JAN 02, 2024

The Buying Process

A Guide to Buying Property in the BVI

Once you have found the property that is right for you the process is relatively simple, but it can take time!  There are some key stages that the sales cycle must pass through, and this document gives an overview of these.

Our role, as realtors, is to ensure that you find the right property but also just as fundamentally to oversee the negotiations between the buyer and the seller. It is not unusual for the realtor to represent both the seller and the buyer during this process so trust and transparency are vital.

Letter of Intent / Heads of Terms

This is the first formal stage of the purchase.  This is a simple document that will be drafted by the realtor and it will outline the principal parameters of the transaction.  It will detail the agreed purchase price, the timeframes for the exchange and any conditions that need to be met to ensure the sale can progress (which can include due diligence checks, finance approvals and government approvals).  Both parties will sign this and the deposit is usually paid at this stage. The letter of intent is subject to contract which means that it is not legally binding but shows a commitment from both parties to enter into the agreement as detailed.  Once the sale and purchase agreement has been entered into however the buyer is legally committed to buy and the seller to sell at the stated price, subject to any agreed conditions documented in the sale and purchase agreement. We also ask our buyers to appoint a lawyer at this stage so they can review the Letter of Intent as this will underpin the process from there on.

Deposit

In a standard property transaction, a deposit of ten per cent of the agreed purchase price is paid by the buyer once the Letter of Intent has been signed by both parties.  Paying the deposit does not secure the property but it demonstrates the buyer’s sincerity and you can at this stage ask the seller to cease marketing the property and/or stop showing the property to any other party.  The deposit is paid to the realtor and it is fully refundable at any time up until the sales and purchase agreement has been signed.

Due Diligence

There is normally a minimum period of thirty days (one month) for the buyer to carry out due diligence checks.  This is to give the buyer full visibility and reassurance on the condition of the property in advance of purchase.  During this period a buyer may consider one or more of the following:

  • as-built survey
  • structural survey
  • boundary survey
  • termite survey
  • electrical survey
  • plumbing survey

The costs of these reports will vary depending on the size and age of the property but we will help identify which suppliers to engage with and will share the anticipated costs but a budget of $5K for checks is appropriate.  In addition to these checks as part of the buying process you will also need an appraisal to accompany the License application.  This gives the market value of the property at the time of purchase and is used at closing to calculate the stamp duty sum.

Whilst these reports are being generated the buyers lawyer will investigate the registered title in respect of the property and prepare a search report for the buyer’s records. This will identify any rights recorded against the registered title that benefit the property and also any incumbrances recorded against the registered title to which the property is subject.

Sale and Purchase Agreement

The first draft of a sale and purchase agreement is normally prepared by the seller’s lawyer and submitted to the buyer’s lawyer for review.  This is a legally binding document so allow time to review this and make sure it details everything needed.  The sale and purchase agreement as standard will contain a description of the land, the nature of the title (whether freehold or leasehold), and the agreed price. In the case of developed property (a villa or built property), the sale and purchase agreement should document if any furnishing are included as part of the sale. It should also discuss the status of any employers and if they will be made redundant to transitioned with the purchase.  The buyer should always be sure to have arranged adequate financing before signing the sale and purchase agreement.  If the buyer is unable to pay the balance of the purchase price at completion, the buyer may then forfeit their deposit. The sale and purchase agreement may be made subject to the satisfaction of one or more conditions. The nature of the conditions will depend on the particulars of the transaction but may include the buyer securing adequate financing and/or the buyer arranging or receiving the results of its various property-related surveys and inspections to its satisfaction if they were not completed during the due diligence period.

Non-Belongers Land Holding Licence

A Non-Belonger, meaning someone not from the BVI, is required to obtain a Non-Belongers Land Holding Licence (a Licence) prior to completing the acquisition of property in the BVI. For this reason, a sale of property to a Non-Belonger should always be made conditional on receipt of the requisite Licence. Licence applications are prepared and submitted to the Ministry of Natural Resources, Labour and Immigration by the buyer’s lawyer. In order to make the application the buyer’s lawyer will ask the buyer to supply various supporting documents, including references and a police certificate. A Licence relates to a specific property and a specific buyer and cannot therefore be used to support the future acquisition of any additional property.

A Non-Belonger purchasing undeveloped land will need to submit a proposal for development of the land as part of the application for the Licence. If the development proposal is approved, it will be included as a condition in the Licence, which the buyer will be expected to comply with.  A Licence will typically be granted with a condition not to undertake any alterations to the property without the consent of the Cabinet of the Virgin Islands. Where a Non-Belonger purchases a developed property and wishes to undertake alterations to it (such as adding bedrooms, bathrooms, a gazebo or swimming pool) the buyer should include details of the proposals as part of the application for the Licence, to avoid the need to make a further application for the required consent after completion.  Working with architects and contractors at this stage will help map out exactly what you want to build so the application plans will reflect what you want to achieve.

The application process for a Licence takes approximately 3-5 months. A sale and purchase agreement will typically provision for longer than that to allow enough time for the buyer to secure the Licence. If the Licence is not secured within this timeframe the sale and purchase agreement will typically allow the parties to agree an extension of time, or for either party to terminate the sale and purchase agreement, in which case the buyer secures the return of the deposit.

Completion

Typically closing occurs within thirty days of the Governor of the BVI signing your Licence. Upon completion the seller and the buyer sign an Instrument Transfer which records the transfer of the property from the seller to the buyer. If the buyer is borrowing money to fund the purchase of the property, the buyer will also need to sign loan documentation at completion. The balance of the purchase price is payable at completion. It is generally upon completion that the buyer takes possession of the property.  At this point we will ensure that the buyer has been able to either transfer the insurcance coverage into their name or has started a new policy on the date of transfer.  Immediately after completion the buyer’s lawyer will present the Instrument of Transfer to Inland Revenue for payment of the requisite stamp duty. Stamp duty is calculated as a percentage of the higher of the purchase price and the market value of the property. For Belongers this is usually 4% (although a stamp duty exemption applies where the Instrument of Transfer in question is executed between 7 May 2020 and 31 December 2021) and for Non-Belongers this is 12%. In each case a copy of a recent appraisal undertaken by a licensed surveyor in the BVI must be submitted as evidence of the market value. After stamp duty has been paid and the Instrument of Transfer stamped, the buyer’s lawyer will submit the Instrument of Transfer for registration at the Land Registry. After completion the buyer will need to ensure that any accounts for utilities are transferred to the buyer’s name.

Personal Attendance

Neither the buyer or the seller is required to be present in the BVI at any stage of the sale and purchase process but being on island at closing always adds to the joy of your new ownership!

The Associated Costs

Ball park costs for the sale process is a follows

  • Lawyers fees – typically 2% of the first $50k and 1 to 1.5% of everything over that.
  • Due Diligence – depends on the complexity of the property but budget for circa $5K
  • Appraisal – 0.1% of the purchaser price / market value
  • Non Belonger Land holding license – a few hundred dollars
  • Stamp Duty – see completion for full details but if not from the BVI 12%, if from the BVI 4%

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