Investment in property has been recognized as the unfailing means of acquiring wealth. The phrase ‘safe as a house’ is clichéd. Yet, it is the only truth in the context of return on investment scenario. Return on investment in property is a slow process. However, it is an investment that never fails. History also testifies to the fact that investment in property is a minimal risk investment. The return from the property, services the investment. The net worth grows over time and generates income for further investments in property.
Like any other investment, Property investment is a skill which has to be learned. The investor must be aware that there are risks attached to any kind of investment. He must also consciously acknowledge the fact that during the process of investment the risks attached seem to be magnified. He must also accept that, the right choice of property, combined with considered management are absolute essentials in any property investment. Property investment is a serious business that requires the right kind of commitment.
Before actually launching into the purchase of a property, the investor must be clear as to the purpose of investment. If investment may be for:
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Personal use
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To buy and Let
The purpose will determine the type and location of the property. In the former instance property may have to be located close to the place of work or near an educational institution. The type of property may not per se be of importance. Its location may be important. In the latter case all aspects of the property assumes importance. It is a property purchased as an investment and the investor expects a return on property investment.
Investment Property should be selected keeping in mind the following environmental factors:
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High employment area
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Attractive buildings and surroundings
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Public Transport facilities
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High capital growth
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Developing areas
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Low maintenance costs
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High demand by letting agents
The Return on Investment (ROI) expected will include factors such as
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Appreciation of the asset
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Regularity of rental income
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Long term stable tenants
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Care by property managers.
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Tax benefits
Investing in foreign countries requires an understanding of the laws and systems as it impacts on investment by foreigners. It also requires an understanding of the socio-economic fabric of the country as it will have a bearing on the value of the property. Therefore, investing in property in a foreign land requires the investor to stay in the country for some time or a study of the socio-economic-demographic and political setup of the country in so far as it impacts on foreign investment in property.
The Jamaican constitution does not refer to investment at all. However, the right to property is defined and property is defined as including investment. Foreign investment is also not defined clearly in the constitution but is defined in the Bilateral Investment treaties. Jamaica’s Economic Development Agency(JAMPRO) undertakes to register all foreign investment in Jamaica. A natural person who is not a resident or citizen of Jamaica can use the legislative, administrative and regulatory framework for any purpose subject to any issues that may be included in the Bilateral Investment treaties.
All persons-- Jamaican and foreign-- have the right to own property in Jamaica. The multi lateral and bilateral treaties provide for non discrimination against foreigners.
All income earned in Jamaica from investment in property is taxable. However, interest on capital borrowed within Jamaica or without is deductible from the income earned from the said property. Property tax is levied at different rates for commercial and residential properties. The transfer of property attracts a tax of 7.5% of the market value of the property. Transfers will also have to pay stamp duty.
A Real Estate Board has been established by the Jamaican Government to monitor the activities of persons and organizations which deal with Real Estate. The Board is governed by the Real Estate(Dealers & Developers)Act 1987. It maintains a Register of Real Estate Dealers and Salesmen and issues licenses to those persons listed in the Register. It prescribes norms for maintenance of accounts and ensures that each development scheme is registered and the monies for the project are paid and all deposits are placed in a trust account maintained in an authorized financial institution.
All persons wishing to acquire Real Estate in Jamaica should engage the services of an attorney at law and should ensure that the transferee of the property is in a position to sell the property and transfer the same on the completion of the contract. The attorney at law should examine the seller’s title to the property and also prepare the necessary agreement of sale which has to be signed by both parties to the contract. On execution of the agreement the buyer has to pay the seller a stipulated sum(usually 9% of the agreed price) and provide for the payment of Stamp Duty at 5.5% of the sale price and Transfer Tax at 7.5% of the sale price. The balance purchase price will have to be paid on completion of the contract. On entering into the contract, it would be in the interest of the buyer to lodge a caveat against the title with the Registrar of Titles and consider taking Insurance on the property. All risks relating to the property will pass to the buyer the moment the agreement is signed.
Real Estate dealers in Jamaica usually charge a sum of 5% of the sale price from the seller of the property. The seller will also have to pay a General Consumption Tax of 15 percent.
Loans for purchase of property can be taken from Building societies, and commercial banks.
Additional expenditure for obtaining loans would be incurred towards legal fees, preparation of the mortgage, documentation and stamp duty of approximately 0.725 percent of the loan account. The buyer will also have to submit a valuation report obtained from a professional appraiser of the property for obtaining the loan which will involve some cost. The Real Estate Board has a panel of Appraisers who can be hired for this purpose.
Sale transactions take about 2-5 months for completion from the date of signing the agreement. If there is a common law title, the completion will be dependent on the exchange of all deeds and documents relating to the ownership of he property and the executed deed of conveyance. A common law title is an ownership of land where title has not been registered under the Registration of Titles Act. Proof of ownership is established by possession and / or documentation. Every time the property is transferred a conveyance has to be prepared and recorded in the Records Office,Central Village, Spanish Town P.O within three months of execution. This recording gives notice of ownership. Titles registered under the Registration of Titles Act do have proper documentation and encumbrance certificates issued. About 55 percent of the land in Jamaica is not registered.
Land and property not registered under the Registration of Title Act can be registered by the person who buys the property. The property should be surveyed by a Commissioned land surveyor who has to prepare a survey diagram. The diagram will have to be sent to the Survey Department in Kingston and got approved. An application form will have to be filled in and submitted to the Registrar of Titles at Kingston. A statutory declaration of ownership will be given to the Registrar along with two supporting declarations from persons who have known about the existence of the land for at least 13 years. All other supporting documents acceptable to the Registrar of tiles need to be submitted. A current Tax payment certificate will also have to be enclosed. The approved diagram from the Surveyor must accompany these documents.
Maintenance and management of properties is governed by the Registration (Strata Titles) Act. All properties are required to become part of a body corporate which has several functions to perform such as maintenance and management of the property, payment of insurance etc. Owners of properties are required to meet the expenses in this context. As per law, this body is expected to maintain and render proper accounts to the owners of the property.
The Jamaican law is based on the English common law and the rules of enforceability are the same as that of the English law.
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