The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Attorneys were yesterday warned to “be on your toes more” to protect clients involved in real estate deals, after the Government unveiled a policy initiative designed to maximise property tax revenues.

The Christie Cabinet has announced that taking effect this Friday, all real estate conveyancings and deeds brought to the Registrar General’s Department for recording must produce a Tax Certificate showing “the current tax status” of the subject property.

The certification, which must be signed by the Inland Revenue Department’s chief valuation officer, seems designed to ensure the Government collects all outstanding real property taxes - using a property’s ‘point of sale’ as the leverage to obtain them.

Although the Government’s notice does not explicitly say so, it appears likely that deeds for properties where real property tax is owed will not be lodged, or recorded, until the outstanding amount is paid.

This, in turn, could expose real estate purchasers and their lenders (chiefly banks) to a lengthier period of risk, as the transaction - and any mortgage liens secured on it - may not be recorded immediately.

Andrew O’Brien, a Glinton, Sweeting & O’Brien law firm partner, told Tribune Business that the Government’s new policy might make completion of real estate transactions “more cumbersome”.

Yet he acknowledged, and accepted, the need for the Government to collect what is due to it, and said the move would force attorneys and other professionals involved in real estate deals to “pay more attention” to property taxes.

“It makes the process more cumbersome, but if it gets people paying real property taxes, I understand the Government’s position,” Mr O’Brien told Tribune Business.

“My only complaint is that I wish we had more notice. This takes effect on January 2, and I wish they would have announced this a month, two months ago.”

The Government notice announcing the policy change, signed by the Registrar General and chief valuation officer, is dated December 12, 2014, but only first appeared in the newspapers the week before Christmas.

Mr O’Brien suggested the move might, in its initial stages, delay the recording of conveyances for transactions where the parties had agreed to settle any outstanding real property taxes via the purchase price.

Further issues, he added, “may arise” if the Inland Revenue Department disputed the real property tax value assigned to the subject real estate, placing “persons at risk for a longer period of time.

“I can see people delaying recording because of real property tax issues, but I understand the Government’s position,” said Mr O’Brien, a former chair of the Bahamas Bar Association’s real estate committee.

“The banks and the Bar will be more exposed, but in time will quickly catch up to this. It will require us to be more diligent in the review process.

“It’s not a major inconvenience, but it means we have to be on our toes more, and will have one more item we have to pay attention to at an earlier stage of the transaction.”

Mr O’Brien suggested the Government’s policy initiative was another sign of the fiscal times.

With the Christie administration increasingly desperate for revenue to plug the fiscal deficit and reduce the national debt, it is introducing numerous ‘first world’ type measures to maximise government income.

The ‘deeds recording’ measure is thus the latest in a series of ‘checks and balances’ the Government is implementing to ensure it maximises all revenue streams.

To obtain certain permits and licences, and be able to record real estate conveyancings, the Government is increasingly requiring individuals and companies to provide proof they are fully compliant with their taxes.

“It seems like the world is closing in to a certain degree with checks and balances,” Mr O’Brien told Tribune Business. “We’re all going to have to be better accountants in the future, which will probably improve our business practices, but not without some pain and moaning.”

Previous estimates have suggested that the Government is owed some $550 million in outstanding real property taxes.

However, Michael Halkitis, minister of state for finance, recently indicated this figure will likely be revised downwards, although it is unclear whether this will be the total amount outstanding or what is deemed realistically collectible.