Costs Above and Beyond the Purchase Price
Buying property involves cost considerations beyond just the contract price of the property. These costs, taken together, add up and lead to an increase in the overall conveyancing costs on any transaction.
Prospective buyers must therefore understand and take into consideration these factors when deciding to purchase property. Having an idea of the nature and amount of such costs allows for more precise planning and budgeting.
There are a number of transaction costs which all prospective purchasers need to consider. While the bulk of the costs are borne by the purchaser, the vendor does not escape the burden as some costs also fall to a potential vendor. Closing costs generally include Non-belonger Land Holding Licence fees, legal fees, real estate agent’s commission, registration and Stamp Duty.
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Property Sales
A purchaser, having settled on a particular property and the parties having reached an agreement in principle, a Sale & Purchase Agreement must be prepared by the vendor’s attorney, who usually has carriage of the sale, i.e. responsibility for the preparation and the proper execution of the transfer documents and generally seeing the process through to its conclusion.
If a Non-Belonger is purchasing property, then the Agreement should be made subject to the purchaser obtaining a Non-Belonger Landholding Licence. Once the Agreement is settled between the parties’ legal representatives, the Agreement is executed and the deposit payment made.
After the Instrument of Transfer for the sale has been executed, the documents are forwarded to the Inland Revenue Department for assessment and payment of Stamp Duty. The amount of Stamp Duty is assessed based on the sale value or market value of the property, whichever is the higher value. Currently Stamp Duty is assessed at 12 % for Non-Belongers and 4% for BVIslanders or Belongers. A valuation appraisal must be submitted with the documents. This must be done at the parties’ expense.
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As highlighted earlier, should the purchaser be a Non-Belonger, they will need to apply for and obtain a Non-Belonger Land Holding Licence. There is also a fee attached to the application for a Non-Belonger Landholding Licence as well as a fee on the granting of the Licence itself.
It must also be noted that in the event that undeveloped property is being purchased by a Non-Belonger, as a condition of the Non-Belonger Land Holding Licence, the buyer will be obliged to develop the property within a specified time period failing which he may be subjected to penalties as imposed by the government.
Legal fees on land transfers are customarily fixed at a percentage of the agreed purchase price and usually vary from a minimum of two percent (2%) upwards. Each party is usually responsible for their own legal fees. The cost of the Sale & Purchase Agreement is a separate cost and is normally borne by the vendor.
The real estate agent’s commission, like legal fees, is fixed as a percentage of the selling price, while a nominal fee is charged for the registration of the documents.
