Real Estate 2020

Last Updated April 14, 2020

St Lucia

Law and Practice

Authors



Du Boulay Anthony & Co is a service-oriented civil law practice, established in 2005, with a firm commitment to offering a personalised client experience and focusing on real estate and commercial law transactions as its core practice areas. It has developed a reputation for providing the most efficient and reliable legal representation and customer service.  The firm maintains a full complement of highly trained staff, including administrative, accounting and clerical personnel to provide support.  It is experienced in handling large commercial, banking and real estate transactions, and has worked with most of the major developers on the island from inception through completion.  The firm's network of associated professionals and dedication to “getting things done” for clients ensures a smooth experience for persons new to the island, particularly investors and developers who require a wide variety of legal and ancillary services.

Real estate law in St Lucia is mostly derived from statute, primarily the Land Registration Act, Cap.5:01 of the Revised Laws, 2008 and the provisions of the Civil Code, Cap. 4.01. 

Most demand for real estate has been in the USD500,000 range over the last 12 months. Such real estate tends to be largely standalone residences or condominium type residences. Higher end properties have also seen movement, with sales in the USD3 million range.

Disruptive technologies are unlikely to affect the real estate market in St Lucia over the next 12 moths. The market remains a traditional one.

The government has recently replaced the Aliens (Licensing) Act, Cap. 15.37 with the Alien Landholding (Licensing) Act, No 1 of 2020. The Act has effected a range of changes to the former legal regime for foreign land ownership on the island. A foreign investor seeking to purchase property on the island will first need to obtain a certificate, which will be valid for either one year or ten years. A holder of a certificate is then eligible to make one or several applications for an Alien Licence for specified property during the validity of the certificate. The Citizenship Investment Unit will be charged with processing applications for certificates or licenses under the Act as well as carrying out the required due diligence. The Act aims to regularise and make the process for the issue of Licences more efficient.

The principal property rights that can be acquired are ownership and leases.

The Land Registration Act, Cap. 15.37 and its attendant Rules apply to the transfer of property. There are no laws that deal specifically with particular types of real estate.

St Lucia employs a land registration system dating back to 1986. Every parcel of land on the island is recorded at the Land Registry and easily identified by reference to Map Sheets. Title to property is by notarial deed, executed before an Attorney at Law in his/her capacity as a Notary Royal. Transfers of title are first presented to the Inland Revenue for the payment of stamp duty, then deeds are stamped and the stamp duty paid is recorded. Thereafter, deeds are submitted to the Land Registry for recordation. Each deed is assigned an instrument number. Once title has been recorded, the Land Register becomes a proprietor proof of title. Title insurance is not used on the island. In the few instances where it has been used, it has largely been in a situation where the purchaser is obtaining funds from a foreign bank.

Typically, a prospective buyer will engage an Attorney at Law to undertake real estate due diligence and title searches. A search of the Land Registry will allow for the proof of title to be obtained, together with copies of the title of a predecessor in title, instruments confirming existing incumbrances (mortgages, restrictions and servitudes) and a map sheet showing the location of the property in relation to other properties. An examination of the Parcel File for any property will generally give a detailed history of the property. The Land Register will indicate if the property has been surveyed or if its boundaries are undemarcated. Survey Plans are recorded and registered at the Department of Surveys and Mapping, and can easily be obtained from there.

A search of the Registry of Deeds and Mortgages will yield deeds recorded prior to 1986, and indicate if there are any recorded judgments against a vendor. It should be noted that judgments in Saint Lucia affect all property of a person, both movable and immovable.

Typically, representations and warranties are given with respect to title being transferred free and clear of encumbrances, judgments or liens, or from appropriation action by the Government. Neither the Civil Code nor the Land Registration Act specifically provide for warranties of a particular kind. In a case where misrepresentation is alleged, a buyer may use all remedies available by law, including rescission and damages.

Any investor should ensure that attention is paid to the primary sources of law specifically the:

  • Land Registration Act;
  • Physical Development and Planning Act;
  • Aliens Landholding (Licensing Act) No. 1 of 2020;
  • Stamp Duty Act Cap. and its regulations;
  • Trade Licence Act;
  • Condominium Act (if applicable); and
  • Tourism Investment Act

There are, of course, other laws which concern more specific areas of law. Any investor should ensure that advice is sought from a professional at the commencement of any investment to ensure that the investor is well equipped with the required information and advice.

There is no legislation in St Lucia specific to soil pollution or environmental contamination; however this would not preclude civil action for any environmental harm.

The Development Control Authority (the “Authority”) is responsible for zoning and land development permissions. A buyer can request this information from the Authority prior to acquisition. Statutory Authorities are permitted to enter into public-private arrangements with developers/investors, provided that this is permitted by that authority's statutory mandate.

The Government may acquire land through compulsory acquisition for a public purpose. This process is regulated by the Land Acquisition Act, Cap.5.04 of the Revised Laws, 2008. Once the property is identified, an advertisement will be placed in the Government Gazette. The owners may then proceed to engage with the assigned officer to negotiate compensation.

In the case of an outright property purchase, the seller pays a transfer tax called vendors tax, and the buyer pays a stamp duty of 2% of the transaction value. Vendors tax for St Lucian citizens is calculated on a scale, while for non-nationals it is calculated at the rate of 10% of the transaction value.

In the case of a share sale, if the property being sold comprises more than 75% of the company’s assets then both stamp duty and vendors tax will apply. Where the 75% threshold is not met, then stamp duty of 0.5% of the net asset value will apply.

Where change in control of a corporation occurs via a share transfer, the rules above will apply with respect to stamp duty.

Foreign investors are not restricted with respect to the acquisition of real estate, provided that the requisite Aliens Licence is obtained in respect of each acquisition. This applies regardless of whether property is acquired by purchase or by long-term lease (known as an emphyteutic lease).

Financing typically comes from local banks, or from foreign financial institutions through mortgage loans.

Financial institutions typically require hypothecation (mortgaging) of the subject property, personal guarantees and, in some cases, a pledge over shares in the corporate entity or its parent.

There are no restrictions in place regarding the granting of security over real estate to foreign lenders.

All security documents that require registration in public registries must first be presented to the Inland Revenue for stamping and the payment of stamp duty. The stamp duty applicable to certain classes of transactions and/or documents is specified in the Stamp Duty Act, Cap. 15.11 of the Revised Laws, 2008. Classes of documents not provided for in the Act would be subject to the payment of a nominal sum of XCD10 for stamping only. Fees charged at the Land Registry are nominal, usually at the rate of XCD20 per parcel.

Deeds that require registration are generally required to be executed before an Attorney at Law in their capacity as a Notary Royal. Such deeds are referred to as notarial documents, and the fees applicable for preparation, execution and registration are fixed by reference to the minimum tariff fixed by the Bar Association (barassociationslu.com).

There are no legal rules or requirements that must be complied with before an entity can give valid security over its real estate assets per se. However, aside from the requirements set by individual financial institutions, in order to give valid security an entity must meet the following requirements:

  • hold an Aliens Licence if a foreign owned or controlled entity;
  • hold a valid trade licence if required;
  • be in compliance with the requirements of the Companies Act insofar as the filing of its annual corporate returns are concerned, so that the Registrar of Companies can issue a Certificate of Good standing to confirm the entity’s compliance with the Act;
  • be in compliance with the tax laws (corporate taxes, valued added tax and property tax );
  • be in compliance with the National Insurance Corporation laws regarding national insurance contributions for employees;
  • not have any recorded judgments for the payment of money or other liability; and
  • the property to be used as security should not be subject to any adverse encumbrances or other registrable liens.

Upon the registration of any security over real estate, the priority of the security instrument is recorded on the Land Register for the property. While the mortgage instrument generally provides for the ranking of the security being provided, this ranking is always subordinate to government taxes and national insurance obligations, and any prior judgments recorded at the Registry of Deeds and Mortgages.

In the ordinary course where the security is by way of legal mortgage and default occurs, a lender is required to take legal proceedings and obtain a formal judgment before moving to enforcement. In the case of a mortgage debenture that provides for the appointment of a receiver, the lender may appoint a receiver upon the occurrence of a default, who then takes over control of the property in accordance with the terms of any loan agreement, the terms of the debenture and the provisions of the Companies Act.

It is possible for existing secured debt to become subordinated to newly created debt, by agreement and by the intervention of the relevant party into the security documents agreeing to an inversion of order with respect to the priority of the security. This is governed by the Civil Code.

There are no applicable laws in this regard, but a lender only holds a lien over the property to the extent of the sum owed, and holds no legal interest in the property that is the subject matter of the lending; to that extent, liability should not be an issue.

If a borrower become insolvent, any security interests created are not made void. The lender remains free to obtain judgment to and execute against any security created in the lender's favour. In the case of a corporate borrower, insolvency or inability to pay debts would effectively be grounds for calling in the security, and will allow a lender to immediately enforce against the security.

Interest rates are generally calculated by reference to the domestic bank’s lending rates, however to the extent that London Interbank Offered Rate (LIBOR) is used, the key consequence to borrowers of the anticipated expiry of the London Interbank Offered Rate (LIBOR) index would be the impact of future interest payments on current loan agreements. In terms of mechanisms to manage the risk, nothing definite has been put in place. There is a hope, however, that there will be a transitional period following its expiry during which LIBOR will be maintained as a shadow benchmark rate for use in transactions that are ongoing. This will require panel banks to continue submitting quotes after 2021, and the administrator will need to agree to continue performing its role.

The Department of Physical Planning is the principal authority regulating land use on the island. The Physical Planning and Development Act, Cap. 5.12 sets out the requirements for obtaining approvals for real estate development on the island. The Act specifies what should form the content of such an application and what should be contained in a plan presented for approval – maps, drawings, descriptive information, and other details necessary to properly illustrate the proposal. In that regard, the Department may involve other agencies and departments, such as the National Emergency Management Office or the Ministry of Health, to get sufficient information to inform a decision on the plan.

The Development Control Authority established under the Physical Development and Planning Act assumes responsibility for making decisions regarding the approval of plans for land development. This review takes into consideration the potential impact on the environment, and the Authority is empowered to request environmental impact assessments for the purposes of evaluating an application and making a decision. Permission for land development may be granted unconditionally, or with specific conditions regarding the location and type of development.

Again, the Development Control Authority established under the Physical Development and Planning Act, Cap. 5.12 assumes responsibility for reviewing and making decisions regarding the approval of plans for land development.

Applications for development approval are submitted by the developer or its agent to the relevant Ministry. The application is checked to ensure that it meets all requirements for the type of application being submitted. Once these requirements have been met, a payment slip is prepared for the payment of fees. Upon the payment of fees, the application is registered and issued with a reference number, stamped and submitted for assignment to an officer for processing. Third party consultations usually occur where change of land use applications are being considered. The Act sets out the procedures in this regard.

A right of appeal to the Appeal Tribunal established under the Act exists in respect of any decision of the Development Control Authority.

Developers are required to follow the established rules, regulations and procedures for property development. Utility companies are free to enter into agreements with developers as they see fit, and whether or not this occurs is in the purview of the utility company.

The Development Control Authority has the authority to issue “stop notices” in the case of unplanned development or where there is deviation from an approved plan. In developments where servitudes and covenants exist, owners may seek to enforce these through court actions.

Investors in real estate typically purchase in their individual names, or may choose a corporate structure, utilising a domestic company solely or a domestic company and an international business company (offshore entity) after consulting with their legal and tax advisers. The domestic and offshore structure was the most common structure used by individual purchasers until recently, but with recent changes in corporate and offshore legislation it remains to be seen what structures will be used going forward. It is anticipated that developers will continue to utilise one or both types of structures.

In the case of both domestic and international business companies, the constitutional documents primarily set out a company’s governance framework and clearly set out the powers of its board of directors, who are charged with the day-to-day management and operation of the business. In the case of a company incorporated as a company limited by shares, the liability of its shareholders is limited to the amount (if any) unpaid on their shares.

There is no prescribed minimal capital required to set up each type of entity. The general practice is to capitalise with USD100 or XCD100.

All domestic companies established under the Companies Act, Cap. 13.01 require directors and a company secretary to be appointed before the commencement of business. Such companies are required to file an annual corporate return at the public Companies Registry detailing shareholding and directors. Changes in beneficial ownership and directors must be reported. Every document filed at the Companies Registry attracts a fee of XCD25. Legal fees vary depending on the firm used.

Companies established under the International Business Companies Act (IBCs) are represented by Registered Agents, who maintain the records of IBCs in keeping with the statutory requirements and, as such, companies are bound to report any changes in shareholding or governance to the Registered Agent. Every IBC must pay an annual renewal fee, presently set at USD300. Registered agents charge annual fees starting from USD500 to act as agent for an IBC. IBCs are required to complete a return annually as well as a financial statement; these are deposited with the Registered Agent. From 1 July 2021, all IBCs will become subject to taxation and, as such, liable to file income tax returns with the Department of Inland Revenue.

In the case of a domestic company, on average costs start at USD700 for the filing of the annual corporate return and the preparation of financial statements. Costs will increase for accounting services, having regard to the amount of trading activity and services required. In the case of an IBC, costs start at approximately USD1,300 for annual registration, registered agent fees and annual accounting services.

Real estate can typically be used for a limited time period pursuant to a lease arrangement which allows a tenant to assume possession of premises for a specified period.

Leases of commercial spaces are negotiated freely by the parties to such leases.

Rents and lease terms are freely negotiable.

Leases of business premises are for an average of two years at a minimum, with provisions for renewal. The Land Registration Act specifies that any leave over two years is subject to registration at the Land Registry. Terms for repair are usually specified in the lease, and negotiated and agreed between the parties. Rent is generally paid monthly in advance on the 1st of the month.

In most cases, a lease will specify whether the rent is fixed for the period, or whether it is subject to increase. Where rent is subject to increase, the mechanism for increase is specified in the lease in order to avoid uncertainty.

In most cases, new rent is determined by incremental increases or by reference to a cost of living index. The norm is by agreed incremental increases.

VAT is payable on rent to the extent that the landlord meets the threshold of XCD400,000 for minimum sales in one year.

A security deposit equivalent to one month’s rent is normally payable by the tenant at the start of a lease, in addition to the first month's rent.

These costs are covered by the landlord, or may be assumed by the tenant if so agreed with the landlord.

Where utilities and telecommunications serve a property occupied by several tenants, a separate utility meter (water and electricity) is connected for each tenant. The tenants are then responsible for paying their own electricity and water charges. Additional services such as cable and internet can be connected if the tenant requires such services, at their own expense. Some landlords may bundle water, cable and internet as part of the rental package.

The landlord is responsible for insuring the real estate. However, it is the tenant’s responsibly to insure their contents and often the cost of any improvements made to the leased premises. If for any reason damage is caused to the property due to the negligence of the tenant, then payments for the repairs would be the responsibility of the tenant. The insurance policy would usually cover events such as fires, flooding, storms, theft, earthquakes and other natural disasters.

Leases generally specify how the property leased is to be utilised. In some cases, this may be specific or in others more general, with a caveat that the property is not to be used for any immoral or illegal purpose. A property cannot be leased for a purpose not in keeping with its development approval – for example, a residential property zoned for residential use and occupation cannot be leased as commercial premises.

A tenant’s ability to alter and improve premises will depend on the terms agreed with the landlord. In general, a landlord will ordinarily permit improvements by the tenant provided that such improvements are agreed in advance, and the landlord does not thereafter become liable to the tenant for the value of these improvements upon termination of the lease (unless agreed).

There are no specific regulations governing leases of particular categories.

As there is no insolvency legislation, the terms of the lease agreed between the parties will generally govern a situation where the tenant becomes insolvent.

Again, this is by agreement. In the normal course, the only security a landlord holds is the agreed security deposit.

A tenant does not have a right to continue in occupation, but most leases do provide mechanisms for renewal; in a case where there is no mechanism for renewal and the parties have not made legal arrangements prior to the termination of the existing lease for renewal, a tenant often remains in possession, paying the monthly rental. In a situation where no mechanism for renewal is set out in the lease, the landlord may advise the tenant prior to the expiration of the term whether he wishes to offer renewal and similarly the tenant would advise whether he wishes to renew.

A tenant does not automatically have the right to assign its leasehold interest. Commercial leases usually indicate whether a tenant has a right to assign. Conditions may vary depending on the terms agreed between the landlord and the tenant.

In the case of a landlord, outside of the obvious reason (non-payment of rent), a lease may be terminated by a landlord who requires a property for personal use, or if any of the agreed terms and conditions of the lease are breached. An event of natural disaster or fire may also create circumstances that give rise to termination if the premises cannot be repaired within a reasonable timeframe.

The Land Registration Act specifies that a lease for a specified period exceeding two years, or for the life of the landlord or the tenant, or a lease that contains an option for renewal and exceeds two years, shall be subject to registration. Registration takes place at the Land Registry and is effected by the opening of a new register designated as a leasehold register and a notation on the land register of the existence of the lease. Leases prior to recordation are subject to the payment of stamp duty. Stamp duty is determined by reference to the Stamp Duty Act, which in most ordinary cases is equivalent to 2% of the consideration over the total term of the lease. Stamp duty is usually payable by the tenant.

In the event of a breach of a term of the lease, the landlord may be entitled to terminate. If the tenant does not agree to give up possession of the premises, the landlord would be entitled to file suit for possession. The length of time that such a process would take would be determined by whether or not the claim is defended.

While not specifically provided for, a lease can be terminated for example as a result of a compulsory acquisition by the Government. In such a case, the loss of rental would be considered as part of the compensation payable to the owner.

The most common structures are “fixed price” and “labour only” structures. Fixed price is tied to the bill of quantities, and architectural drawings and alterations are allowed at extra cost. The opposite is true if the client uses less expensive materials than planned. The labour only structure comes into effect where the owner supplies all materials and only pays the contractor for the provision of labour. Most new builds are priced by reference to the fixed price structure.

Typically, design and construction are dealt with as separate aspects. An architect is hired by an owner to create design documents, often in consultation with an engineer if needed. Upon completion of the design documents, contractors are usually requested to provide quotations or to bid after reviewing the documents. Upon the selection of a bid, the owner/developer will proceed to enter into a contract with the selected contractor.

The usual devises used in standard construction practice are utilised to manage construction risk, and much will depend on the form of contract used. It is not uncommon for standard type FIDIC or other contracts to be used. Much depends on the contracting parties.

These events are usually provided for in the building contract. There could be penalty clauses for cost overruns, and many owners will hire a quantity surveyor to oversee and manage the project in accordance with budget, value the work-in-progress, prepare bills of quantities for payment, etc. Both the owner and the contractor can agree beforehand who will bear responsibility for cost overruns. Insurance companies offer contractors-all-risks policies where both the principal and the contractor can be covered for unforeseen events that could delay completion of the project and incur additional costs. This generally applies to large-scale projects, both residential and commercial.

In contracts of a higher value, penalties for late delivery of works are not uncommon. Performance bonds usually relate to commercial contracts.

The Civil Code provides that architects, builders and other workmen have a privilege upon the buildings, or other works constructed by them, for the payment of their work and materials. This is subject, however, to specified rules.

Most projects that are sufficiently large will provide for certificates of completion to be issued by a quantity surveyor or other construction professional prior to a property being made available for habitation or use.

If the regular business of a company is to sell real estate (eg, a developer), and revenue will exceed USD400,000 per annum, then VAT is payable on the sale price at the rate of 12.5%. However, if a company sells a building as a one-off event, no VAT is payable.

Projects that quality for concessions from the government often obtain an exemption from or reduction of the applicable stamp duties payable on the initial acquisition of the real estate.

Business premises are subject to the payment of property tax at the same rate as individuals – ie, 0.25% of the market value of the property.

Withholding taxes for foreign investors are charged at the rate of 25% on payments to extra-regional consultants or entities and 15% on regional consultants or entities.

Taxation is levied on rental income from real estate, minus allowable expenses at the rate of 30% per annum.

Development costs are accumulated and amortised as the developed land is sold. There are no Capital Gains Taxes in St Lucia, only vendor’s taxes on the sale of property, which is levied on the owner and calculated on the basis of a sliding scale.

No depreciation or capital allowances are taken on land, but capital allowances at a rate 2.5% per annum on commercial buildings and 5% per annum on industrial buildings can be used to reduce the tax liability for income arising therefrom. Loan/mortgage interest on the purchase or construction of a home or investment property is also an allowable deduction. Incentives are available for the building of tourism type developments under the Hotels’ Incentive Act, and tax holidays can be granted where approved by Cabinet.

Du Boulay Anthony & Co

P.O. Box 1761
Castries, LC04 101
St. Lucia

+758 452 5111

+758 452 5114

mdesir@slulaw.com www.slulaw.com
Author Business Card

Law and Practice

Authors



Du Boulay Anthony & Co is a service-oriented civil law practice, established in 2005, with a firm commitment to offering a personalised client experience and focusing on real estate and commercial law transactions as its core practice areas. It has developed a reputation for providing the most efficient and reliable legal representation and customer service.  The firm maintains a full complement of highly trained staff, including administrative, accounting and clerical personnel to provide support.  It is experienced in handling large commercial, banking and real estate transactions, and has worked with most of the major developers on the island from inception through completion.  The firm's network of associated professionals and dedication to “getting things done” for clients ensures a smooth experience for persons new to the island, particularly investors and developers who require a wide variety of legal and ancillary services.

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