Acquiring Property in Bermuda

Acquiring Property in

Bermuda

ACQUIRING PROPERTY IN BERMUDA

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Preface

This publication has been prepared for the assistance of anyone who wishes to acquire residential

property in Bermuda. It deals in broad terms with the requirements of Bermuda law and, where

applicable, the policies of the Bermuda Government. It is not intended to be exhaustive but merely to

provide general information to our clients and their professional advisers. In particular, it is not intended

to deal with acquisitions by non-Bermudians married to Bermudians, non-Bermudians acquiring

property for their Bermudian children or grandchildren or by corporations since, in each case, special

rules apply.

We recommend that our clients seek legal advice in Bermuda on their specific proposals before taking

any steps to implement them.

Conyers Dill & Pearman

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TABLE OF CONTENTS

ABOUT BERMUDA 4

ACQUIRING PROPERTY 4

LICENCE TO ACQUIRE PROPERTY 4

LICENCE FEE 5

ACQUISITION OF A HOUSE 5

ACQUISITION OF APARTMENTS OR CONDOMINIUMS 6

ACQUISITION OF TOURIST ACCOMMODATION OR HOTEL RESIDENCES 6

ACQUISITION OF UNDEVELOPED LAND 7

LETTING OF PROPERTY 7

ACQUISITION BY WAY OF INHERITANCE, VOLUNTARY CONVEYANCE ETC. 7

TITLE TO PROPERTY 7

TAXES 7

CONCLUSION 8

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ABOUT BERMUDA

A solitary outpost of beauty and civility in the mid-north-Atlantic, Bermuda enjoys a delightful sub-

tropical climate entirely incongruous with its northerly latitude. The proximity of the Gulf Stream

accounts for the mild temperatures which, combined with fertile soil, have produced a verdant island,

ablaze with the colours of ever-present flowers and shrubs.

Abundant natural beauty has been equally matched by astonishing economic success so that Bermuda

can also boast a highly educated and professional work-force, backed by a sophisticated infrastructure

of support services, which have combined to transform what was once merely an idyllic holiday retreat

into a dynamic centre for international offshore business.

First settled in 1609, Bermuda has its own democratically elected Parliament dating from 1620, the

oldest in the British Commonwealth outside the United Kingdom. As Britain’s oldest existing colony,

Bermuda has close ties with the United Kingdom which is responsible for the foreign and defence

affairs of the island and provides a valuable frame of reference for the local legal system. While the

latter is independent, English cases are of strong persuasive authority before the Bermuda Courts and,

indeed, final appeal lies to the Judicial Committee of the Privy Council.

The eastern seaboard of the United States is two hours flying time from Bermuda with daily flights to

major cities. There are flights to London of approximately seven hours’ duration most days each week.

Ease of access is complemented by efficiency and comfort on arrival. First rate hotels and restaurants

and easily available water and land sports afford enjoyment and relaxation to the visiting business

people already attracted by the exceptional communications and commercial expertise of the Island.

ACQUIRING PROPERTY

The Islands of Bermuda comprise an area of approximately 24 square miles, measuring some 21 miles

in length with an approximate maximum width of 1 mile. The physical constraints on residential

property will therefore be apparent and the stated intention of the relevant legislation is to preserve the

majority of the housing stock and undeveloped residential land for Bermudian ownership. However, the

Government recognises that there is a limited Bermudian market for the higher priced properties and it

is these properties, together with others that are linked to hotel developments, that may be acquired by

non-Bermudians for their private residential use.

LICENCE TO ACQUIRE PROPERTY

A non-Bermudian wishing to acquire property in Bermuda must obtain a licence from the Minister

responsible for Immigration. Applicants must complete the prescribed form and are required to supply

a banker’s reference and two personal references from people who have known them for at least three

years. The referees need not be Bermudian, although this is preferable. Evidence must also be given

to show that Bermudians have been given a fair opportunity to acquire the property. Copies of

advertisements appearing in local newspapers are currently satisfactory evidence.

A licence, when granted, will contain a number of conditions including:

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that the property is used for the private residential use of the licence holder and his

household only;

that the property shall not be developed or altered in such a way so as to add to the

number of potential dwelling units;

that the property may only be rented out or used for profit in accordance with the specific

permission of the Minister (Note: this restriction does not apply to licences to hold hotel

residences or tourist accommodation or any licences granted to non-Bermudians who

have Permanent Resident’s Certificates);

that the property may not be subdivided and its boundaries may not be changed; and

if the licence holder holds (whether directly or indirectly) more than one other property in

Bermuda then he must, within 12 months of the date of approval of the new licence (or

such period not exceeding three years as the Minister may allow), divest himself of such

other property.

LICENCE FEE

The fees for the grant of a licence issued by the Minister responsible for Immigration to a non-

Bermudian to acquire property in Bermuda are currently:

• Purchase of a freehold house – 12.5% of the value of the property

• Purchase of a leasehold condo - 8% of the value of the property

• Purchase of tourist accommodation or hotel residence with election to keep for private use - 6.5% of

the value of the property or interest

• Purchase of tourist accommodation or hotel residence with election to place in hotel inventory - 0%

of the value of the property or interest

• Purchase of either a freehold house or a leasehold condo by a permanent resident’s certificate

holder – 6% of the value of the property

• Purchase of any other type of land not mentioned above however acquired - 5% of the value of the

property or interest

ACQUISITION OF A HOUSE

In order for a freehold house to qualify for purchase by a non-Bermudian (other than one with a

Permanent Resident’s Certificate), it must have an Annual Rental Value (“A.R.V.”) at least equivalent to

the minimum established by the Government from time to time. Currently the minimum A.R.V. is set at

$126,000.00, ensuring that only the higher valued properties are available for non-Bermudian

purchase. (It should be noted that the A.R.V. is established by the Land Valuation Office from time to

time and the amount of Land Tax payable is calculated as a percentage of the A.R.V; the A.R.V. is a

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notional value and does not indicate the amount of rent a property would achieve if let on the open

market).

Further restrictions exist to prohibit non-Bermudians from acquiring multi-unit dwellings, except those

which are already owned by non-Bermudians and subject to one of the units having an A.R.V. of, or in

excess of, $126,000.00. Non-Bermudians are not permitted to own more than two residential

properties (whether a house, apartment or condominium) at any one time, with the only exception being

that a non-Bermudian will be permitted to purchase a third property on condition that the individual

disposes of the original property within twelve months (or such longer period up to a maximum of three

years as the Minister may approve) of the issuance of the licence for the third property.

In general, non-Bermudians will not be allowed to sub-divide land and will be required to sell the

property as a whole single unit. An exception may be made where the property has more than one

dwelling and the sub-division would result in the non-Bermudian retaining a dwelling with an A.R.V. in

excess of the minimum and the portion divided for sale being sold to a Bermudian.

ACQUISITION OF APARTMENTS OR CONDOMINIUMS

Apartments and condominiums (other than those referred to in section 7 below) are only available for

purchase by certain categories of non-Bermudians, being Permanent Resident Certificate holders,

holders of residential certificates and individuals with a close Bermuda “nexus” (such as the non-

Bermudian parent or child of a Bermudian). The minimum A.R.V for such persons without a Bermuda

“nexus” is $25,800. There is no minimum for those with a Bermuda “nexus”

ACQUISITION OF TOURIST ACCOMMODATION OR HOTEL RESIDENCES

A non-Bermudian may be permitted to acquire a “hotel residence” which is property intended for private

residential use that was constructed as part of a hotel development.

A non-Bermudian may also be permitted to acquire tourist accommodation. Tourist accommodation is

accommodation within the grounds of a hotel such as a hotel room or suite or fractionally owned unit.

Where the non-Bermudian is an individual, the tourist accommodation may only be occupied by the

licence holder, his family and guests who are staying with him or his family or, if the tourist

accommodation is being managed by a property management company, paying transient guests.

Where the non-Bermudian is an exempted company, the tourist accommodation may only be occupied

by a tenant pursuant to a rental agreement which has been approved by Government, to a paying

transient guest if the tourist accommodation is being managed by a property management company, or

a transient guest with the permission of the exempted company.

In the case of fractionally owned tourist accommodation, licence holders must agree on a defined

reservation schedule for use of the unit during the year.

An application for a licence to acquire or hold tourist accommodation or a hotel residence must include

an election as to whether the applicant will place the accommodation or residence in the hotel inventory

or keep the accommodation or residence for his private use including, in the case of a hotel residence,

renting it out privately. The land-holding charge will be calculated according to this election (0% where

the accommodation is placed in the hotel inventory and otherwise 6.5%). If, following an election to put

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the accommodation or residence in the hotel inventory, the applicant wishes to keep it for private use

only, the Minister must be notified and the applicant will be required to pay the licence fee at the rate

applicable for private use.

ACQUISITION OF UNDEVELOPED LAND

Save in limited circumstances (generally where the non-Bermudian has a Bermudian nexus

(Bermudian spouse/parent/child) the sale of undeveloped residential land to non-Bermudians is

prohibited.

LETTING OF PROPERTY

A non-Bermudian (other than one who holds a Permanent Resident’s Certificate who may let without

restriction) who owns a house or a condominium must obtain the permission of the Minister responsible

for Immigration in order to let the same. Permission will seldom, if ever, be granted for a period in

excess of twelve months in the first instance and renewal of permission will be considered on its merits

at the time. Further, permission will not normally be given if the owner intends to reside in Bermuda

during the rental period. A Government tax (currently 7.25% of the rent paid or $72.50 whichever is

greater) will be payable for the permission.

A non-Bermudian who owns tourist accommodation may rent it to paying transient guests provided that

this is done by placing it in the hotel inventory.

ACQUISITION BY WAY OF INHERITANCE, VOLUNTARY CONVEYANCE ETC.

Generally a non-Bermudian will not be granted a licence to hold real estate in Bermuda as a result of

voluntary conveyance, deed of gift, devise, inheritance, purchase, lease in excess of five years or any

other means of acquisition unless the property is one that is available for purchase by non-Bermudians

(i.e. is over the requisite A.R.V.). However, special rules apply in the case of non-Bermudian spouses

where the property is owned by the other spouse and non-Bermudian children of a Bermudian where

the property is owned by the Bermudian parent.

TITLE TO PROPERTY

Generally a non-Bermudian who is granted a licence to acquire property in Bermuda will be required,

under the terms of that licence, to hold the property in his individual name and will not be permitted to

hold title through a company or a trust. This is intended to prevent property from remaining in non-

Bermudian ownership indefinitely. A limited exception exists whereby a property may be held in a trust

for a limited time period not exceeding the life of the named beneficiary or surviving beneficiary where

there is more than one. An application for a licence permitting such ownership structure will be

considered on a case by case basis.

TAXES

There is no income or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or

inheritance tax payable by persons ordinarily resident in Bermuda. As previously mentioned, Land Tax

is payable by a property owner and is calculated as a percentage of the A.R.V. Certain deeds, for

example, conveyances of freehold and leasehold property and mortgages, attract ad valorem stamp

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duty. Further, ad valorem stamp duty is payable on the Affidavit of Value of the estate of a person who

dies owning property in Bermuda, but only upon the value of the Bermuda asset.

CONCLUSION

This publication is intended to cover the general aspects of acquiring property in Bermuda. For further

clarification or more detailed information please contact our Real Property Department.

This publication should not be construed as legal advice and is not intended to be relied upon in relation to any

specific matter. It deals in broad terms only and is intended merely to provide a brief overview and give general

information.