BERMUDA Law and Practice Contributed by: E. Scott Swainson, Andrew Morgan and Erik Gotfredsen, Wakefield Quin Limited
7.6 Liens or Encumbrances in the Event of Non-Payment Contractors’ Liens Bermuda does not recognise contractors’ liens per se. Debts converted to judgments may be registered and so attach to real property but would stand behind any Plant may be subject to contractual retention of title provisions but once installed commonly becomes a fixture and part of the land as a matter of law. In such cases, the provider would be in the same position as a contractor. If the land upon which the plant is situ - ated is subsequently sold, rights may well attach the proceeds of sale (the defaulting seller being deemed to hold on a resulting trust). earlier registration. Retention of Title 7.7 Requirements Before Use or Inhabitation A certificate of occupancy must be issued by the Department of Planning before any new buildings may be lawfully occupied. If a building is substantially complete and a material part is habitable, a partial certificate of occupancy may be sought.
able consequence of a delay resulting from a breach of the agreement can be pursued. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance Limited Liability Most construction is carried out by companies incor - porated with limited liability. Directors of LLCs are lia - ble for debts incurred whilst the company is knowingly trading whilst insolvent (knowledge must be proven and cannot be assumed). Subject thereto, liability is limited to the amount of any unpaid share capital and is hence nominal at best. Guarantees Personal and parent guarantees are not common, except on large projects where there has been a for - mal tender process (eg, PPP projects, such as the new hospital or new airport). Other Factors Bermuda is a small place and the “Bermudavine” (local gossip) twinned with an officious planning regime tend to be an effective deterrent to contractors taking shortcuts. Reputable contractors are protective of their reputations and tend to address defects even after defects periods have expired. Phased Payments Whilst there may be a small activation payment, most contractors are paid in arrears. Lender Constraints Where a bank is providing construction financing, it will commonly require the following: • a fixed price construction contract; • a quantity surveyor report confirming that the con - tract sum is supportable; • a quantity surveyor/architect sign off that the requested value has been added to the site prior to any drawdown; and • confirmation that the borrower will bear 50% of the costs of the raw land and 35% of the phase pay - ments from its own resources.
8. Tax 8.1 VAT and Sales Tax
VAT is not applicable in Bermuda. 8.2 Mitigation of Tax Liability Tax Planning
Stamp duty is payable on the vast majority of trans - actional documents. Some transactional documents are subject to notional duty only – eg, group company transfers, exchanges of land, or acquisition of land owned by a company by amalgamation/merger. Avoidance Most properties are conveyed by separate instrument, so that each qualifies for the lower stamp duty bands on the relevant part of the consideration for a portfolio acquisition. There are rules limiting tax minimisation by “splitting” (ie, transferring property interests via an unnecessary series of transactions that have no valid justification save tax avoidance – such as transferring
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