By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former Bahamas Real Estate Association (BREA) president yesterday said not all attorneys ask for proof of subdivision approval before giving title opinions on property purchases.

David Morley, Morley Realty’s principal, told Tribune Business his experience had been mixed when it came to attorneys investigating whether developers had obtained the necessary subdivision approvals from the Government’s planning authorities before giving their buyer clients the go-ahead to purchase in these developments.

Speaking after the London-based Privy Council, the highest court in the Bahamian judicial system, upheld the Planning and Subdivision Act provision that all conveyances/sales of land in unapproved subdivisions after it took effect in 2011 are “null and void”, he argued that it was difficult for those who now find themselves without good title to obtain proper redress.

“In my experience, some attorneys did ask for proof of subdivision approval, and I’m aware of some attorneys not raising that requisition on title approvals,” Mr Morley said. “It’s [the Privy Council ruling] woken people up to what’s going on, but there has to be recognition the burden should not fall on the property owner to incur additional expense to get good title or their money back.”

With lot purchasers having subsequently built their home, only to find out their title is no longer any good because it is situated in an unapproved subdivision, the Morley Realty principal acknowledged that the Act’s intent - to prevent developers selling lots in subdivisions where there were no roads and utilities infrastructure - was correct.

“But I don’t think it intended to unfairly put any buyer at risk,” he added. “If you built a home eight, 10 years ago and now find the conveyance is null and void, and find you have not title, who do you go to for recourse? If any developer has not put in infrastructure, what are your chances of getting your money back, and any recourse against the attorney who did not find out there was no subdivision approval?

“If you look at our court system, if you were to initiate action against a developer for the same recourse, what is the likelihood of getting a court date in the near future and, if you get a judgment, when are you going to get payment or good title?”

Suggesting that buyers who had purchased such lots “in good faith are the unfair victims in these circumstances”, Mr Morley added: “We’ll seed what happens and if the Government is going to move forward and do any amendments.

“What’s also concerning is if any conveyance after 2011 is deemed null and void because subdivision did not get approval, it means any mortgage where the bank is holding that property against the mortgage is not worth the paper it is written on. You have a lot of Bahamians over the years who built subdivisions without approval.”

Developers are either supposed to finance the infrastructure works themselves or secure a performance bond that guarantees the necessary work will be completed and there is sufficient funding available.

The issue arose after the highest court in the Bahamian judicial system ruled that an Exuma developer should not be granted “any further indulgence” when it came to returning almost $900,000 to a US citizen who had sought to purchase a lot in its project.

The dispute, which revolved around the interpretation of the Planning and Subdivisions Act and the transition provisions for when it became law in 2011, was sparked when Mr Momin agreed to acquire lot 36 in Elizabeth Harbour Estates via a sales agreement that was executed on February 18, 2008.

The $895,000 price was to be paid in installments, with an initial $350,000 deposit to be followed by a further $125,000 on August 1, 2008, and another $120,000 on February 1, 2009. The remaining balance was to be paid in monthly installments from March 1, 2008, carrying interest at 7 percent.

February Point was “to retain rights and interest in the lot until all payments had been made”. The Privy Council added: “The full price had been paid as of February 2013. A dispute then arose between the parties.

“The plaintiff purchaser argued that he was entitled to the return of the money he had paid because the defendant vendor [February Point] had not obtained the subdivision approval required by the 2010 Act and, by reason of section 62(1), there could be no valid conveyance to him.

“The defendant argued that it was able and willing to convey the property to the plaintiff and that, applying section 62(2), that conveyance would not be null and void even though there had been a failure to obtain the necessary approval for the subdivision. The plaintiff was therefore not entitled to the return of the purchase price paid.”

The transaction between Mr Momin was caught in the transition to the Planning and Subdivisions Act. While the sales agreement had been executed prior to the Act coming into force, the conveyance - the legal instrument recording the transfer of title - did not occur until after the Act came into law.

The Planning and Subdivisions Act’s section 62(1) treats all conveyances made after the Act came into effect as “null and void” if they involve lots in subdivisions where the latter have not been approved by the relevant government authorities.

Given that the Act took effect for Exuma on December 1, 2011, Mr Malik argued that this provision meant February Point could not convey good title to lot 36 as the Elizabeth Harbour Estates subdivision had not been approved. Therefore he demanded his purchase price be returned.

However, February Point argued that section 62(2) created a ‘carve out’. This, it asserted, said the failure to obtain subdivision approval did not make the conveyance to Mr Malik “null and void” because it upheld the validity of conveyances or sales agreements made before the Act came into effect - just as had occurred here.

The Privy Council, though, ruled in favour of Mr Malik’s argument.