Your Cayman Islands Property

Legal

This summary is to provide a preliminary outline of various considerations and costs which may be involved in real estate transactions and is for general information only.

It should not be regarded as specific advice applicable to any particular circumstances and it is recommended that legal counsel be sought for matters requiring detailed legal opinion.

INTRODUCTION

All dealings in real estate in the Cayman Islands are based on a registered land system. Details of ownership, title, mortgage and other interests in land must by law be recorded in a public register which is located in the Land Registry.

A major advantage of this system is that all registered absolute titles are effectively guaranteed by the Cayman Islands Government and title insurance is therefore unnecessary. The system also offers greater simplicity and certainty in real estate transactions which can, if necessary, be carried out with considerable speed.

Most land in the Cayman Islands has freehold (absolute) title, however some areas of the West Bay Beach peninsula are held on a lease from the Crown.

OWNERSHIP REQUIREMENTS

There is no legal restriction on ownership of real estate in the Cayman Islands by individuals who are not Caymanians or who are not resident where the real estate concerned is for their own personal use.

If the real estate is to be used for business or development purposes then there are various licensing requirements which may be applicable. We would strongly advise that clients seek legal counsel before signing any sales agreement, however informal.

Corporations may also own real estate but certain types of corporations are prohibited by law from real estate ownership altogether. Others may require licenses depending upon the type of corporation and the proposed use of the real estate concerned. There are also various considerations relating to the transfer of shares in corporations owning real estate. We would therefore recommend clients discuss their proposals with legal counsel before embarking on real estate ownership through a corporation.

REGISTRATION OF TITLE

All land in the Cayman Islands is identified and numbered and a public record sheet outlining all details is kept at the Land Registry. The record also shows the identity of the owners of the property together with details of any rights or liabilities attaching to it (eg leases, rights of way, etc). Details of all mortgages (known as ‘Charges’) are also shown on the register. With a few exceptions, there is very little which can affect the property that cannot be discovered by an examination of the register concerned.

Title documentation is unnecessary because entry on the register is itself proof of ownership or possession of any other interest (eg tenant or security holder). Also, since the Cayman Islands Government by law provides an indemnity for any loss incurred in the event of any mistake, error or omission in the register, title insurance is unnecessary and is never used.

The system enables actual registration of a title or other interest in land to be reasonably straightforward. The precise terms of any real estate transaction are very important and are almost always incorporated in a detailed written contract which is usually prepared and signed by the parties’ attorneys. We can recommend legal counsel who could prepare such contracts for clients and we would also strongly recommend that counsel be consulted before signing any other form of contract.

For example, a typical real estate purchase would involve preliminary enquiries followed by a sales agreement (usually prepared by the attorney of the seller) being signed by the parties with the buyer paying an initial deposit (usually ten percent (10%)) towards the purchase price. This would be followed by a closing at a mutually agreed date when a transfer of title document will be handed over the buyer’s attorney in exchange for the balance of the purchase price. The transfer of title document is registered at the Land Registry (usually by the purchaser’s attorney unless there is a mortgage involved) and the register for the property concerned is amended by the Registrar deleting the name of the seller and inserting the purchaser as the new owner.

Clients should be aware of the potential risk of signing any agreement, however informal, relating to real estate before legal counsel has had the opportunity to review the documents. This is because under Cayman Islands Law, once parties have committed certain basic terms to writing and signed them, they may well find this enforceable against them despite the fact that there are important provisions which remain to be finalized and notwithstanding that other important arrangements have not been made.

CONDOMINIUMS

Generally, condominium developments in the Cayman Islands have the same basic characteristics as condominiums in the United States and elsewhere however there are provisions of Cayman Islands Law. Condominium apartments can be bought and sold in basically the same way as other real estate as outlined above. Whilst most condominium apartments will have what is effectively freehold title, there are however, some developments on the West Bay peninsula where title is leasehold.

Upon the purchase of a condominium apartment the owner becomes a member of the general owners association which is known as the ‘Strata Corporation’ of the development concerned. Each Strata Corporation has registered By-laws which are its constitution and will also determine how the development is managed. Normally the Strata Corporation will be run by an Executive Committee of several owners elected by the general membership. Many condominium developments, particularly those with rental pool arrangements, also have resident salaried managers employed by the Strata Corporation.

Ownership of a condominium apartment will involve periodic payment of Strata Corporation dues to cover maintenance of common areas, building insurance and other expenses. Details of such dues can and should be obtained before purchasing any real estate.

Finance

Mortgages are available in Cayman for residents, expatriates and foreign investors. There are a large number of banks and financial institutions offering mortgage packages in the Cayman Islands.

Interest rates for real estate in Cayman are based on prime plus one or two. Standard mortgage terms require 10% to 25% down payment plus closing costs, at a rate of one or two percent above the prime rate. Loan duration is normally from 10 to 30 years, with most lenders eliminating pre-payment penalties.

When purchasing a property in Cayman a one time “stamp duty” must be paid at the time of purchase. Along Seven Mile Beach where there is high infrastructure, stamp duty is 7.5%. Duty on all other areas of the island varies from 5% upwards.