Legal Angles with Erica Marshall-Forde

In this episode of Sun Sea and Second Homes, Barbados-based Realtor Sean Stewart talks all things legal with Head of Property at Dentons Delaney, Erica Marshall-Forde.
They discuss real estate red flags, common misconceptions, tips for overseas buyers and so much more. It's a must-watch if you're planning on purchasing property in Barbados.

Transcript

Sean 0:00

Erica, thanks for joining me. Before we dive into the legal side of things, tell me a little bit about your role and your work in the Caribbean.

Erica 0:07

Sure. I am the head of property at Denton's Delaney. And what that means is for the 13 jurisdictions throughout the English-speaking Caribbean that Denton's Delaney covers, whether you are a developer, a purchaser, a seller, or an investor in property in the Caribbean, those transactions are handled by my team.

Sean 0:30

Amazing. And what do you most enjoy about your role?

Erica 0:35

So property is a dream for a lot of people. And I think in my role, I get to see those dreams come alive. Developers who have a concept in mind and working alongside them, whether it be engaging them with the different um planning laws or just property laws in general that will affect what is being sold and helping them to build that dream into something that is then sold. And likewise worth working for purchasers who also have a dream of owning a property in the Caribbean, whether they're from the Caribbean or whether they are non-resident and looking to invest in the Caribbean, working alongside them and bringing those dreams to fruition.

Sean 1:30

Let's start with some basics. What are the key legal steps that a buyer would go through when buying property here?

Erica 1:36

So before we actually get to the legal step, they engage with with you and negotiate their offer. That offer is accepted, and then it's turned into an offer and acceptance, which is then the document that is presented to the vendor or the seller's attorney, and they use that to turn it into an agreement for sale, a sale agreement, or sale and purchase agreement as it's known in some parts. So that's then the first step in the process, the draft sale and purchase agreement, which is prepared by the vendor's attorney and sent to the purchaser's attorney for review. As purchaser's attorney, we review the agreement, make sure all is in order, of course, have a discussion with our client about it, make sure their interests are properly covered. And once the agreement is settled, it's finalized and sent to the purchaser for signature. And at that point in time, they pay a deposit. So when the agreement is signed and the deposit is paid by the purchaser, it then goes back to the seller's attorney or the vendor's attorney. Right. The vendor then signs, and it's at that point that we say we've got exchange of contracts. Right. And you have a binding agreement then, and the process continues from there. Until completion. After the agreement is signed, then you have your due diligence where the purchaser's attorney is investigating title, making sure that all is good and that there's good and marketable title to be sold to their client. And once that due diligence process then is completed and everything is found to be in order, we move to the third step, which is essentially preparations for completion. That's when the transaction documents that are going to indicate that the purchaser is now owner of the property, when those documents are then finalized and settled, and you have the exchange of funds for title deeds or transfer documents. Understood. And title or ownership is passed then from vendor to purchaser. And that's essentially the transaction in a nutshell. Of course, there's a a lot more intricacies to it. That happen in between. Yes.

Sean 4:02

Yeah, absolutely. And and one of the frustrations that I've been made aware of from obviously from foreign buyers, especially because they're not used to it, is the amount of time that it can take uh not knowing what has to be done and how it all works. Obviously, our system here is is is different. It's probably not as as uh evolved as other systems in the world. Uh so what would you say is a reasonable expectation of time uh for a transaction to take place?

Erica 4:36

So we would usually advise between 60 to 90 days. Okay. And the the reason for that is because in in Barbados, we predominantly deal in with unregistered title. And what that means is that your ownership your ownership to a property is traced through physical title deeds, so a stack of title deeds going back 20 years, which showed that in 1990, Sean Stewart owned this property and he transferred it to Erica Marshall Ford, and she then transferred it to someone else, and so on and so forth up to the current point. And so because that's the way that title is traced for unregistered property, then that also takes up part of the process because we're charged with making sure that title to the property is good. So the property searches are a bit more involved and comprehensive than it would be for registered title, where it's simple enough just to look at the title register and see all of those things that we would otherwise for unregistered title have to flip through title deeds to look at. So that's that's a big part of the process. The other part of the process that tends to take a bit of time is having various clearances that you may need in order to transfer that good and marketable title.

Sean 6:00

Okay.

Erica 6:01

So land taxes, for example, those have to be paid up to date. And in Barbados, one of the requirements is that the you're producing a land tax certificate. So if it's a case where there's an issue with land taxes, then that could draw out the process because it means that vendor is trying to settle that issue in the background before their attorney can be provided with the land tax, a current land tax bill and land tax certificate. And again, that that's something that could stretch out. So whilst the the 60 to 90 days might seem to be a while, and I acknowledge that it would be a while for persons who are used to doing transactions in 30 days based on the system that is prevailing in in their home jurisdiction, there are those factors that come into play that draw out the transactions here, and that's why that timeline that I mentioned would be realistic.

Sean 6:59

And I'm I'm assuming based on that, and and this this would naturally apply to anything, but uh the more prepared the seller and the purchaser for that matter are, the more likely the transaction is to adhere to the time frames that you may outline.

Erica 7:20

Most definitely. So I I I did mention that 60 to 90 days, um, transactions can be done in less. Right. And one of the things we tell sellers who are coming to us is let's make sure that everything is in order from the time that property goes on the market. Because once we are able to ensure that all of those boxes are ticked, it ensures a seamless transaction. And you can very well have a completion timeline that is less than 60 days, and we've done it before.

Sean 7:54

Yeah, makes sense. And how early should a buyer involve a lawyer in the process?

Erica 7:59

So from the time you're serious about the property and you're you're making an offer, I'd say that's the point that you should start speaking to an attorney. And the reason for that is there may be questions that you've got about the property. Um, of course, your your real estate agent can answer them, but sometimes they're bordering between a transactional and uh a legal nature. Okay. And it might be useful to have that feedback during the initial stages.

Sean 8:28

Right. Understood. What's one common misconception that non-residents have about buying in Barbados?

Erica 8:33

So one of the most popular ones is the thought that a survey of the property is part of the process. And when I say survey of the property, I'm not speaking of survey of the boundaries to the property because that is part of the process, but more so a survey on the the actual building and structure itself. Condition, etc. Yes.

Sean 8:57

Okay.

Erica 8:58

So because in a lot of markets that is something that they're used to, and um that is something that is part of the process, it's it's a natural question that arises here when should I have the survey conducted? And we would indicate, well, the survey is is not a requirement for purchasing property in Barbados. It's definitely not something that um wouldn't be recommended, but because it's not a requirement, then it's something that the buyer or the purchaser covers the cost of. And we would recommend that you do it as early as possible, again, to ensure that you keep within that optimal timeline for the purchase. And one of the things that purchasers could also consider is making their offer conditional on the outcome of that condition assessment or condition survey.

Sean 9:52

Very interesting because uh uh yes, having worked in the UK uh property market and now being here, a survey means two completely different things. Uh so it's it's interesting to hear that coming from you, what the expectation is when someone mentions the word survey. So just moving on a bit, are there any restrictions on foreign ownership in Barbados?

Erica 10:16

No restrictions on foreign ownership, and that's one of the things that makes Barbados appealing to a lot of purchasers. So, in in some of the other jurisdictions, you might have a requirement for a landholding license, or if there's um citizenship by investment, there are certain um factors that have to be satisfied. Okay. In Barbados, the only requirement for non-resident purchaser is that they're required to get exchange control approval from the central bank of Barbados. Right. And what that means is your funds for the purchase have to be registered with the central bank, and the central bank confirms that those funds have been registered, and once those funds have been registered, i.e., you have invested foreign currency in Barbados to purchase your property, then they they issue what is is known as a TR form, which allows for the transfer of property to a non-resident purchaser. It also works similarly if the purchaser is resident and the seller or the vendor is non-resident, in that you would require that central bank approval. Right.

Sean 11:29

Okay.

Erica 11:30

And um, just to explain the registration process a bit more, um, it is very simple. It is something that the buyer's attorney would do on their behalf. They're going to send in funds to purchase the property. It's going to come to the attorney's client trust account. The attorney gets a credit advice from their bank that shows that these funds have come in, that they came in in foreign currency, and that they're being used to purchase the property at XYZ location. They say to central bank, this is the contract between the buyer and the seller, and these are the funds that have come in to purchase the property. Please would you register these funds? Please, can you issue the form that shows that these funds have come in and you know and have approved that these funds are being used for that purchase.

Sean 12:16

Right. Understood. Okay, make makes perfect sense to me. Could you explain the importance of title searches and what's involved?

Erica 12:22

Sure. So earlier on, I mentioned our obligation to ensure that there is good and marketable title. And when we're speaking about good title, we want to ensure that there are no charges against the property or no encumbrances against the property. Okay. That the property is not burdened with anything, any third-party interest that would prevent me buying from you, and in that process inheriting ownership that's fully and solely mine. Right. Obviously, if there's a third-party interest or something bearing on the land, it's going to affect how I am able to own the land. Of course. So the reason we conduct those title searches is to identify whether there are any charges, whether there are any encumbrances, whether there are any third-party interests that have to be relinquished for you to fully pass title or ownership to me.

Sean 13:18

Interesting.

Erica 13:19

So one example of that, for instance, might be a mortgage. A lot of persons may have gotten finance in when they purchased the property. They're now coming to sell. They may have paid off the mortgage or they may be using part of the purchase proceeds to settle the mortgage facility. One of the things that our title searches would show is that there is a charge against the property, and that charge is registered in the name of a particular financial institution. We then know that in order for the title to be passed, a release of that mortgage has to be a part of the title bundle that is being handed over to us at completion. So it helps us to identify any relinquishment of rights or charges that have to be handed over when title is passed.

Sean 14:09

Understood. What are some red flags that might pop up during the legal review of a property?

Erica 14:14

I'll speak to three of the um most I wouldn't want to say popular, but the ones you see most often. Yes. So what one of the first things is the title deeds and where they are. So we often ask vendors when we're working for them, um, where are your original title deeds? As I mentioned to you earlier, uh most of the title in Barbados is is unregistered. So it's that original stack of deeds that has to be handed over as part of your your good title. If you don't know where those deeds are, then that's a that that could potentially be a problem.

Sean 14:57

So this is this is interesting because uh I having heard this uh before, it's it's amazing. The owner could have these deeds anywhere. That's right. They could get lost, they could get wet, they could get burnt, they could they could get blown away. That's that's I mean, that's uh it's a pretty important document to leave to chance, so to speak.

Erica 15:22

Yes. Um it doesn't happen every day, but there are times that you know it may have property may have changed hands, you may have moved, and for some reason you can't track down the title deeds. They're either they're either lost or misplaced. Wow. And what that means is that those title deeds then have to be restored. And the restoration process means we go to the land registry and ask that the copy that the land registry has be certified as good as the original. Right. It's simple in in terms of what it is, but there is a process associated with it, and that could take anywhere between six to eight to nine months. And so therefore, it's it's something that you want to know before you actually sell the property. So the the earlier you know it, the better, so that you know what timeline you're dealing with, and you know that the restoration process has has to be started as soon as possible. So that's that's one of the the red flags that that we we see.

Sean 16:29

So I I guess advice to a seller is don't keep the title days under your bed or definitely not folded in your pocket or something like that.

Erica 16:36

So so keep them in a safe place. Some some purchasers um on on buying a property feel comfortable leaving them with with their attorney to keep in a safe place. Right. And that's that's perfectly acceptable. That's something that can be agreed between your you and your attorney. If that's not something you feel comfortable with and you want to have those deeds tangibly with you, then please keep them in a very safe place.

Sean 17:01

And if the if the property is purchased with a mortgage, does the bank hold on to those title deeds until such time as the mortgage is is paid off and relinquished?

Erica 17:10

That's right. Right. So the the bank, because it it has a charge over the property, is going to hold those title deeds until you pay the facility in full. And the release that I mentioned earlier on up in our conversation, once that is signed by the bank, they would hand over the title deeds with the the release back to the owner.

Sean 17:32

Okay. Were there a couple of other ones that you were going to mention? Yes.

Erica 17:35

So the the second um flag or or potential issue is if there's an estate involved in the the sale and purchase process. Right. So you may have owned a property, passed away, and either died with or without a will. And in in either circumstance, your estate has to be dealt with before the property that you own can be sold. So that's something if it hasn't been done before a property goes on the market or an offer and acceptance has been signed, if it's going to be dealt with during during the currency of the sale and purchase process, it's going to stretch it out.

Sean 18:16

Is this something that you would then recommend to a seller or an agent recommend to a seller prior to putting the property onto the market that the estate is sorted rather than having it come up in the middle of a transaction?

Erica 18:30

Most definitely.

Sean 18:31

Right.

Erica 18:31

Yes. So but the unfortunate thing is that some people don't know and they they might um unknowingly, in having the conversation with their estate agents, say, well, yes, everything is in order, and yeah, my mother owned the property and I'm I'm now able to sell because she would have left it to me anyway. Sure. Not having gone through the actual process in order to be able to sell the property.

Sean 18:58

But if I if I hear that statement as an agent, really I should be saying, has the estate been sorted out? Exactly. That should be my next question. Exactly.

Erica 19:06

And um one of the the other potential flags is uh if there are any encroachments on on the property being sold. Okay. And what you're talking about when you speak of encroachments is that boundary survey that I mentioned earlier. Obviously, the property's got certain boundaries, it it abuts and abounds um on places in the north, south, east, and and west, and it measures certain dimensions. If something on my property is is protruding onto your property, that is is potentially an encroachment. There's there's something not belonging to your property, that is is on your property, and it's affecting the boundaries to your property. Right. And that's something that you definitely want to have dealt with because what it means is when the the purchaser is is buying, they could potentially be buying a property with something on it that ought not to be there. So you want to have either the encroachment removed or some meeting of the minds between the person that's encroaching and the property that is being encroached on as to removal in the future.

Sean 20:24

That's a that's an interesting one. And uh yeah, I'm always intrigued by that because there are then lots of spinning wheels happening all at the same time.

Erica 20:32

Yeah, yeah.

Sean 20:33

Interesting. Could you take me through some of the typical costs involved, like stamp duties, government fees, transfer tax, etc.?

Erica 20:40

So you've got your your property transfer tax and stamp duty. Um the property transfer tax runs about 2.5% of the purchase price. Okay. If there is a structure on the property, there is uh uh an allowance that's that's deducted from that 2.5%. The stamp duty runs 1% of the sale price of the property. These costs are borne by the seller or the vendor, so they're not buyers' costs. Okay. The the buyer's cost would be the any amounts that are spent on on title searches, because that's usually an out-of-pocket expense, and recording the transfer documents, whether it be a conveyance at the land registry or a sure transfer document with the the registered agent or with the corporate affairs registry. Those costs are are based usually on the the value of the property being transferred. Understood.

Sean 21:42

Okay. Uh some purchasers will purchase via a trust or a company. What's the legal basis behind doing so? Uh what are the advantages or disadvantages of doing this?

Erica 21:54

So it it's all about um structuring your affairs. And the the benefit of purchasing in an in a trust or having a trust as part of your structure is that it allows for easy management of your estate on your death. You don't have to worry about your will being um probated or your estate, quote unquote, being being settled before you're able to be able to sell this. The trust has been built factors that that deal with how the property um is supposed to pass. You might also own in a corporate structure, and the the benefit of that is really on resale of the property. It helps you to avoid and and legally so those taxes that would otherwise be payable by you as seller, that's 3.5%. And uh I'll stick a pin there to say that that would be legitimately avoided when you're talking about sale of shares in an offshore holding structure and not uh a domestic or local structure, because those would still come under our property transfer tax and stamp duty laws, and therefore that 3.5 would be applicable. Right. Whereas if you're selling the shares in an offshore property, let's say, for example, you've set up a company in the BVI and then registered it here in Barbados so it could own property, you're selling the shares in that BVI company, and therefore, because it's uh an offshore transaction, our property transfer tax and stamp duty laws wouldn't come into play. And it it saves the seller then that 3.5%. So those are the um reasons that persons might want to consider uh a trust structure or a corporate structure. Of course, we we also tell buyers to ensure that they get tax advice from their resident jurisdiction because that might also have an impact on whether they would employ a structure to own the property or whether it might be more beneficial for them just to own it in their own names.

Sean 24:04

Very interesting. Uh, and and I think it's something that is not always considered. Uh, a lot of the time, the consideration on the purchaser's part until they're revised otherwise, is how does it affect me tax-wise here in Barbados? Without thinking actually, how does it affect me back at home where I actually actually pay tax? Yes. Interesting. And and it's wise to understand that each individual and their situation is going to dictate what's best as far as the purchase is concerned. There's no one general rule for any particular demographic, any particular uh type of buyer. It really does come down to what the purchaser wants to do long term and and what their current situation is both at home and here in Barbados as well.

Erica 24:53

That's absolutely right, Sean.

Sean 24:55

So I'm I'm just want to talk a little bit about uh purchasing a condo versus land versus a house. Are there any legal differences between purchasing a condo, standalone home, or just land?

Erica 25:07

So the the legal differences, and it's mostly between a condo and um the standalone land and and villa, we can put those in um one category together. Okay. So when you're purchasing a condominium, what you're purchasing is uh the actual unit as well as a share in in the condominium property or a share in the common property of the condominium. So the condominium is a building, obviously, and there are going to be spaces that are not owned by any one person in particular. They're shared spaces. Corridors, etc. Corridors, stairways, there might be a garden, and those are owned by all of the condominium unit owners. And so because you're a condominium unit owner, you you've got a share in that common property. So it's it's your flat or apartment, if you will, right, plus that share in the common property.

Sean 26:03

Understood. For buyers considering off-plan or pre-construction purchases, what legal protection should they ensure are in place?

Erica 26:12

One of the key things that they they want to make sure, even before they enter into the contract, is that the developer has got the requisite approvals to build.

Sean 26:24

Okay.

Erica 26:24

Because you don't want to be handing over your money, and then somewhere um during the process, you realize that there's there's something um not just right with those those approvals that have to be have to be made. How would one go about doing that? So in having the conversation with the developer or with the developer through your agent, you just want to make sure that the relevant approvals are in place.

Sean 26:48

And that should be relatively easily forthcoming. Exactly.

Erica 26:51

The other thing you want to make sure is that there's some protection for you if the project goes over time and goes over time by uh a significant number of months, for instance. Okay. Because obviously you've made this investment and you've made this investment expecting that you are going to be able to start generating returns from a certain time. It's going to have an impact on you if it's not finished by that time or or shortly after, and you don't have proper notice and time to agree with the developer that you allow for an extension. Um so the protection that you would want to have in the agreement in those instances, that is where you've not agreed with the developer, that there's need for an extension, right, would be liquidated damages. That's where there's a dollar amount assigned to every day or week that the property is not handed over, is not in a position to be handed over to you. So you kind of recoup some of those losses that that you should might have incurred.

Sean 27:59

Okay, interesting. If you could give advice to someone buying for the first time in Barbados, what would it be?

Erica 28:04

Know the property that you're buying. And by that I mean ask as much questions as possible. Um, there's there's no question that is is too insignificant to ask. Uh, you're purchasing in Barbados for the first time. It's a system that you're not familiar with. Yeah. You may think that you know because you've purchased properties in in various parts of the world, but there are different systems in in different parts of the world. And even where there are similarities, there there could be some small differences. So ask about the process, ask about the property, how long it's been there, um, whether there are any issues with the planning in relation to the property. You want to know that the property is structurally sound if it's been there for a while, and that's where the survey that we mentioned earlier um comes into play. You want to know whether there are any issues on the seller's side that might prevent for a smooth transaction. So, like whether there's an estate involved or whether it's owned by a holding company, and if that holding company is is in good standing, whether there are any taxes owned on the property, ask as much questions as you you think of so that you can know the property that you're buying, so that there are no surprises when the process starts.

Sean 29:23

Yeah, makes sense. Uh stitching time saves nine. Exactly, exactly. And for those who've already bought or bought a while ago and they haven't looked at their structure or agreement for a long time, should they revisit?

Erica 29:37

Absolutely. Because there are there are changes to the laws um ever so often. I won't say every day, but but ever so often. And they could have implications for you today that they wouldn't have 10 years ago when you bought. Right. So for example, if you bought a property um 10, 20 Years ago and owned it in an offshore holding structure, depending on that the jurisdiction that the company was incorporated in. There may have been changes that require you to make additional regulatory filings, and you may not be aware of those. But you also want to be familiar with the requirements, and if they're becoming too onerous, and if you need to consider um a change in the structure, you may not have had children 10 years ago when you bought the property and you now have children, you might want to consider putting a trust in in place and having that trust somehow incorporated into the ownership of the property so that it makes managing your estate a lot easier.

Sean 30:57

Interesting. Yeah, it makes it makes sense. A lot can change in five, ten years. Where can people reach out to you or the dentist team if they want to get some legal advice?

Erica 31:05

So um finding us is pretty easy. You you go to dentons.com and That's easy. It it takes you to the different jurisdictions that um Dentons Globally covers. Obviously, you can find the Barbados team in in Barbados. Me personally, I'm Erica.marshallHyphen4 at Dentons.com. Perfect. But like I say, if you if you go to the website, we are very easy to find.

Sean 31:30

I'm gonna shoot a few questions at you. They're quick questions uh and uh I think they're uh good digestible bits of information that people may find helpful. Do foreigners need a special permit or license to buy? Myth or fact?

Erica 31:43

Well, that depends on where you're buying. But if you're talking about Barbados, okay. If you're talking about Barbados, then that's a myth.

Sean 31:49

Do you always need to fly to Barbados to complete a transaction?

Erica 31:52

That's a myth. It's a myth. You you may want to, um, and that's absolutely permissible, but you don't have to be there. The close-in is a meeting between the attorneys where funds or completion funds are exchanged for ownership documents.

Sean 32:05

Okay. Is buying a beachfront property in Barbados more complicated than any other?

Erica 32:10

Once you've got a lot a a capable attorney, absolutely not.

Sean 32:13

I like that. Excellent. Erica, I think I've grilled you enough uh in one session. Thank you so much for your time. It's always a pleasure. Um and I look forward to having you again soon.

Erica 32:25

It was my pleasure as well, Sean.

Sean 32:26

Thank you.