Do I need a lawyer to buy a house? — Property Cayman | Real Estate Experts in the Cayman Islands

Do I need a lawyer to buy a house?

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Jennifer Powell

Real Estate Agent

Whether you are buying or selling a property, you are entering into a binding legal contract. That is why we always, and I mean always, recommend you engage an attorney who specializes in Cayman real estate transactions.

There is no exception to this rule. Even if your sister, cousin, or neighbour is an attorney, our advice remains the same - engage a third-party attorney, a lawyer whose expertise is real estate in the Cayman Islands. It will ease the contractual process, but more importantly, it will protect you and your interests.

From the homeowner and buyer to the mortgage advisor and agents, real estate transactions have many moving pieces and people involved. Convincing a client to add an attorney to the mix can at times be a difficult discussion. But it is an important one.  And it is one I find myself having daily. So I sat down with Michael Sharvin and Ian Jamieson, of Bedell Cristin to clarify what a real estate attorney does, and why they are essential.

Top Real Estate Legal Questions

1. Why is it important to use an attorney for the real estate transactions? 

From the offer to purchase to closing, a property transaction is a legal contract between a seller and a buyer. Both parties are promising to fulfil specific duties, and are bound by law to do so. Not to mention that real estate is typically the largest monetary transaction someone will make in their lifetime. Knowing all that, would you want to proceed without legal advice? It just makes good sense to have a real estate legal expert in your corner, to protect you and guide you through the process.

Cayman Real Estate Laws

2. Do the Cayman real estate laws change often?

There are often changes implemented by the Cayman Islands government, some of which are minor changes, but others have significant implications for buyers and sellers.

3. What is an example of a real estate law in Cayman that has changed recently?

The Cayman Islands government has made significant changes to the island's stamp duty regulations in the last two years.

4. How has the Cayman Island's stamp duty legislation changed?

There is a bit of confusion about stamp duty regulations in the general public at the moment. First, the Cayman Islands government changed how stamp duty was calculated for pre-construction properties. More recently, there was a change to the stamp duty legislation for contract assignments. As it stands, purchasers who take an assignment of certain property contracts can still benefit from very minimal stamp duty, provided that the assignment occurs before the 30th of June, 2021. Specifically looking at developments that Property Cayman has listed, the One Canal Point townhomes is an example of where these savings still apply. This allowance means significant savings for purchasers and is a welcome boost for developers.

5. What is the difference between the U.S. and Cayman's property closing process?

In our experience, some purchasers assume the closing process in Cayman is similar to that of the U.S. When, in fact, the closing process in the Cayman Islands is entirely different. Here is a small example of one of the differences. In Cayman, there is no title insurance covering title defects or escrow officers who act as an independent third party to deal with closings on behalf of sellers and purchasers.

Cayman Real Estate Offer to Purchase

6. Do you need an attorney to sign an Offer to Purchase? 

We recommend that you consult an attorney before the CIREBA OTP (offer to purchase) is signed so that your lawyer can review the contract conditions. Every contract and property is unique, and therefore there will be different issues to consider. Additional conditions may be required depending on the buyer's circumstances. We have completed plenty of transactions where clients have saved substantial sums of money and legal proceedings because of conditions or clauses added by their attorney to protect their position.   

7. How do real estate contracts differ?

Real estate contracts can differ based on the property and the buyer and seller needs. A general example is that a pre-construction contract, compared to an existing home contract, should include a clause returning the buyer's deposit in case the developer goes bankrupt or the project never breaks ground.

Cayman Real Estate Closing Process

8. Who handles real estate closings in Cayman?

Property closings in the Cayman Islands are typically handled by the sellers and purchasers' respective attorneys.

9. What are the potential risks of not using an attorney for your real estate closing?

 If a purchaser or a seller elects not to appoint an attorney, they run the risk of:

  • paying closing monies to someone who is not the legal owner of the property or a fraudster;
  • buying a property with a defective title or an existing charge (as a result, the property could be difficult to sell or be inadequate security for future lending); 
  • failing to register as the new legal owner of the property at the Cayman Islands Lands and Survey Department and/or paying stamp duty (resulting in fines and interest if unpaid);
  • inadvertently getting caught up in money laundering proceedings, by accepting money for the sale of a property from a purchaser who is not represented by an attorney and using laundered money;

Official Search and Stay of Registration on a Property in Cayman

10. What is a Stay on a property?

A Stay freezes the title of the property you are buying. It gives you a 14 day period to register as the new owner of the property at Lands. All well-advised purchasers will register a stay before a property closing.

11. What are the risks of not registering a Stay on a property?

If you proceed without registering a Stay, the seller could sell the property to someone else. A third party could also register something on the title, such as a charge. This charge would be binding on you as the new owner. In both cases, it would be a week or two after you have paid the seller before you would know there was a problem.

Issues that Impede Real Estate Transactions in Cayman

12. Is it possible for a seller to have legal issues that would impede a sale? 

Yes, it is. But it is not very common when you use an attorney, because our job is to identify problems and find solutions so that the transaction gets done.

13. Can you provide an example of a legal issue that would impede a sale?

The registration of a charging order against the title to a property can delay the closing, especially when handled incorrectly. A charge can only be removed by an order from the Court. Currently, it is taking around 8 to 12 weeks to obtain the order. But again, this is not very common. It is just an example of the obstacles an attorney would handle for the buyer.

14. What happens if the sale conditions are satisfied, but the seller or buyer is unwilling to meet the agreed closing date?

It depends on what the contract says. The CIREBA OTP (Offer to Purchase) states that a seller who is unable to meet the agreed completion date will be liable for damages and losses under clause 17 (b). Under clause 17 (b) (2), if the specified date for completion has passed and the seller is in a position to complete, they may serve a Completion Notice to the purchaser. The notice requires the purchaser to pay the closing monies' balance within seven days of being served the Completion Notice. Should the purchaser fail to comply with the Completion Notice, the seller is entitled to the purchaser's deposit (typically 10% of the purchase price) together with any interest earned as liquidated damages. The offer to purchase will terminate immediately.

15. Are there other issues that can happen during real estate transactions?

Apart from the charging order mentioned above, the main ones are title issues or failing to include a contract condition. For example, we often see contracts that are not conditional on satisfactory replies to purchasers' attorneys' enquiries. Or in transactions involving standalone houses, deals that are not conditional on a satisfactory planning search.

Real Estate All Cash Offers

16. When there is no financing required, what steps do cash buyers commonly forget before the property closing?

When an attorney is not appointed to handle the closing, the main items forgotten are insurance, not registering a stay, or transferring the title through Lands.

Real Estate Attorney Costs

17. How much does it cost to use a real estate attorney?

On average, 0.5 to 1% of the purchase price. A cost that pays off tenfold. It gives the client's legal protection throughout the negotiations and closings, providing peace of mind and ensuring that the deal gets done.

Real Estate Legal Words of Wisdom

18. Is there anything else you would like to add?

I think we have covered a lot, and hopefully addressed some of the many real estate legal questions. Everyone at Property Cayman is a delight to work with, and it is no coincidence that transactions always run smoothly when you guys are involved. I am always impressed with your commitment, knowledge and attention to detail and, like us, you guys put your clients' interests first.

Engaging a Real Estate Lawyer in Cayman

Simply put, engaging a real estate attorney is the smart play. They will remove any seen and unforeseen obstacles that could impede the property sale while ensuring your legal protection throughout the process.

Whether you're looking to buy or sell your property, we at Property Cayman work hand in hand with dedicated real estate attorneys to give you the best guidance and service possible before you make an Offer to Purchase and through the entire Closing process. Never hesitate to ask your agent or attorney questions – we're here to make this tricky and sometimes overwhelming process, as smooth and transparent as possible.   

We look forward to assisting you on your next journey to closing, soon!

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