By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An Opposition MP says he has "zero confidence" that the Government is going to make last-minute changes to proposed legal reforms that threaten to throw real estate sales "on their head".

Adrian White, the St Anne's MP and an attorney who specialises in conveyancing, told Tribune Business that based on his conversation with Wayne Munroe, minister of national security and the Government's leader of business in the House of Assembly, it appears the Davis administration will not back down on measures to crack down on suspected tax evasion worth $100m.

He warned that the proposed amendments to the VAT and Conveyancing and Law of Property Acts, if passed as is, will result in parties to a real estate deal having to "take steps in reverse" to confirm the title and close the transaction because the conveyance will have to be recorded, and due tax paid, first as opposed to being the last stages of the process as at present.

"There has been nothing publicly, and a conversation that the minister of national security participated in ended with me having zero confidence they are going to change the Bills as they are," Mr White told this newspaper.

"Despite what Sean McWeeney wrote, the minister of national security sees the issue differently from Sean McWeeney, and the Prime Minister and minister of state for lands, Leon Lundy, have not said anything yet. It could be changed at the committee level, after we've finished the debate and gone through the Budget heads, but I don't anticipate this government is going to do that.

"The outcry from the professionals has not had any impact and caused them to change course from the Bills as is. He [Mr Munroe] didn't see the arguments presented by Sean McWeeney, and because of his position in Cabinet I don't anticipate that they have seen any necessity change the Bills as they are presently drafted."

Mr McWeeney, the former attorney general, now a consultant counsel at Graham, Thompson & Company, in a note understood to have been shared with some 100 attorneys warned that legal reforms intended to combat real estate-related VAT evasion will have “disastrous consequences” for the industry and all related sectors if passed as is.

He added that, if proposed changes to the Conveyancing and Law of Property Act are not altered, they threaten to create multiple “title woes and legal controversies” when the Government’s new fiscal year begins on July 1.

Asserting that the present Bill should be “abandoned”, he added that its intent - rendering all real estate transactions closed since July 1, 2022, “void” unless they have been recorded in the Registry of Records - creates numerous unanswered questions such as whether, and how, a “void” conveyance can be “resurrected from the dead” and brought into compliance with the amendment.

Mr White, meanwhile, told Tribune Business of these reforms and planned changes to the VAT Act: "It's going to have an immediate impact. It's going to throw the titles of a number of property owners who have completed their purchases into questions of validity according to the law. They won't be valid transfers until they are stamped and recorded."

He explained that, under current practice, attorneys first confirm whether there is good and marketable title to the subject property. If the go-ahead is given, the purchaser then pays the agreed price into an escrow account, the vendor delivers over title, and the transaction is closed.

Now, under the proposed reforms, where the Government is seeking to ensure the VAT due on the sale is given priority and paid first, rather than at or after closing, Mr White said: "It's really going to turn the process of land transfers in The Bahamas on its head. It's going to end up with the steps in reverse" with the conveyance's recording, and payment of due tax, happening first.

He pointed to the increased risk that will result, arguing that the planned amendments "almost limit purchasers coming out of a sales agreement because they've already paid the VAT to the Department of Inland Revenue".

"This is more of a tax collection measure than Bills to ensure completeness of land title in the Commonwealth of The Bahamas," Mr White added. "You're really going to have to put your best forward to make the most of what has become an overly-complicated, overly-litigated and prohibitive real estate industry.

"The market's thrown up in the air, and we're having to wait and see how it plays out. It throws a cloud over the certainty of the sale and purchase process in The Bahamas. The period where a property remains without closing is going to be extended. It isn't when the attorney says everything is in order, it's when the Department of Inland Revenue says everything is in order."

The St Anne's MP suggested that properties will remain on the market longer before any sale closes, which will delay realtors receiving their commission, and as much as three months could be added to the completion process if the tax authorities challenge the purchase price because it appears significantly less than the value attached to it by the Department of Inland Revenue's real property tax assessment.

Mr McWeeney, acknowledging the Government’s legitimate desire to promptly collect all VAT due on real estate sales, amid the belief that it is losing $100m in revenue per year to avoidance and evasion in this area, argued in his note that the problem could be tackled by reform measures of a much different nature.

Instead of amending the Conveyancing and Law of Property Act’s section 40 to stipulate that “all conveyances of land, or of any interest therein, are void for the purpose of conveying or creating a legal estate unless made by deed and duly registered”, he suggested it instead focus on reforms to the VAT and Stamp Acts.

Mr McWeeney recommended that a transaction be blocked from closing unless the due VAT is “first collected and held” in an escrow account controlled by either of the attorneys representing the buyer and the seller. These taxes must then be paid within either 30 days of closing, 30 days from the Department of Inland Revenue determining the amount of VAT due, or within 30 days of a court or appeal ruling.

And, in addition, he suggested that the Government finally enforce a provision in the Stamp Act which makes it a criminal offence for attorneys to hold on to taxes generated by real estate sales “for their own benefit rather than paying it over to the Government”. These provisions were also thought to be contained in the VAT Act.