The Jamaican Home Buying Process – the legal perspective
Once you have decided to purchase real estate, you will need to secure the services of an Attorney-at-Law. Your Attorney will protect your interest before and during the transaction and it is most unwise to purchase real estate without an Attorney on your team. Choosing an Attorney is a process that requires your good judgment. You should ensure that he or she has substantial experience in real estate transactions. Your Attorney will liaise with the other party’s Attorney on your behalf and a pre-transaction conference with your Attorney is desirable, so that you can hammer out all the terms you want to govern the transaction and obtain the full guidance of your Attorney.
The legal process of buying real estate has two aspects – signing the Agreement for Sale and signing the Instrument of Transfer. The cost of preparing the Agreement will normally be shared equally between Vendor and Purchaser.
The Agreement for Sale contains all the business aspects of the transaction, that is the terms and conditions agreed between Vendor and Purchaser as regards the monetary aspects of the transactions and other specific conditions regarding, for example, who will bear the risk of the property pending completion. This last aspect bears some elaboration. If the property is being purchased at the height of the hurricane season, then the Purchaser may want to have the Vendor bear the risk pending completion, so that any hurricane damage would be the Vendor’s expense.
So the Agreement will contain, among other things, provisions regarding the purchase price, how the same is payable, a description of the property as contained in the Certificate of Title, whether you will take possession at the completion of the transaction or whether the Vendor will agree to early possession, subject to a probable nominal interest charge, depending on the circumstances. This is the stage of the transaction where your Attorney will try to obtain the best possible terms for your purchase.
The Agreement for Sale will also cover the matter of taxes and fees involved. On one hand, the property taxes payable on the property being sold will usually be pro-rated as of the date of completion. On the other hand, most Agreements will provide that the Stamp Duty (approximately 5.5.% of the purchase price ) will be shared equally between the Vendor and Purchaser.
The Transfer Tax, that is the tax on the capital gain earned by the Vendor on sale of the premises is payable exclusively by the Vendor at a rate of 7.5% of the purchase price. The Registration Fee, that is the fee payable for the Purchaser’s name to be endorsed on the Certificate of Title is normally shared equally between Vendor and Purchaser and is normally 0.5% of the purchase price.
When the Purchaser signs the Agreement for Sale, he or she will pay approximately fifteen percent of the purchase price plus half the cost of the Agreement for Sale. It is unwise for a Purchaser to pay over money to the Vendor prior to the signing of the Agreement for Sale, because among other things, it may become difficult to determine the commercial purpose of the payment at a later date. One copy of the Agreement will be returned to the Vendor’s Attorney for signing after which your Attorney will keep a copy of the binding Agreement on your behalf.
The Agreement for Sale will contain the date for completion of the transaction, normally ninety to one hundred and twenty days from the date of signing. During this period, the Purchaser normally finalizes all documents and requirements of the mortgage company if purchasing with a mortgage. If the Purchaser purchases by cash, he or she will at this stage enable his or her Attorney to give the Vendor’s Attorney an undertaking, that is, a legally binding guarantee, for the balance of the purchase price plus costs of the transaction.
Once all the business aspects are completed, the Instrument of Transfer is signed. This is the document that conveys ownership of the land from the Vendor to the Purchaser and is oftentimes witnessed by each party’s Attorney-at-Law.
Your Attorney will charge as his or her fee for guiding your hand and protecting your interest at a rate of 3% to 5% of the purchase price of the transaction. This amount is payable on completion of the transaction.
To get the most from your Attorney, ensure that you understand the process so that you can pose relevant questions at each stage of the transaction.
An informed client is a satisfied client.
- Originally published & written for the Jamaica Real Estate Guide by: Annette Johnson, Attorney-At-Law.