The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank's governor yesterday revealed two reforms designed to reduce the 'red tape' that has dramatically slowed approvals for real estate deals involving foreign investors.

John Rolle, responding to Tribune Business's inquiries, said the regulator's exchange control department will require "less documents" for a process that Bahamian attorneys say is threatening to undermine investor confidence in this nation.

The Governor identified two specific steps set to "take current effect", with the Central Bank "ceasing" its demand for proof that title has been recorded via the transaction being entered into the Registry of Records.

And it will also halt its demand for foreign-owned corporate entities, which are selling/purchasing Bahamian real estate, to provide Board approvals and resolutions relating to the deal. "We are introducing two changes taking current effect," Mr Rolle told Tribune Business via e-mail. "Proof of recording of title is being ceased. Evidence of corporate Board approvals or resolutions is also being ceased as a requirement for non-commercial transactions."

The Governor said this would result in "less required documents for property transactions", but added that real estate deals should only be submitted to the Central Bank "at the point of official completion of the transaction; that is after it has been presented to the Public Treasury for stamping".

Mr Rolle's comments were cautiously welcomed last night by Bahamian attorneys specialising in property law and conveyancing. One, speaking on condition of anonymity, said of the reforms: "That's helpful. That's a good start. Many of these issues are pressing and difficult to deal with."

They refrained from further comment, saying they wanted to assess how Mr Rolle's comments would work in conjunction with the latest round of exchange control liberalisations announced earlier this week.

And they also wanted to see how exchange control applied these changes in practice, adding that it was the department's daily operations that have been "crippling" the processing of real estate transactions.

However, the Governor's announcements appear to deal with two key contentions for foreign investors and their attorneys. The requirement for a conveyance that has been lodged with the Registry of Records, and proof this has been done, was adding four to six weeks to the Central Bank approval process. This has now been eliminated.

And removal of the requirement for Board minutes and resolutions also ends another aspect contributing to delayed approvals, with clients and attorneys viewing this as unnecessary and possibly beyond the remit of the Exchange Control Regulations Act.

Tribune Business revealed yesterday the warnings of attorneys that the Bahamas is "shooting ourselves in the foot" through foreign investor real estate transactions becoming mired in increasing bureaucracy/red tape.

This is subjecting such deals to multi-month delays, and causing "uncertainty and anxiety" among the foreign investor community that drives the Bahamian economy, with many "wanting to get out" of this nation.

Several attorneys spoken to by this newspaper said the situation was undermining the very underpinning of foreign investor confidence in the Bahamas, which is their ability to monetise real estate investments, and get their money out quickly and securely.

Mr Rolle yesterday pushed back against some of the criticism, saying: "The public commentary is static and looking into the past."

He added that the Central Bank had informed both the Government's 'ease of doing business' committee, and the private sector via the Chamber of Commerce, that it is "taking a forward-looking approach to reforms to streamline exchange control processes".

Mr Rolle said the Central Bank had also moved to streamline the approvals process itself, having persuaded the Ministry of Finance to end enhanced "vetting" of real estate transactions involving foreign investors to ensure the appropriate Stamp Duty was paid.

"By way of background, the Bank introduced some additional vetting around Stamp Tax compliance on request of assistance from the Ministry of Finance," he revealed.

"We are discontinuing this practice given the absence of evidence around its effectiveness, and the compliance focus that was too narrow on just foreign real estate transactions. We have advised the Ministry that a more comprehensive approach would also promote revenue compliance on domestic real estate transactions."

The Governor, though, warned transaction participants and their attorneys that the Central Bank will no longer accept incomplete applications for exchange control approvals.

"We have signalled to our industry stakeholders that we will no longer receive piecemeal applications for real estate approvals, as it creates the false impression that the application was delayed when, in fact, the timer starts when the completed documentation is received," Mr Rolle told Tribune Business.

"The Bank uses an electronic queuing, which keeps requests at the back of the line until all information was received. This is fair to persons who submit fully completed applications."

Adrian White, head of the Bahamas Bar Association's real estate committee, yesterday said the Central Bank's increased requirements were impacting the Bahamas' competitiveness, ability to attract foreign direct investment (FDI) and prospects for improving its 'ease of doing business' rankings.

Backing the previously-expressed views of other attorneys, he told Tribune Business: "I can't see how we're going to improve in the ease of doing business with the existing exchange control regime, and the time taken to complete these post-transaction.

"It's going to make, and has made, things more cumbersome and difficult to complete in a timely manner when we're trying to compete with other jurisdictions and trying to move up the ladder in the ease of doing business.

"Certainly, the way the Central Bank is doing it is making things more difficult than they have historically been, and I think there should be some type of feedback from the Central Bank and exchange control on why these changes happened and provide further discussion with the Bar's real estate committee and member of the real estate industry on what can be done so that we remain competitive with the outside world."

Tribune Business understands that another key issue revolves around the Approved Investment Status granted to foreign investors, and how the Central Bank has changed processes and procedures in this area.

When it came to Bahamians purchasing from foreigners, the Central Bank has traditionally given exchange control approval in advance of the sale. However, it is now requiring that a stamped copy of the conveyance first be produced, adding a four-six week delay on something that is outside the foreign vendor's control.

As for deals involving foreign vendors and buyers, foreign currency sales proceeds have traditionally been remitted without prior approval provided the purchaser then seeks Approved Investment Status.

Tribune Business, though, has been informed that the Central Bank is now requiring the vendor to seek approval to receive these monies which, in turn, is conditioned on the purchaser gaining their approvals - again adding weeks to a deal's closing.