BERMUDA Law and Practice Contributed by: E. Scott Swainson, Andrew Morgan and Erik Gotfredsen, Wakefield Quin Limited
Limitations Property must be “made available” to Bermudians who are willing to pay an equivalent value. Non-Ber - mudians may not buy raw land (unless building a hotel residence, within a licensed hotel scheme). Licence Fees The licence fee is based on a percentage of the pur - chase price, dependent upon the nature of the prop - erty and the status of the applicant. For example, the purchase of a freehold property attracts a fee of 12.5%, whereas a leasehold condominium fee is 8%. Hotel residences attract a fee of 6.5%, unless the buyer opts to include one key in the hotel inventory, when it is reduced to 0%. Corporate Ownership Non-Bermudians generally cannot hold residential land in an LLC or trust. A corporate investor beneficially owned/controlled by non-Bermudians requires further corporate approv - als, which may include a licence to do business in Bermuda and/or to take mortgage security. A com - pany where 40% or less of the share capital is foreign owned is deemed to be locally owned. 3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate Local Lending Local acquisitions are most commonly funded by a Bermuda licensed bank. It is relatively rare for an over - seas bank to lend funds on the security of a Bermuda asset (except regarding a large hotel project). Typical Lender Limits Local banks tend to limit lines of credit to 50% of the loan to value on raw land and 65% of the project costs as construction progresses. They also require cost overrun guarantees. Full Recourse Loans Mortgages are “full recourse”. Where a borrower enjoys limited liability (eg, a company or trust), the
bank will often require personal guarantees for the full amount of the borrowing. 3.2 Typical Security Created by Commercial Investors Security Commercial real estate is commonly secured by way of legal charge or mortgage debenture. Local banks may also require shareholders’ guarantees, an assign - ment or charge over shares and the assignment of any rental income. Registration Legal charges/mortgage debentures will trigger first registration of the property with the LTRO, which should also be recorded with the Registrar of Com - panies. Failure to register the security does not render the security invalid vis a vis the borrower, but it does impact priority. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders Foreign Lenders Special rules apply if a foreign lender wishes to hold a mortgage over real property in Bermuda, including obtain - ing the prior consent of the Minister of Finance and the Minister responsible for Immigration, respectively. Enforcement If such a mortgage is subsequently enforced, any land obtained by a mortgagee in possession must be sold within five years either to a person or entity having Bermudian status or to another licensed party. Restrictions on Repayments Generally, there are no restrictions on repayments being made to a foreign lender under a security docu - ment or loan agreement. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Fees and Taxes Stamp duty is payable on the mortgage/debenture; see 2.10 Taxes Applicable to a Transaction . Exemptions Most assignments of mortgages are exempt. As of 1 April 2023, refinancings up to the maximum value of
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