gains tax, inheritance tax or gift tax in Barbados.

FEES

Legal fees average out at around 1.5 - 2% of the purchase price. VAT is applied at 17.5%.

Agents' fees are usually 5% of the purchase price plus VAT at 17.5% paid by the Vendor.

Land Surveyor's Fee are approximately Bds$1,500.00 plus VAT. Can be higher depending on the size of the property and whether a new Boundary Plan is required in order to complete the sale.

INSURANCE

You might consider insuring your newly purchased property, which would come in at roughly:

? 0.4% for residences
? 0.6% for commercial buildings;
? 0.9% for hotels

Clearly this depends on the size of the property, area of land and other characteristics such as location, value and rental exposure.

DOMICILE

As a non-domicile of Barbados you must get permission to buy a property on the island from the Central Bank of Barbados under the Exchange Control Act. Your lawyer will do this for you. This is just a formality.

BORROWING

Mortgages are available for non-nationals at around 50%-70% of the property value, with a maximum term of 15 years, and must be approved by an offshore financial institution. You must be able to prove you can make the repayments exclusively from personal funds and not connected to any expected rental income. We are happy to provide reliable contacts for financial advice and mortgage providers.

BUILDING/APPLYING FOR PLANNING PERMISSION
Planning approval is required for all new construction work as well as for any extensive alterations to a building. Regulations to consider include being set back from the road, beach or cliff top as well as the height and density of the building. Our agent on Barbados will advise you as required.

Planning approval is usually granted within six to eight months depending on the nature of the Application.

PROPERTY MANAGEMENT

Barbados is an island blessed with a thriving rental market for both long-term and holiday rentals. If you choose your property and management company well, rental returns will cover your running costs and give you a couple of free holidays a year. We do not recommend buying a property in the Caribbean for the rental income, but for the enjoyment of it and the increase in capital value which can be significant year on year. We will advise you on the rental agents that provide the best property management services. Their services will include seeing to routine maintenance, checking utilities and paying bills in return for an agreed fee, usually between Bds$500-1,000 per month, depending on the size of the property, the number of staff and the extent of the services required. All management services are subject to 17.5% VAT.
BANKING

Banking is easy in Barbados with a broad range of currencies available to convert to either Bds or US dollars on island. You can use most credit or debit cards to get cash from the ATM's. However, with exchange rates and consumer confidence in constant flux it can be a good idea to use currency exchange specialists to arrange the transfer of funds to your local bank account or lawyer. In any event, you will always get a better rate of exchange from a specialist company and there will be no banking charges for the money transfers.
When you purchase your property in Barbados you will need to transfer money abroad. The common currency quoted for Caribbean property is the US Dollar. If you are buying foreign currency, it is certainly worth considering different options for the exchange.

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RBC Royal Bank of Canada offers term loans for non-Barbadians

TERMS & CONDITIIONS SUBJECT TO CHANGE

Purpose
To provide financing by way of Collateral Mortgages to foreign residents to build, purchase, and improve or any combination of these.
Types of Buildings
Owner occupied residential units (detached townhouse, condominium and duplex units).
Minimum Loan to Value
Will be ascertained primarily by the location of the property being financed. The maximum lending value assigned will be determined by multiplying the lesser of the appraised value or cost as follows:-
a ) For Loans in excess of USD500,000 - on the first $500m by 70% the next $250m by 60%, the next $250m by 55% and over $1mm by 50%. Properties valued or costing in excess of $2 Million will be determined on a case by case basis.
b) For Loans below USD$500,000 - 70%.
Interest Rate
US Prime Plus 3.00% Minimum draw : USD250,000.
Amortization
Up to 10 years and to qualifying borrower, a maximum of 15 years (early repayment allowed without notice or penalty).
Fees
All related legal & government fees plus 1.00% Administration Fee. (Financing involving construction, additional 1% to cover site inspections).
Maximum Age of Applicant
Present age of principal earner plus loan amortization not to exceed 65 years (some exceptions may apply).
Requirements
? Current personal statement of affairs and if a company, we require audited financial statements for the last three years from a reputable Chartered Accounting firm.
? Satisfactory bank references (2 minimum-originals) from banks acceptable to RBC Royal Bank of Canada.
? Total Debt Servicing Ratio not to exceed 40%.
? Approval from the Central Bank of Barbados.
? Proof of Income to service the debt (i.e. Employment Letters / Income tax return for the last two years)
? Standard documentation for account maintenance at Royal Bank of Canada.
? Credit Report.
? Sales Agreement and Property Appraisal.
? Two forms of Government Issued ID for each Applicant.
Collateral
Registered First Charge over property. Stamped for full amount of the mortgage.
Security
? Title searched by lawyer approved by RBC Royal Bank of Canada.
? Property insurance coverage all risks.
? Life insurance (Optional).
? Co-signature/guarantee of spouse/or principal of entity if applicable.
? Central Bank Approval.