CAYMAN ISLANDS Law and Practice Contributed by: Norman Klein and Adam Johnson, Appleby
3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate The most typical forms of security for the financ - ing of real estate are: • legal charge; • debenture (corporates only); • legal or equitable mortgage/charge over shares in the company that holds the real property; • assignment of any rental income; • assignment of any sale contracts and/or any development contracts (usually for develop - ments); • assignment of insurance proceeds; and • guarantees from directors, shareholders, related companies or individuals. All legal charges over real property must be reg - istered at the Cayman Islands Land Registry, and debentures creating fixed and floating charges are noted on the title for the real property if they are related to a registrable legal charge. Charges over shares in a Cayman Islands company will typically be noted on its register of members, and all security interests granted by a Cayman Islands company should be recorded in its reg - ister of mortgages and charges. Assignments by way of security are usually cre - ated by deed, and notice must be given to the counterparty in order to perfect the security. Due to the size of the Cayman Islands real estate market and the stamp duty payable on direct and indirect ownership interests in Cayman Islands real estate and the granting of security, it is generally not common to see large portfolios of real estate held by funds or investment trusts.
3.2 Typical Security Created by Commercial Investors See 3.1 Financing Acquisitions of Commercial Real Estate . 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders There are no restrictions on granting security over real estate to foreign lenders, although a foreign company holding the benefit of a legal charge over Cayman Islands real estate must register as a foreign company in the Cayman Islands. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Ad valorem stamp duty is payable on deben - tures and legal or equitable mortgages, or on charges of immovable or movable property with - in the Cayman Islands (subject to certain excep - tions that are at the discretion of the Minister of Finance). In the case of a debenture or a legal or equita - ble mortgage, or a charge of immovable prop - erty within the Cayman Islands, where the sum secured does not exceed KYD300,000, duty is 1% of the sum secured; where the sum secured is more than KYD300,000 (whether initially or after a further advance), duty is 1.5% of the sum secured. In the case of a legal or equitable mortgage, or a charge of movable property within the Cay - man Islands, duty is 1.5% of the sum secured (subject to a maximum charge of KYD500 where the security instrument is granted by a Cayman Islands exempted company, a Cayman Islands ordinary non-resident company, a Cayman Islands exempted trust or a body corporate incorporated outside of the Cayman Islands, or where the security is over shares in a Cayman
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