Business

Be ridiculously serious about real estate investment

Legal Notes

Alicia Hussey

Wednesday, September 26, 2012    

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Real estate transactions are exciting, so much so that the business of buying and selling real estate has formed the substance of several very engaging and entertaining TV shows. We become consumed with watching house-hunters, investors and many property virgins seek to acquire real estate for various purposes. What is usually not revealed in many of these TV shows is the hard behind-the-scenes work which goes into ensuring that these transactions are actually legally and commercially sound.

The business of real estate is a serious one, particularly in today's reality when real estate prices are seen as 'ridiculous' by many. As such, when you decide to invest millions, of mostly borrowed money, to acquire real estate, whether as a residence or for business, you must be 'ridiculously serious' about your investment. There are certain enquiries that must be made and investigative steps which, especially as a purchaser, you must take. For example, you can ill afford to overlook the need to have a title search done and conduct a survey of the property at the outset.

There are two types of titles to land in Jamaica; registered and unregistered. A registered certificate of title is the document created by the Titles Office. Under our system of land registration, the certificate of title represents absolute, valid and indefeasible ownership by the registered proprietor of the land contained in the certificate. The government is the custodian of all title records. Therefore, when you are issued with a certificate of title by the Registrar of Titles, it is called a "duplicate certificate of title" because the original must be retained at the Titles Office as stipulated by the Registration of Titles Act. For unregistered land, there is common law title, usually a deed of conveyance which indicates ownership. This common law title may be formalised and made official through the issue to the land owner of a registered title when the necessary steps to bring the land under the operation of the Registration of Titles Act are undertaken.

Whether you are purchasing registered or unregistered land, great care should be taken to investigate title, bearing in mind that the investigative steps are generally far more extensive in the case of unregistered land. In this case, ensuring that the vendor can prove good title and can establish that there are no defects in the chain of title will go a far way in avoiding potential headache, heartache, litigation and losses. These are ills which may beset you in the event you find yourself locked in at the advanced stage of a transaction with persons who do not possess good title to land that they assumed was theirs.

Buying and selling real estate may be as complicated as it may be straight-forward. Transactions are often as diverse as the persons involved and so each individual transaction must be given the care and attention it deserves. The circumstances faced by purchasers will vary, particularly in relation to the nature of the land to be purchased. Different considerations are given to whether the land intended to be purchased is undeveloped, landlocked, agricultural, a strata lot, a townhouse, a commercial building, you name it. There are separate considerations to be applied, for example, to purchasing units in a new or proposed residential or commercial development, pre-construction contracts and purchasing with cash as against obtaining mortgage financing. Additionally, a further set of considerations will apply to issues relating to zoning and use, encroachments, restrictive covenants, caveats and the manner in which the title is to be issued when you are purchasing jointly with other parties.

It cannot be overemphasised that proper legal representation is crucial for protecting your interests when making as significant an investment as real estate acquisition in Jamaica today. It is critical that you are aware of the conditions of any proposed mortgage financing and that you secure a proper understanding of the provisions of the documents involved in a sale, especially one which is financed by a mortgage. Of course, all of this must happen before you sign the Agreement for Sale or other transaction documents. Fundamental to transacting any real estate purchase or sale is obtaining a full appreciation of the fees and costs involved and the timeliness for payments. Whether it be the payment of Transfer Tax and Stamp Duty to the Government or a further payment to the vendor, the repercussions of missing a payment deadline may be to your financial detriment.

Apart from your education, investing in real estate may be the most valuable investment you undertake and should never be taken lightly. Guarding your real estate investments and having your transactions properly guided at each stage, through to a smooth and on-time closing, will serve your interests best. This will go the distance in avoiding the pitfalls of those oversights and common mistakes which often lead to disputes and property-related litigation.

Alicia Hussey is an Associate at Myers, Fletcher & Gordon and is a member of the firm's Property Department. Alicia may be contacted via alicia.hussey@mfg.com.jm or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.

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