The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Realtors yesterday hailed as “awesome” the Central Bank’s proposal to relax exchange controls on residential property deals involving foreign buyers and sellers with effect from October 1.

The regulator, in a four-page document outlining its liberalisation rationale, admitted that the current requirement to obtain Central Bank exchange control approval for such transactions involving expatriates had created “a very regimented process”.

Under the proposed changes, foreshadowed this summer by governor John Rolle, no applications to the Central Bank for approval of “any aspect” of residential real estate deals will be required.

Foreign purchasers would automatically inherit “approved investment status” on completion of such transactions, with the sale of shares in companies that hold real estate also enjoying the exemption from exchange control approvals.

While foreign real estate developers will still need to obtain exchange control approvals at the initial stages of their projects, subsequent sales of subdivided units or constructed homes will also be free from such requirements.

The Central Bank is planning to delegate the authority to convert Bahamian dollar proceeds from real estate sales to foreign currency, ahead of their repatriation to the foreign seller, to the Bahamian commercial banks once evidence is supplied that the vendor is non-resident.

“This reform departs from current policy, which requires Central Bank approvals on any real estate transaction involving non-residents, and for the conversion out of Bahamian dollar proceeds on sales by non-resident to residents,” the Central Bank said.

“It extends the process of gradual liberalisation, improve[s] administrative processes and relaxes controls in ways that still preserve the sustainability of the Bahamian dollar fixed exchange rate.”

And it added: “Under the amended framework, no application would be required to the Central Bank for any aspect of the residential real estate transaction involving a non-resident as either vendor or purchaser. Additionally, the “approved investment status” would be automatically acquired by the purchaser on the execution of the transaction.”

Realtors, attorneys and other professionals involved in the Bahamian real estate industry have long called for such changes on the basis that exchange control “red tape” had dramatically slowed approvals for real estate deals involving foreigners, and was threatening to undermine investor confidence in this nation.

Several realtors yesterday said they and attorneys had “caught hell” and been “cussed out” by expatriate clients, especially sellers, who had become increasingly anxious as to whether they would receive their sales proceeds due to delays associated with Central Bank exchange control approvals.

Mike Lightbourn, Coldwell Banker Lightbourn Realty’s president, told Tribune Business that the Central Bank proposal “sounds wonderful” provided it translates from theory into on-ground reality.

“That’s a big deal. On the surface it sounds really wonderful if red tape has been eliminated,” he said. “It sometimes takes three to four months to be able to repatriate sales proceeds, and the sellers - who live in the US or elsewhere - often feel that the lawyers are deliberately delaying the process or have stolen the money.

“It’s nothing to do with the lawyers, and is not their fault. They’re simply waiting for exchange control permission. Lawyers have caught hell. I just hope they don’t find some way to frig this up with red tape. It’s long overdue; it should have been done some years ago, but better late than never.”

John Christie, HG Christie’s president, was equally enthusiastic in describing the Central Bank’s move as “perfect”. He told Tribune Business yesterday: “I think that’s awesome. It’s good news.

“It just cuts the bureaucracy. We’ve had red tape getting money out of the Central Bank, which has held closings up. It’s just bureaucratic people in the Central Bank and it’s causing a lot of frustration.

“We have foreign sellers who have finally sold their properties after having them on the market for a year or two, and they can’t get their money. They then get mad at the lawyers and ask why it’s taking so long. It’s frustrating. It’s just rigmarole for no reason. It holds it up for two weeks, three weeks, one month because some bureaucrat in the Central Bank is playing power games.”

Mr Christie added that the Central Bank’s reforms were needed now more than ever because of Hurricane Dorian, and that they promised to “speed up” real estate transactions involving expatriate investors and make them easier “just like a real country and how any business should be done”.

However, Mr Lightbourn felt the success of the Central Bank’s proposal depended on the co-operation of commercial banks when it came to processing currency conversions to repatriate proceeds to overseas sellers.

“The only issue I see here is the banks,” he said. “The banks hold the key here. Maybe there are some government issues that could come into play. I don’t see that there are, but maybe I’m not thinking straight.”

Tribune Business first revealed complaints in early 2018 that the requirement for a conveyance that has been lodged with the Registry of Records, and proof this has been done as confirmation of sale, was adding four to six weeks to the Central Bank approval process.

And the requirement for board minutes and resolutions if companies were involved in the real estate ownership structure was also said to have been contributing to delayed approvals, with clients and attorneys viewing this as unnecessary and possibly beyond the remit of the Exchange Control Regulations Act.

Mr Rolle, the Central Bank’s governor, responded then by saying it was “ceasing” its demand for proof that title has been recorded via the transaction being entered into the Registry of Records as well as the request for foreign-owned corporate entities, which are selling/purchasing Bahamian real estate, to provide Board approvals and resolutions relating to the deal.

The reforms now unveiled by the Central Bank represent a further step in its phased exchange control liberalisation process, and dovetail with the government’s wider efforts to improve the “ease of doing business” and make The Bahamas more attractive to investors.

The Central Bank, in its discussion paper, said the move posed no threat to The Bahamas’ balance of payments or the one:one exchange rate peg with the US dollar. “

“The potential for unmanageable capital (foreign exchange) outflows on liquidated real estate does not arise in any material sense, nor would it hamper the ultimate ability of the Central Bank to comprehensively monitor foreign real estate transactions for statistical and policy making purposes,” it added.

“It is anticipated that there will be net inflows of capital into The Bahamas, and no materially plausible scenario where resident investors could finance a large divestiture flow by non-residents.”

The Central Bank added that foreign buyers and sellers will still need to obtain all other relevant government approvals, including those from the Investments Board (International Persons Landholding Act) and those stipulated by the Companies and International Business Companies (IBCs) Acts.