The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The 2013 Stamp Tax amendments appear to eliminate a key concern for the real estate industry by making it clear that mortgage and conveyancing values will not be combined to disqualify first-time buyers from getting the duty exemption.

The Stamp (Amendment) Bill 2013, a copy of which has been seen by Tribune Business, says first-time buyer applicants would not receive the exemption “where in the case of a mortgage or conveyance instrument, the total value of the transaction(s) exceeds $500,000”.

That appears to clarify a key source of confusion for both first-time buyers, and their realtor and attorney advisers, given the past tendency of the Treasury to add mortgage and conveyancing values together.

This resulted in many failing to qualify for an exemption that could, at the top end, be worth a total $50,000. However, the amendment that introduces a new five-year exemption until 2018 appears to eliminate such a possibility, through the language ‘mortgage or conveyance’.

Tavares LaRoda, Arawak Homes’ in-house counsel, told Tribune Business yesterday that he felt the issue had already been “resolved” under the existing first-time buyer exemption.

The Government, based on his experience, had clarified the situation via regulation and policy, and he added: “The situation was resolved.

“People are getting the exemption for property purchases up to $500,000, even when secured by a mortgage. The reality is the applications are going through.”

Acknowledging that attorneys often interpreted the same piece of legislation differently, Mr LaRoda said the key on the first-time buyer exemption was whether the intent of Parliament was being followed, and if it was being carried out “on the ground”.

The 2013-2018 first-time buyer Stamp Duty amendments also introduce two new requirements for getting the exemption: Proof of Bahamian citizenship, and that “the value of the property and dwelling house” where the applicant must reside - for a minimum nine months per year - is $500,000 or less.

Mr LaRoda added that the Bill also expands the exemption net to triplexes and places with more than one unit, although the applicant must live in one of those.

The new Bill includes the language “a single family dwelling house, a condominium unit and the portion of an apartment building on which the owner resides”.

Mr LaRoda was also joined by realtor Mike Lightbourn, head of Coldwell Banker Lightbourn realty, in calling for only qualified applicants to obtain the exemption.

Mr Lightbourn called for the Government to apply “stronger” penalties against applicants who swore false affidavits, claiming it was their first purchase when they were already property owners.

Stating that he personally knew of such episodes, Mr Lightbourn said: “They should make it stronger . If someone does that, they should prosecute them, not just refuse it.”

The Coldwell Banker chief added that if the Government felt it was losing too much revenue as a result of the first-time buyer Stamp Duty exemption, it should lower the $500,000 threshold.

Suggesting that $350,000 “would have been a good number”, Mr Lightbourn said: “They’re the Government of the day and have to make that decision. It’s better to have it at $400,000 and make it known that if you’re a first-time buyer, at $400,000 or less, you get the exemption.”

Mr LaRoda agreed that the Government was “not giving up $1 or $2 in taxes” through the exemption, so it needed to ensure only those entitled to qualify did so.

Prior difficulties have revolve around uncertainty over whether applicants will be approved for the exemption, resulting in commercial banks and other lenders stipulating that buyers place a sum equivalent to the potential Stamp Duty payment into escrow.

This not only slows the mortgage approval/real estate transaction down, but potentially places the property beyond the buyer’s reach if they have to raise the Stamp Duty payment, too.

And, as Tribune Business previously revealed, there is the confusion being caused by the Treasury’s practice of adding the mortgage value to the conveyancing value - a tactic that often pushes a first-time buyer transaction beyond the $500,000 qualifying cut-off.

Both the Bahamas Real Estate Association (BREA) and the Bahamas Bar Association’s real estate committee are working on recommendations, set to be presented to the Government shortly, on plans to make the first-time buyer exemption process work more rapidly and efficiently.