THE BAHAMAS Law and Practice Contributed by: Alistair Chisnall and Erica Paine, Graham Thompson
Under a Bahamian lease, a tenant is contractu - ally granted the right of exclusive possession of a property for a specified period, subject to the terms and conditions of the agreement and the rents thereby secured. Under a licence, an own - er grants permission to a licensee for the use and occupation of a property. However, unlike a tenant under a lease, the licensee does not have exclusive possession or proprietary rights to the property. 6.2 Types of Commercial Leases Standardised forms of commercial leases have not yet been adopted and agreed for use in The Bahamas. While the preferred forms of lease agreement used are generally comparable and similar in style and content, there may also be wide variation between those used by smaller local developers or landlords and those used in larger resort, tourist or commercial complexes, which require more sophisticated provisions. 6.3 Regulation of Rents or Lease Terms Lease agreements and the terms between the parties are freely negotiable and subject to con - tract. Certain limited covenants are implied by the Conveyancing and Law of Property Act, 1909, but the material commercial terms are open to agreement between the parties. 6.4 Typical Terms of a Lease In July 2019, The Bahamas government over - hauled the tax regime for real estate transac - tions and made leases (along with many other real estate transactions) subject to VAT. The tax treatment of leases varies depending upon the length of the term of the lease, with leases for five years or more (other than leases of dwell - ings) attracting VAT on both the capital sum pay - able for the lease and the periodic rent payments (with the VAT payable on periodic rent payments
only being able to be claimed as an input tax deduction). Under a typical Bahamian lease agreement, the following is generally industry standard: • the tenant is responsible for repairing the leased premises; • the landlord insures and maintains the build- ing and the common parts; and • rent and additional charges (such as com - mon area maintenance charges and/or utility charges) are paid monthly or quarterly, and The variation of rent is freely negotiable and sub - ject to the contractual agreement of the parties. Well-drawn commercial leases often make provi - sions for rent to be reviewed or updated at a cer - tain agreed stage or date but, practically speak - ing and more commonly, the issue is addressed generally in advance. 6.5 Rent Variation There is no legal or regulatory restriction gov - erning the agreement between the parties of how new rent may be calculated. The industry standard commonly used is that increases are in line with the Consumer Price Index (CPI) or a pre-agreed percentage. 6.7 Payment of VAT Under the VAT Act, leases are subject to the pay - ment of VAT unless exempted. The rental of a “dwelling” (meaning a building or premises intended to be used as a place of resi - dence or abode of a natural person) is exempt from VAT. However, for vacation homes that are rented or let for a continuous period not exceed - ing 45 days, VAT is payable at a rate of 10% when the lease falls due for renewal. 6.6 Determination of New Rent
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