By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Attorneys have branded the Government's abandoning of legal reforms that would have treated unrecorded real estate deals as "void" as "a huge relief".

Wayne Munroe, leader of government business in the House of Assembly, told Tribune Business that instead of pursuing such changes to the Conveyancing and Law of Property Act it had elected to amend the VAT Act to crack down on the evasion/avoidance of $100m on real estate transactions.

He also confirmed that the compliance burden, and duty to ensure all due VAT is paid within the stipulated 180-day target timeline, is being spread among all parties involved in property and land transactions - the buyer and seller, their respective attorneys, and any realtors who are involved.

The Government, though, has retained the amendment requiring realtors to notify the Department of Inland Revenue of all transactions, and changes in ownership, within 30 days of completion. This had sparked concerns and complaints from the Bahamas Real Estate Association (BREA) and its members, who had argued it was unfair to place this burden on them when they are not responsible for closings.

"There were changes to both of those Bills," Mr Munroe told this newspaper of the VAT (Amendment) Bill and Conveyancing and Law of Property Bill. "The import of it is that you have to get an invoice from the VAT 30 days before you come to close and then, when you close, you have 180 days to pay and everybody has an obligation to see it's paid.

"The 180 days also means that the concern people had about it being retroactive is no longer an issue." The Conveyancing and Law of Property Bill, in its original form, had been made retroactive to July 1, 2022, meaning that all unrecorded conveyances not lodged in the Registry of Records over the past three years would have become "void" after July 1, 2025.

Andrew O'Brien, the Glinton, Sweeting & O'Brien attorney and partner, told Tribune Business that the Government's last-minute changes to the Bill were "a huge relief", and added: "It would have left a big question as to how you cure a 'void' conveyance. Is it cured once it's recorded?

"That, I'm sure, was the assumption of the Government, but the Bill left that up in the air for you to assume. At a minimum, it would also have created this gap period where someone paid for a property, but does not own it until it is recorded, which takes from a couple of weeks to a couple of months.

"I'm sure it would be very odd for a bank to lend money when they don't have any security, and have that exposure for that time period, as well as I don't think an insurance company would issue a policy to someone who did not own the property," Mr O'Brien added.

"What would happen if a hurricane struck in that gap period, and the bank has a loan or purchaser has put his life savings into the home, and it's gone. That's some of the mischief this would have caused, but I think everyone supports the premise that taxes should be paid in a reasonably timely manner."

The "voiding" of conveyances was designed to force purchasers and their attorneys to pay the VAT due on real estate transactions in full, and a timely manner, as otherwise they could not have the conveyance recorded in the Registry of Records.

Mr Munroe, who is also minister of national security, also explained that it was important for the Government to have removed the retroactive element in the Bill. "You might say the value on this is $200,000 when you submit it in, and they [the Department of Inland Revenue] does the valuation and it's at $500,000," he explained.

"That changes the VAT, and if you've completed the transaction and money has been disbursed, there's no guarantee that the purchaser will have the money [to pay the extra VAT]. It just makes sense.

"In private practice, I've been involved in at least one matter when this happened when you close, give the vendor the balance of the purchase price and, if it's a mortgage transaction, you send the conveyance to the Department of Inland Revenue to take the value of that and they say it's more than this," Mr Munroe said.

"Regardless of whether it's an arm's length sale, you owe more VAT and that puts you in a quandry. If the vendor is supposed to pay half of the VAT, and they've got their money and gone, good luck in getting it."

Adrian White, the Opposition MP for St Anne's, and an attorney and conveyancing specialist, told Tribune Business that realtors will still be required to give the Department of Inland Revenue notice of all transactions within 30 days of closing.

"The realtors are still responsible and obligated to the Department of Inland Revenue," he said. "Their mode of operating has changed. Then there is also an obligation on them to ensure that the VAT is paid within 180 days of the execution of the conveyance. They're going to have to make follow-ups with either their client or attorneys representing them to ensure the VAT gets paid on time.

"There are penalties, not only a surcharge, but on the individual that have not been in place before. If the document is stamped so that the VAT is paid on it within 180 days of the execution of the conveyance, then the parties, the attorneys and the realtors will have responsibility for ensuring the tax is paid in time.

"You also have a process where the banks, lenders and purchasers cannot release the money to close a transaction until the invoice is obtained from the Department of Inland Revenue identifying and stating with certainty what amount of VAT is due on the transaction," he added.

"Instead of the conveyance being declared 'void' if it is not stamped or recorded, it gives a 180-day period from execution [of the conveyance], which is different from within 180 days of the issuance of an invoice. That's a bit more of a workable timeline because it's six months.

"It has not changed from what it previously was. You should be able to get a post-closing certificate of registration from the Bahamas Investment Authority. All parties have to ensure tax is paid, and the realtor has to ensure that notice of change in ownership is filed with the Department of Inland Revenue in 30 days."

Mr White, though, reiterated that the Department of Inland Revenue is likely to challenge any sales or transaction prices presented to it which "are not in line" with the property valuations generated for its real property tax assessments.