The Foreign Investment Act, Trinidad & Tobago

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The Foreign Investment Act, Trinidad & Tobago

In Trinidad, the Foreign Investment Act, 1990 relaxed the restrictions on the foreign

ownership of real estate by foreign investors and improved the conditions for investment.However, in Tobago, the Foreign Investment (Tobago Land Acquisition) Order, 2007

places some new restrictions on the foreign ownership of real estate.

In this Chapter, Tiffanny Castillo, Senior Associate in the Property & Estates Groupgives an overview of the following:

The provisions in the legislation which permits a foreign investor to acquire landfor residential and commercial purposes in Trinidad;

The provisions in the legislation which permits a foreign investor to acquire landfor residential and commercial purposes in Tobago;

Agreements for Sale of Property;

The two land title systems governing the ownership of land in Trinidad &Tobago;

The new system of land title which the Government proposes to bring into forceand the process by which land is transferred under this new system;

The procedure involved to transfer real estate;

Transfer taxes which vary depending on the nature of the transfer and thepurchase consideration;

The new Property Tax Regime; and

The requirements for land use and development.

Acquisition of Real Estate In Trinidad

Generally, the Foreign Investment Act, 1990 (sections 6 & 7) allows foreign investors inTrinidad (including individuals and companies) to purchase:

up to one (1) acre of land for residential purposes; and

up to five (5) acres for commercial purposes.

The Foreign Investment Act 1990 (Chapter 70:07) is available for download at thewebsite of the Ministry of Legal Affairs athttp://rgd.legalaffairs.gov.tt/Laws2/Chs._69-73/70.07/70.07_aos.htm.

The purchase price for the acquisition by the foreign investor must be paid in aninternationally traded currency through a bank or other entity authorized by law as adealer in that currency. One exception is in the case of a company incorporated inTrinidad and Tobago where such consideration is financed out of capital reserves or
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retained earnings.

Additionally, the foreigner must, through his Attorney/Agent, deliver to the Minister ofFinance, a Notice specifying inter alia:

his name;

address;

nationality and any former nationality;

purpose for which the property is acquired;

name and address of Vendor;

the date and registration particulars of the deed and/or instrument by which hebecame the owner of the property; and

evidence of his payment in foreign currency.

It is also noted that the Minister of Finance may by Order prescribe areas in Trinidad inwhich a foreign investor may not acquire land without obtaining a licence: section 6(2) ofthe Foreign Investment Act, 1990. However, no areas in Trinidad have yet beenidentified.

Foreigners may exercise the option to lease property or buy freehold title.

Under the Foreign Investment Act, 1990 (section 8) land may be acquired by a foreigninvestor in Trinidad without a licence:

on an annual tenancy or for any less interest for the purposes of his residence, trade or

business but not exceeding five (5) acres of land in all;

under an intestacy, or as a beneficiary or as an executor under a will, for a period of one(1) year from the date of the death of the testator or intestate, or for such extended time asthe President may grant;

in pursuance of his rights to foreclose or enter into possession as a mortgagee for aperiod of one (1) year from the acquisition of such land or for such extended time as thePresident may grant;

as a judgment creditor for a period of one (1) year from the date of his acquisition of theland or for such extended time as the President may grant; and

jointly with his spouse, where that spouse is a citizen of a Caricom member country whois resident in Trinidad and Tobago within the meaning of section 5 of the ImmigrationAct, Chapter 18:01.

Mortgages are given primarily upon satisfactory evidence as to the value of the propertyand the fact that the title to the property is free from all encumbrances.


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If a foreign investor wishes to purchase land in excess of the stipulated acreages, he mustapply for a licence from the President of the country in order to do so.

This application must indicate inter alia the proposed land use and must comply with thecontrols and restrictions of the relevant planning and environmental authorities. Theapplication form for a Licence is available for download from the website of the Ministryof Finance at http://www.finance.gov.tt- Application Form to Hold Interest in Propertyunder the Foreign Investment Act, 1990.

Acquisition of Real Estate in Tobago

All foreign investors desirous of purchasing any land in Tobago are required to obtain alicence effective February 16, 2007 and pursuant to The Foreign Investment (TobagoLand Acquisition) Order, 2007. However, since the Order has come into effect, nolicences have been issued for the purchase of property by a foreign investor in Tobago.

In the 2009/2010 Budget, the Government indicated the need to spur foreign investment

economic activity in Tobago. The Government held extensive discussions with theTobago House of Assembly and other stakeholders with a view to inter alia:

protecting the land ownership rights of nationals of Trinidad and Tobago; and

reducing the processing time for the grant of licences.

Six regions on the island of Tobago were designated as tourism-related developmentareas:

Arnos Vale and Culloden Estate;

Bacolet Estate;

Buccoo and Golden Grove Estate;

Englishmans Bay;

Lowlands (including the Tobago Plantations Development) and DiamondEstate; and

Mount Irvine and Grafton Estate.

Currently, the application process is lengthy and the Government has proposed that therequirements contained in the application form be reduced. It has also been proposed that

foreign investors be granted conditional licences on satisfaction of predetermined criteriawhile awaiting regulatory approvals which will enable them to commence construction.

Agreements for Sale of Property

In the case of an agreement for the sale of land, Trinidad & Tobago law prescribes that:

the agreement must be in writing; and
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duly signed by both parties (the Vendor and the Purchaser).

There is no fixed form of contract. An agreement for sale usually contains the following:

the property;

the price;

the parties must be identified;

the payment of a ten per cent (10%) deposit on the purchase price;

the balance of the purchase price in a certain period of time (normally ninety (90) days);and

the deposit to be forfeited by the Vendor if the Purchaser fails to complete the purchasewithin the stipulated time except where this is due to the Vendors default.

Where a real estate agent is employed to sell land on behalf of an owner, the agent oftenprepares the Agreement for Sale. It is advisable, however, that the Purchaser ensures thatthe agreement is approved by an Attorney before he signs it. Alternatively, the Attorneymay prepare the agreement. Where a real estate agent has been retained by the owner, acommission is payable by the owner amounting to three to five percent (3-5%) of thepurchase price.

Land Title Systems

There are two (2) systems of law under which land is held in Trinidad & Tobago:

The old law or common law system of conveyancing, and

the Torrens system of registered conveyancing or the Real Property Act Chapter 56:02(R.P.A.) system of conveyancing.

Old Law System

Most of the land in Trinidad & Tobago is still held under the old law system which isbased on the English common law as modified from time to time by statute such as, forexample, the Conveyancing and Law of Property Act Chapter 56:01.

This is the system of registration of deeds relating to the transfer of land. The originaldeeds are lodged at the Deeds Registry of the Registrar Generals Department. Searchesare conducted at the Registrar Generals Department to trace the Vendors title or

determine how the Vendor acquired ownership of the land or property being sold.

The Purchasers Attorney or his search clerk prepares an Abstract of Title whichconsists of:

a list of documents;

facts;


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events setting out the history of ownership of the property; and

all dealings with the property over a period of at least twenty (20) years.

The first document contained in the Abstract is called the root of title. Thereafter, forgood title to be constituted there must be, in chronological order, a chain of title that

continues from the root to the Vendor, free from all encumbrances and without any breakin the chain.

Title to property may be either freehold or leasehold. If the property is leasehold, the termof years can vary from periods of 25 years to 999 years.

R.P.A. System

The R.P.A. system is based on the Torrens System (after Sir Robert Torrens whoinvented it) which is used in Australia, New Zealand and several other countries whichhave adopted it. In Trinidad & Tobago, the R.P.A. system exists alongside the old lawsystem, and it is not uncommon to find one property consisting of lands held under both

systems.

All dealings with land or property under the R.P.A. system are endorsed on a documentcalled a Certificate of Title, the original of which is kept in the R.P.A. Registry of theRegistrar Generals Department, and the duplicate of which may be withdrawn from theRegistry and held by the owner of the property or by anyone else (e.g. a bank) who mayhave an interest in it.

Under the R.P.A. system, once a persons interest in property has been endorsed on theCertificate of Title, that interest is said to be indefeasible, that is, it is backed by a LandAssurance Fund against which any person who has been fraudulently deprived of his

interest in land can claim compensation and to the extent of any shortfall in the Fund. Theclaim is guaranteed by the Government of Trinidad & Tobago as a charge on theConsolidated Fund.

Proposed New Registered System

The Government has recently passed three pieces of legislation which it proposes to bringinto force in the future and which will revolutionise the system of registration of land inTrinidad and Tobago. These are:

the Land Adjudication Act, 2000;

the Registration of Titles to Land Act 2000; and

the Land Tribunal Act 2000.

Land Adjudication Act 2000

The Land Adjudication Act 2000 will regulate all first registration of land, and theadjudication process will be compulsory and final. This process will begin by theMinister designating and declaring an adjudication area. Tobago may be identified as the


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first area. After a particular area has been adjudicated, any person who may have a rightto land will be invited to come forward and make claims to establish these legal rightsand/or interests. It is the intention that over the course of a ten (10) year period, everyparcel of land in Trinidad & Tobago will be adjudicated. Upon adjudication, a uniqueidentification number will be assigned to each record delineated on a parcel identification

map.

Registration of Titles to Land Act 2000

The Registration of Titles to Land Act 2000 will create a new land register which isintended to replace, during the course of the ten (10) year period, all deeds, leases andcertificates under the existing laws. A fundamental principle of the new register is that itwill record ownership of land or entitlement to rights and interests in land, as a fact asopposed to evidence that must be deduced from a chain of documents. The advantages ofthe new land registry are efficiency with transfers and dealings will be less costly forpersons.

Land Tribunal Act 2000

The Land Tribunal Act 2000 will create a new court for real property matters. However,initially, its function will primarily be to only hear appeals to decisions of theAdjudication Officer and the Land Registrar. The forum is intended to be a less formalsetting and less expensive. The Tribunal will be presided over by a qualified Attorney atLaw and assisted by various land professionals and appeals against decisions of the LandTribunal will be made to the Court of Appeal.

The Government anticipates that the new system of registration will be more efficient forthe documentation and enforcement of real property rights in Trinidad and Tobago.However, there is so much to be done by the Government from an administrative and

legislative point of view prior to bringing this legislation into force, that it is not expectedthis will be done in the near future.

Procedure for Transfer of Real Estate

In order to facilitate the smooth and timely conclusion of a purchase transaction, theparties concerned are required to submit to the Attorney preparing the transfer documentscopies or originals of the following documents where applicable:

The Agreement for Sale signed by the parties i.e. the Vendor and the Purchaser;

The Deed by which the Vendor acquired the property or the Instrument and/or

Certificate of Title if the property is held under the R.P.A;

Releases of all outstanding mortgages on the property together with statements from themortgagees as to the amount required to effect the releases, and a note on the legal costsincurred in preparing such releases;

Current receipts for Water and Sewerage Rates and Lands and Buildings Taxes and aWASA Clearance Certificate;


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If the Property is leasehold, Land Rent and Condominium Management Charges (ifapplicable), Consent of lessor and the Share Certificate of the vendors interest in themanagement company (if applicable);

If the Vendor is a company, a signed, sealed and dated by laws of the Company and thecurrent filed copy of the Annual Return; and

If the property is to be developed by the Vendor before completion of the sale (or hasrecently been developed), the planning approval (Development Final Approval orCompletion Certificate from the Local Regional Authority) for such development.

As soon as the relevant documentation is received, the Attorneys will engage the servicesof a Search Clerk to conduct a search of the records at the offices of the RegistrarGeneral. These searches will indicate the history of ownership of the property and verifywhether the property is subject to any and, if so, what encumbrances. On average such asearch takes between two (2) to three (3) weeks and costs between TT$1,000 andTT$2,000. Whilst the search is in progress, the relevant Deeds/Instruments may be

prepared.

Once it appears to the Attorney that the Vendors title is in order, the relevant transferdocuments may be completed. These documents typically consist of aDeed/Memorandum whereby ownership in the property will be transferred from theVendor to the Purchaser. If the Purchaser is taking mortgage financing to purchase theproperty, the Lenders Attorney will also have to verify that the Vendors title is in orderand prepare the document effecting the mortgage for the Purchaser to sign. The Purchaseris required to engage the services of an Attorney to prepare this Deed/Memorandum onhis behalf.

The Vendor may either choose to appoint his own Attorney to revise the documentation

on his behalf, in which case he should notify the other parties involved of the identity ofthat Attorney or alternatively, arrangements can be made for the Vendor to attend on thePurchasers Attorney to execute the documents there.

The Purchasers Attorney is usually responsible for co-ordinating the closingarrangements for this transaction (or if the Purchaser is taking mortgage financing, theLenders Attorney). This entails verifying that the title is in order and that the relevantdeeds/instruments, including the release of any existing mortgages on the property, haveall been properly executed. When the relevant transfer documents have been signed by allthe parties involved, the balance of the purchase price is paid to the Vendor and/or hismortgagee and the sale transaction finalized.

Transfer Taxes - Stamp Duty

The next stage in the process is the stamping of the documents by the Board of InlandRevenue. Stamp duty is payable as per the Stamp Duty Act and its Regulations,depending on the type of property.

Residential Transfers (including a dwelling house)


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Where the consideration for the sale or disposal of the property is:

Consideration Rate

Up to $850,000.00TT 0%

Next $400,000.00TT 3%

Next $500,000.00TT 5%

Over $1,750,000.00TT 7.5%

Residential Transfers (land only)

Where the consideration for the sale or disposal of the land is:

Consideration Rate

Up to $450,000.00 TT 0%

Next $200,000.00 TT 2%

Next $200,000.00 TT 5%

Over $850,000.00 TT 7%

Non-Residential Transfers (Commercial)

Non-Residential Transfers refer to commercial properties. The stamp duty payable is:

Consideration Rate

Up to $300,000.00 TT 2%

Next $100,000.00 TT 5%

Over $400,000.00 TT 7%

Once the appropriate stamp duty has been paid, as certified by an embossed stampaffixed by the Board of Inland Revenue, the original transfer documents are lodged withthe Registrar Generals Department and a registered copy will be delivered to thePurchaser as proof of his ownership of the land. The registration fee payable for the oldlaw system is typically TT$100.00 and TT$50.00 for the R.P.A. system.

Property Taxes

The Government proposes to bring legislation to Parliament in 2009 to give effect to thenew Property Tax system. This legislation proposes to radically reform the currentproperty tax regime. The new system is expected to be implemented on January 1, 2010.Further, it is proposed that the date after which penalties are applied for the non-paymentof taxes will be extended from 30 June to 30 September, the last day of the fiscal year.Under this system, the Valuation Division of the Ministry of Finance will assess


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properties based on the rental value appraisal method.

A new four-tiered regime will be implemented as follows:

Type of Property Rate Formula for Calculation of Property Tax

Agricultural 1% 1% of Annual Taxable Value (ATV)

ATV = 2% of the capital value

(land and farm building)

Residential 3% 3% of ATV

ATV = 90% of the annual rental value

Commercial 5% 5% of ATV

ATV = 5 % of capital value

Industrial 6% 6% of the ATV

ATV = 6% of the current market value or

6% of the installed cost of

specialized buildings, plant & machinery

ATV = 5% of the capital value of vacantland

Examples of how to calculate the property tax may be found in a Publication calledFAQ Brochure on Property Tax dated October 20, 2009 on the website of the Ministry

of Finance athttp://www.finance.gov.tt/index.php .

It is proposed that the new system will streamline the:

assessment; and

management and collection of property taxes

through the Valuation Division, which will assess properties in accordance withinternational standards and a single collection agency, the Board of Inland Revenue. TheGovernment emphasises in the Budget 2009/2010 that the new system will facilitate

easier collection of taxes by increasing the number of payment centres, as well asallowing for greater access by the taxpayer to his property and tax information via theInternet.

Land Use and Development

Land use and development is controlled by the local Regional Corporations and the Townand Country Planning Division. Permission is required to:
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subdivide land;

alter land use;

carry on development or construction;

repair property; or

renovations to property.

Plans must first be submitted for the approval of the Town and Country PlanningDivision. If the plans do not contain any defects that infringe planning and/or buildingregulations, outline approval is granted subject to the approvals of the other controllingauthorities such as:

the Water and Sewerage Authority (if area is metered);

Drainage Division (Ministry of Works and Transport;

The Highways Division (in some instances);

the Fire Services;

Environmental Management Authority (EMA); and

the local Health Authority.

Final approval from the Local Authority by the issuance of a Development FinalApproval or Completion Certificate is granted when all the Authorities have certified thatthe necessary infrastructural works have been put in place and all regulations have beencomplied with.

A Certificate of Environmental Clearance (CEC) is required from the EMA for:

clearing;

excavating;

grading; and

land filling

an area more than 2 hectares (approximately 5 acres) during a two year period.

In some instances, the EMA may require an Environmental Impact Assessment beundertaken prior to determining an application having considered the nature and type ofdevelopment that is proposed. See Chapter 10 for additional information onEnvironmental Approval.

The Foreign Investment Act, Trinidad & Tobago

Documents

Transcript of The Foreign Investment Act, Trinidad & Tobago