By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

THE BAHAMAS Real Estate Association’s (BREA) president yesterday warned persons seeking to acquire property via rent-to-own deals to make sure they have legally watertight contracts as they are taking all the risk.

Nikki Boeuf told Tribune Business that rent-to-own contracts must be structured and vetted by an attorney because such arrangements are not specifically dealt with in existing Bahamian law.

“It’s just the structure of the agreement needs to be clear on both sides and at the outset,” she explained. “There’s a difference between agreement for sale and a sale or sales agreement. Normally a rental owner does not have a sales agreement until the very end.”

Mrs Boeuf warned that those on the rental side will otherwise lack “proper recourse”, and the vendor will have more legal rights because they retain title ownership to the property until the very end. The BREA chief said it was critical for any deal to clearly stipulate, and record, which portion of the renter’s payment is treated as rent versus what is applied to the principal payment.

“I can only tell you from my perspective of what I understand as a realtor in the business, and that is that they need to decide if there are any sums of money that’s being used or perceived as rental money versus money going against the principal owed,” she added.

“For example, during an interest period, if there’s interest on the loan - because really that’s what the seller is potentially providing to the owner - they need to decide is that a rental amount or is that interest that the seller is actually retaining, and [is] separate and apart from what will be taken out of the final principal amount that remains on the books? And, more importantly, is who maintains these books.”

Those on the rental side will also be unable to borrow against the equity in the property “because they’re not the principal owners of the title”. Mrs Boeuf added: “That title normally is with the bank. As soon as you take a loan out, you essentially give your title and your right of ownership over to the bank until such time as they give you a mortgage release that says you’ve settled on everything that’s outstanding.

“So the banks have the ownership until such time as you complete your loan,” she said. “It’s just quite a number of variables that need to be clearly looked at, established and agreed upon on at the outset. There has to be a discussion on if there’s going to be a forfeiture and if, at some point, somebody is suddenly unable to pay for an extended period of time what then happens?

“That’s the part that I think people forget to look at. If at any stage the renter forfeits the deal, the ownership is retained by the seller no matter how much money has been paid for or disbursed up until that time.”