- July 29th, 2011
- in Yachting
CLOSING 101: The basics to title transfers in the BVI
Some compare closing a real estate purchase to taking a final exam. Undoubtedly it can be a stressful process. Here are a few tips to reduce the stress and any surprises that come along with a closing.
What is closing?
Closing, also called, completion, is the process by which (a) title to property is transferred from the seller to the buyer, in accordance with the terms of the contract; and (b) if there is a mortgage involved, the buyer grants a charge (mortgage) over the title to the bank, and the bank pays the balance owing on the sale price to the seller.
When should I start thinking about closing?
Even before you make an offer. You have to factor closing costs into the assessment of whether you can afford the purchase. You will need to come up with funds to cover:
(a) the earnest money deposit of 10%;
(b) at least another 10%—most banks lend 80% of the sale price or appraised value, whichever is lower;
(c) stamp duty at 12% of the sale price or appraised value, whichever is higher (4% for belongers);
(d) bank fees on the loan of at least 1% plus the cost of stamping and registration of the charge and any other security for the loan;
(e) attorney’s fees;
(f) structural and boundary surveys, an appraisal, and a pest report;
(g) Non-Belonger Landholding Licence application, collection, and registration fees (if applicable);
(h) insurance—most banks will require you to obtain property insurance and to have a policy of life insurance assigned to the Bank to cover the mortgage.
Do I need title insurance?
No. There is a central registry of land title holdings operated by the government (i.e. a registered land system as opposed to deed-based system) which creates a land register for every parcel of land in the territory. The register is deemed to reflect accurately the ownership and all other necessary information about title (e.g. charges [mortgages] and other encumbrances, e.g. rights of way or restrictive covenants.) In the event an error is made by the registrar in registration of a transfer or other interest, any person who suffers loss as a result of such error is entitled to compensation from the government. This system provides a reliable, straightforward and speedy system of registration of interests in land, protecting owners, lenders and others alike.
When do I make the deposit and who holds it?
As early as when the offer is accepted, but not later than execution of the contract. The deposit is usually held in escrow by the real estate agent, or the vendor’s attorney. The usual practice is to include a recital in the contract regarding the escrow, which will also specify how the escrowed funds are to be paid out.
Do I really need an attorney?
Yes (although this adds to costs). For either party, your attorney can review the Contract for any pitfalls. When one or more parties are corporations, trusts or partnerships, contract preparation and the requirements for closing are more complex. An attorney understands these additional requirements. An attorney can easily deal with essential matters that you either may not be aware of, or are unsure how to handle, such as title searches, freezes and requisitions, and securing documentary proof of clear title.
When is closing scheduled?
After all conditions of the Contract are met. All surveys and inspections must be satisfactorily completed, and all financing and licences obtained. The contract will usually provide 60 days for the various surveys and inspections, and 12 months to obtain a Non-Belonger Licence. Closing usually takes place within 30 days from the purchaser receiving notification that the Non-Belonger’s Licence is ready for collection. If no such licensing is involved, closing should take place within 90 days of contract. Along with your attorney you should double-check all documentation to be signed at closing, and the condition of the property to ensure that it has been maintained in accordance with the contract. The attorneys for both parties (and the bank, if financing is involved) will settle a closing statement, which you should review a few days ahead of closing.
What is my proof of ownership?
The Land Register for your particular property—called a parcel. Each parcel is part of a larger block and registration section. The original is held in a register book at the land registry but a certified copy can be obtained. Proof of purchase is the land registry stamped transfer instrument passing title from the vendor to you. At the end of that process, if anyone were to look up that property in the Register Book, your name would show up as the official owner!