BERMUDA Law and Practice Contributed by: E Scott Swainson, Katrina Dickson and Erik Gotfredsen, Wakefield Quin Limited
2.11 Legal Restrictions on Foreign Investors Foreign investors will generally require govern - mental consents to acquire or take security over Bermuda real estate. Individuals A non-Bermudian individual wishing to acquire property must obtain a licence to acquire land from the Minister responsible for Immigration. Application is via a prescribed form and requires financial and personal references. A non-refund - able application fee is payable at submission, and an additional licence fee is payable upon grant of the licence. Limitations Property must be “made available” to Bermudi - ans who are willing to pay an equivalent value. Non-Bermudians may not buy raw land (unless building a hotel residence, within a licensed The licence fee is based on a percentage of the purchase price, dependent upon the nature of the property 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 residen - tial land in an LLC or trust. A corporate investor beneficially owned/con - trolled by non-Bermudians requires further cor - porate approvals, which may include a licence to do business in Bermuda and/or to take mort - hotel scheme). Licence Fees
gage security. A company 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 overseas bank to lend funds on the secu - rity 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 Commercial real estate is commonly secured by way of legal charge or mortgage deben - ture. Local banks may also require sharehold - ers’ guarantees, an assignment 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 Regis - trar of Companies. Failure to register the security for the full amount of the borrowing. 3.2 Typical Security Created by Commercial Investors Security
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