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REAL ESTATE TRANSACTIONS IN FREEPORT After the passage of the Hawksbill Creek Agreement, much of the land in the Port Area of Grand Bahama Island was sold to offshore owners—most of whom never saw or developed the land they bought. Many have changed their address and are difficult to trace. There is no land registry as such, only a registry of records that lists the dates on which sales were completed. Even these dates are convoluted, as it can take several months for a transaction to be lodged for record. This makes it difficult to trace the owners of any particular parcel of land, 25-30 years after the purchase. Many of these owners bought at comparably high prices which have not been justified by subsequent development, and many have unrealistic expectations about resale potential of their property.
To accelerate the negotiating process, Freeport brokers use Form Contracts, valid in facsimile (fax) form, establishing a meeting of the minds on price, terms and conditions. Always subject to the Seller delivering a good marketable title.
Freeport brokers take a Binder Deposit when they submit an offer, and on acceptance, this is increased to ten per cent, usually by local cheque or wire transfer. These are the preferred payment instruments, as offshore cheques can take up to six weeks to clear. These deposits are held in trust accounts in foreign currency with the approval of the the Central Bank of the Bahamas. Deposits are refundable in the same currency if the Seller cannot deliver a good marketable title, or if the parties cannot agree on the terms and conditions of the contract.
Contracts are not “time of the essence” because of the difficulties and delays in negotiating with offshore sellers who may have changed their address many times since the original purchase. Printed form contracts are a cost-free method of establishing a binding contract between the parties as quickly as possible. Once a preliminary understanfin has been achieved or if the terms and conditions are complicated, a formal agreement or purchase and sale can be prepared and reviewed by attorneys acting for the parties.
Freeport Commission Scales Commissions charged by real estate agents vary according to the type of property and should be agreed in writing between the seller, who pays the commission, and his agents. In Freeport, much of the vacant land is owned by non-Bahamians and this inevitably increases overhead and the time required to complete a sale. The supply of undeveloped land currently exceeds the demand and many sellers offer incentive commissions for quick cash sales. Commission scales are under continual review and as a guideline the following apply:
Leasing Fees When leasing a house or apartment, agents charge a fee of one month’s rent or if they have a management agreement they will charge 12.5% of all rents collected and deposited to the owner’s account.
Listing Procedures Brokers do not accept listings without a physical inspection to establish salability. If the property merits promotion and advertising or a sign the broker will request an “exclusive right of sale agreement” and will contract to cooperate with all other broker members of the Bahamas Real Estate Association (BREA) which is testing a multiple listing service (MLS).
Net Listings Many owners ask for a “net listing” which will deliver a specified amount of cash after all fees, costs and commissions have been paid. Net listings are not allowed by BREA rules—for good reasons. Few buyers offer to pay the listed price and there are invariably negotiations. In calculating a listing price it is possible to predict the stamp duty and a real estate commission accurately.
The legal fees and costs are not so simple, as the real estate broker is not likely to be familiar with the root of title and will not know if there is a will to be probated or resealed in the Bahamas, or if there is a wife or widow with dower rights which can be difficult and expensive to renounce, or even if the documents of title are legally binding.
These problems are usually brought to light when a Bahamian attorney acting for a prospective purchaser uses his due diligence and makes requisitions on title. At that moment extensive and unpredicted expenses come to light—and where there is a net listing it is invariably suggested that the deduction should be made from the real estate commission. For this reason, BREA does not permit member brokers to accept net listings.
Offshore Ownership The purchase of land in the Bahamas is frequently profitable, especially if the owner is an experienced developer. Speculative investment in an unserviced land can also be rewarding if population growth creates a demand for the land. CAVEAT EMPTOR! The buyer should be familiar with the laws of the Bahamas before he completes a purchase. Many of the laws of the Commonwealth are not the same as those of the USA or other countries. For example, all offshore wills must be probated in the jurisdiction of death and then resealed in the probate registry of the Bahamas.
The sale or any transfer of title of land in the Bahamas must be carried out by a Bahamas-based attorney. Documents prepared by offshore attorneys (meaning, those outside of the Bahamas) have no validity.
In the Bahamas there is a still a dower rights act. If a married man takes title to land in his name only, he should be aware of the fact that his wife (or widow, as the case may be) will have a lifetime dower interest in the property—one-third of the value. This dower right can only be renounced at the time a sale has been agreed, and again takes time and incurs costs to carry out.
Investors don’t live for ever, and if they are in for the long haul, we recommend they consider passing title to their land in the Bahamas by a deed of gift (prepared by a Bahamas-based attorney, of course) to avoid the costs of probate and resealing in the Bahamas.
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