BAHAMAS Law and Practice Contributed by: Alistair Chisnall and Erica Paine, Graham Thompson
3.9 Effects of a Borrower Becoming Insolvent Valid security interests created in favour of a lender do not become void if the borrower becomes insolvent, and a lender may exercise the remedies granted under a debenture or mortgage (see 3.6 Formalities When a Borrower Is in Default ), regardless of the borrower’s solvency. Typically, a properly drawn mortgage would reflect that the insolvency of the borrower (or the com - mencement of such proceedings that are not sub - sequently stayed) would be deemed to be an act of default and entitle the lender to exercise its remedies under the mortgage. 3.10 Taxes on Loans Following the expiry of the London Inter-Bank Offered Rate (LIBOR), local commercial banks took measures (where necessary) to address and agree the use of alternative reference rates with their customers. How - ever, a large majority of domestic lending transactions are calculated by reference to the domestic bank’s prime lending rate and have not been impacted by the expiration of the LIBOR index. A number of Bahamian statutes provide the frame - work for regulating development and use of land but, generally speaking, development, planning, zoning and land-use regulations are set out in the P&S Act and related regulations (see 2.8 Permitted Uses of Real Estate Under Zoning or Planning Law ). The P&S Act provides the overall structure for the administration of development, planning and zoning matters by the Department of Physical Planning, the Town Planning Committee and related subcommittees and appeal boards. The P&S Act also provides for: • the establishment of land-use plans, zoning plans, development controls, environmental controls and related by-laws; • the requisite approvals that must be obtained in respect of proposed developments; and • the process for obtaining such approvals. 4. Planning and Zoning 4.1 Planning and Zoning Framework
(the most common and expedient remedy used by lenders) under one of the following circumstances: • notice requiring payment of the mortgage money has been served on the borrower, and default has been made in payment of the mortgage money, or of part thereof, for three months after such service; • some interest under the mortgage is in arrears and unpaid for two months after becoming due; or • there has been a breach in observing or performing some provision contained in the mortgage deed or in the Act, on the part of the borrower or of some person who agreed to arrange the mortgage, other than and besides a covenant for payment of the mortgage money or interest thereon. Formal written notice of default is required to be served under any mortgage, and the notice period would be stipulated in the mortgage. It is also not uncommon for a mortgage to stipulate shorter default timelines in substitution for the above provisions of the Act, although, in the case of mortgaged proper - ties that constitute a borrower’s primary residence, certain required procedures and minimum notice peri - ods must be complied with under the Homeowners Protection Act, 2017. 3.7 Subordinating Existing Debt to Newly Created Debt A legal mortgage or debenture should be recorded in the Registry of Records in order to preserve priority against subsequent encumbrances. It is possible for a secured lender with senior priority, as a commercial business decision, to contractually agree to subordi - nate its debt and/or a newly created debt to another lender. A subsequent action for foreclosure can be brought by any lender of property, whether it is the first or subsequent lender. 3.8 Lenders’ Liability Under Environmental Laws A freehold or leasehold mortgagee who is not in possession would not be liable for environmental damage, provided that the mortgagee has not itself caused damage to the property. Where a mortgagee is responsible for the actual damage, they would be liable for the remediation costs and fines.
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