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Buying a House in Jamaica

Buying a House in Jamaica

Prospective buyers fall into three market segments: local residents, the Jamaican Diaspora, and foreigners. Buying and selling real estate in Jamaica is marked by an absence of standardized contract. Thus the process is heavily dependent upon the involvement of lawyers.

The Meaning of Conveyancing:

The exchange or transfer of real estate is known as conveyancing. That is, to transfer or deliver land or property to another or to perform an act that is intended to create one or more property interests regardless of whether the act is actually effective. The usual means of transfer is by deed-written instrument on paper.

Conveyancing can take three forms. A primary or an original conveyance is one in which an estate such as feoffment, gift, lease, exchange or partition is done. A secondary conveyance is one that follows an earlier conveyance and serves only to enlarge, confirm, alter, restrain, restore, or transfer the interest created by the primary conveyance. A voluntary conveyance is one made without valuable consideration.



Other terms that you may come across are:
mesne conveyance- an intermediate conveyance
present conveyance- one that takes effect at once as opposed to the future
conveyancer-a lawyer who does conveyancing
conveyee-one to whom property is transferred is conveyed
conveyor- one who transfers or delivers title to another.

The Five Stages of Conveyancing:

In brief, there are five stages of the conveyancing process:

1. Pre-contract negotiations
2. Exchange of Contracts
3. Pre-Completion Procedures
4. Completion
5. Post-Completion


Pre-Contract Negotiations- Stage 1
The buyer and the seller must work out their respective positions. It is not the duty or role of the lawyer to undertake negotiations. The operative word is KNOW in the context of what you the buyer are buying and what you the seller are selling.

The objective is to arrive at all the terms especially the price and the extent of the property that is being sold and conversely bought. The parties must discuss and agree to any and all conditions such as key dates when contracts are to be exchanged and the completion date.

Exchange of Contracts-Stage 2

After the parties agree upon the terms, then the services of an attorney should be utilized to draw or write the sale-purchase agreement or other modes of transfer. The identities of the parties must be mutually verified. Attorneys should check for conflict of interests before deciding on accepting a party as his or her client. Most attorneys in Jamaica will insist on receiving written instructions from their client.

Buyers would be prudent to perform the followings steps at this stage:

i Secure mortgage commitment pre-qualification or firm commitment
ii Make searches of title records
iii. Pre-purchase inspection- engineer’s report by buyer
iv. Secure insurance to commence on signing contract, if the risk of loss of of the property passes on signing contract.

v. Secure deposit

Sellers would be wise to check the buyer’s finances to ensure that the transaction can be completed as intended. In some instances, sellers may decide to finance the transaction and accept a mortgage from the buyer.

After these preliminaries are done, a draft contract is prepared by the seller or her attorney that is sent to the buyer or his attorney for signing. It is customary for the buyer to make revisions, which are usually done through the post. Upon the resolution of all terms, the stage is set for the signing of the contracts and payment of the deposit to the seller or his attorney. We would recommend that the deposit should be no more than 10 percent of the selling price. If the deposit exceeds 10 percent of the contract price, then special care must be taken to designate that amount as an additional deposit. It is customary for the vendor’s or seller’s attorney to act as the facilitator of the conveyance or carriage of sale with responsibility for the execution of the pre-completion formalities listed in the stage 3. The completion of this stage is marked by the physical exchange of contracts.



Pre-Completion Procedures-Stage 3

This stage is marked by the following formalities being completed:

i. Agreement is submitted to the Stamp Duty and Transfer Tax Division of the Tax Administration Office- commonly called the “stamp office”- for the assessment of transfer tax and stamp duty payable;
ii. Payment of Stamp Duty as a percentage of the price is split or shared by the parties;
iii. Seller alone pays the transfer tax;
iv. The executed instrument of transfer is accompanied by the original duplicate title for submission to Office of Registrar of Titles to record the new owner and mortgage(s), if any, and;
v. Secure title insurance- optional.

Additional Steps to be taken if Purchase is being Financed or Mortgaged:

i. (a) If part of the purchase price is funded by a third party, that is, the grant of a mortgage, then the buyer or purchaser would immediately take steps to finalize his mortgage arrangements and get a letter of commitment that is presented to the seller’s attorney within the time stipulated in the contract. The buyer pays all fees and duties associated with the mortgage and in due course executes a note followed by a mortgage deed/Instrument of Mortgage. These documents are prepared and presented for execution by the lending institution or mortgagee or its attorney.

(b) If the transaction is an all cash deal, then the buyer pays the balance of the purchase price and both parties execute the Instrument of Transfer for presentation to the Office of Registrar of Titles.


The pre-completion procedures are characterized by intensive so-called back office work being done to prepare all the title and mortgage registration documents, e.g. making arrangements for the net transfer of funds between the parties and securing funding of new note and simultaneous pay-off of old indebtedness.

The use of title insurance is relatively new in Jamaica and buyers should consider getting this form of insurance protects against title defects, legal defense costs and indemnity up to the amount of the title insurance.

Completion-Stage 4

This is the stage where all the paperwork is signed and the relevant documents submitted to the Office of the Registrar of Titles. After the transfer is registered, a buyer should arrange for a last minute inspection or walk-through of the property to ensure that the property is in the same condition as it was when the contract was entered into by the parties.

After the transfer is registered, you may now be said to be the owner of the property with or without a mortgage. The time for completion of the first three stages is usually fixed at 90 days. If the transaction or conveyance is a cash sale, it is customary to allow 60 days for completion.

At this point in the sale process, the buyer’s attorney will have prepared letters addressed to the various utilities and land tax office regarding the transfer and for the various utilities to register or commence service in the name of the buyer, now owner. Care must be taken that final utility readings are done on or as soon as possible after the execution of the transfer. Failure by the vendor or seller to do this could result in being billed for use or consumption by the new owner.



Post-Completion or Closing-Stage 5

The buyer’s attorney ensures that the transfer is completed and the duplicate certificate of title is accurate. Further, the title reflects the discharge of any prior mortgage(s) and the accuracy of any new indebtedness or mortgage. After inspection, the owner is given his certificate of title or a certified copy of the title if the lending institution kept the original certificate of title. The post-completion process should take less than 3 months.

Conclusion:

Conveyancing in Jamaica is attorney driven. Although the process appears to be simple it can be quite intimidating because of the large amount of paperwork involved. Standardized contracts do not exist so you must be prepared to negotiate and draft a satisfactory contract. The time for completion of the sale is usually set at 90 days if a mortgaged is involved. The time limit for the completion of a cash based deal is usually set at 60 days
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