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Cayman Islands - Buying Property
Furthermore, you won’t be asked to pay capital gains tax if your property is sold for a lot more than you paid for it. There isn’t even the annual property tax which most countries in the world levy. You will, however, pay stamp duty of up to 7.5 percent of the purchase price, depending on your citizenship and the type of property purchase.
If you live in the Cayman Islands, you need to register for tax on your income sources and pay high levels of duty on imported goods. If you remain overseas as a fiscal resident of the US or UK, for example, you are required to complete your tax returns to the authorities there. In addition, if you still own your property at the point you die, there won’t be any death duties to be paid on your estate to the Cayman Islands government.
The Cayman Islands are financially and politically stable. Legal titles of property were clearly documented in the 1970s Cadastral survey, with complete mapping of the islands and their parcel numbers. The land registry contains evidence of the current legal ownership of every property and piece of land.
All of these factors make property purchases in the Cayman Islands an attractive proposition for local people and migrants alike.
Finding An Estate Agent
The Cayman Islands Real Estate Brokers Association (CIREBA) sets out rules and regulations to which its brokers and agents must adhere.
Since it runs a multiple listing service, you only need to choose one agent in order to view a wide selection of homes, saving you time and effort.
Mortgages In The Cayman Islands
If you have been living and working legally on the Cayman Islands for at least six months, the banks will normally consider your mortgage application. Migrants may apply for funds, but the deposit required will be much higher. It is a good idea to look at the range of terms and conditions on offer by different banks. A slightly higher interest rate will obviously a real difference in what you pay over the course of the entire mortgage, for example.
A broker will suggest a number of options to help you choose the right mortgage. However, be aware that commission may affect the options you are presented with, so do your homework too.
If you need a mortgage, ensure you have received pre-approval before you start viewing. Finding your dream home to then be turned away from financing it is not only a heart-breaking experience, it also wastes everyone’s time and money. Buying a property with a mortgage will attract a higher rate of stamp duty. The rate depends on the value of the house, but can be up to 1.5 percent more than standard stamp duty.
You will also need to arrange adequate life insurance so that your mortgage is covered should the worst happen.
Sometimes the owners of a property in the Cayman Islands are unable to cover the mortgage, usually because of a change in their circumstances. The banks try to negotiate with the owner to find a way out of the arrears, and often do so over a number of years. However, if the situation cannot be resolved, the banks take court action to obtain legal ownership of the property. It is then placed on the open market, so sale proceeds can be used towards the outstanding mortgage and associated debts. Around a hundred properties in the Cayman Islands will be foreclosed each year.
Foreclosed properties tend to be at the entry level point of the market, followed by middle tier homes. Large homes are fairly unusual as those purchasers tend to have a wide variety of assets they can fall back on in times of need.
When initially placed on the Cayman Island property market, the prices of foreclosed properties are standard or even optimistic. As a result, they rarely sell quickly. Over time, it becomes possible to negotiate the price down, although many will be purchased at the going rate. So whilst foreclosure gives you more room to negotiate than with an individual homeowner who is in rush to move, you are unlikely to find a bargain basement deal.
Apartments on different levels, or with shared areas, are bought with strata ownership. The regulations set out the legal framework under which owners pay strata fees, which are spent to manage and maintain the entire block. If you are purchasing a property which is a subdivision of a larger block, be aware that you will be legally required to pay these fees. They are charged monthly or quarterly, and must be paid in advance.
Make sure you are given full disclosure of these costs before you make an offer to purchase an apartment. Double check you can afford these fees, especially as you are likely to be paying large advance quarterly charges as one lump sum.
Although a strata property commits you to an additional outlay, it may be a worthwhile investment. Someone else undertakes maintenance of the property, communal areas and gardens. Swimming pools and play areas will be kept clean, safe and functional. If a pest control issue arises or the pool filtering system breaks down, it will be dealt with. Security is often part of the package, a great comfort if your property will be empty for long periods. Moreover, some of the strata fees are used to provide property insurance cover.
If you live in an independent property and undertake maintenance jobs yourself, those will take time and money. You will have to find contractors and obtain quotes, and if the contractor doesn’t turn up, it becomes your problem to find out what has happened and possibly start the process again.
Obviously, this is annoying if it interferes with a relaxing retirement, and is particularly problematic for those working long hours. For expats who have a holiday home in the Cayman Islands, traveling to talk to builders and oversee work can become expensive and difficult. This is why strata properties are popular.
Detached properties are often built on developments which have a strata-style homeowners association, although the insurance is not included.
Ensuring Your Property Purchase Is Legal
If you are buying a property in the Cayman Islands, you will need to appoint a lawyer or notary to ensure the title is clear and correct, and to arrange and process your contracts. They will charge one percent of the purchase price for this work.
Should you require a mortgage, the bank will nominate a law firm to undertake the work. You will still be responsible for paying the bill, so ensure you receive the estimate before work begins.
Offers to purchase a property must be made in writing. If you have used the services of a CIREBA registered agent, they will have standard documents to do this and help you through the process.
Your offer will include the purchase price, deposit, conditions of the offer, and suggested closing date. This becomes legally binding once both parties have agreed.
You will now pay the deposit, via your lawyer. If you pull out of the purchase without good reason, you will lose your deposit. At this stage, you should have the property inspected by a surveyor to ensure it is in good condition.
Once your lawyer has completed all the checks and prepared the documents, you will sign the final contract and provide the funds to pay the seller. You will also pay the stamp duty, estate agent fee, and the lawyer’s fees at this point. The lawyer will then process the Transfer of Land Form RL1, and give you copies of this to use for connecting utilities and so on. Congratulations; you will now be a Cayman Islands property owner!
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