Buying Property in the Cayman Islands

The Cayman Islands has always had an active real estate market. This article provides a brief overview of the legal and practical aspects of buying and selling real estate in the Cayman Islands. However, it is not intended to deal exhaustively with all aspects of the subject and proper legal advice should always be obtained before entering in to any real estate transaction. 

The Land Registry System 

As an overseas territory of the United Kingdom, the Cayman Islands enjoys a political stability which may not be present in other locations in the Caribbean. To protect ownership interests in land, there is a Land Registry System maintained by the Government of the Cayman Islands and governed by the provisions of the Registered Land Law (1995 Revision) (the "Law"). 

The Law creates a Land Register which contains a record for each parcel of land in the Cayman Islands, indicating ownership interests, mortgages and charges against the land, easements and restrictions, and other legal and equitable interests in land. Thus, a search of the Land Registry pertaining to a particular parcel will reveal the necessary information to allow a buyer or mortgagee to enter into a transaction with respect to that parcel. When a purchaser enters into a contract to buy property the risk of an intervening interest being registered can be eliminated by filing what is commonly known as a "Search and Stay". This essentially "freezes" the title and prevents any other interests from being registered against the parcel during the priority period until it is transferred to the purchaser. In this way, the purchaser can be certain he or she will obtain the property encumbered only by interests they were aware of at the time of entering into the transaction. 

Once a person is registered as the proprietor of a parcel of land, that ownership is absolute and protected by the Law. In the event an error is made by the Registrar in registration of a transfer or any other interest, any person who suffers a loss as a result of such an error is entitled to be indemnified by the Government of the Cayman Islands. The result is a Land Registry System that provides owners, lenders and others with full and complete protection of their proper interests and rights in land. 

Another feature of the Land Registry System is the ability to obtain a registered and secure leasehold interest in land. Any parcel of land or portion thereof can be dealt with by way of a lease, and leases can be registered on the system as other interests are, protecting both landlord and tenant. 

Strata Titles Registration Law (1996 Revision) ("STRL") 

Many properties in the Cayman Islands are multiple unit complexes divided into individually owned condominium or "strata" units. The STRL is the statute that governs the registration of "strata plans" and creates strata, or condominium, corporations similar to those in existence in many other jurisdictions. A strata plan consists of two elements being the individual units with separate titles, and the grounds, common areas, amenities (pools, tennis courts, etc.), collectively known as the "common property". The strata corporation holds the title to and manages the common property. Maintenance fees are collected from the individual unit owners and applied to maintaining all of the common property. The individual unit owners hold title to their units in the same way as the owner of any other parcel of land, and the Land Register maintains the same type of records for these strata units. 

Stamp Duty 

Although there are no income or property taxes levied in the Cayman Islands, the government needs to take in revenue to pay for its programs and services. One of the ways that revenue is generated is by the imposition of stamp duty on the transfer of land. For property on Grand Cayman, which is where almost all the population of the Cayman Islands lives, there are generally two different rates of stamp duty. In the popular Seven Mile Beach area, the stamp duty payable on transferring land is 9% whilst on the rest of the island, the stamp duty is 7.5% of the fair value of the property, subject in each case to the concession noted below. 

Whilst the Cayman Islands enjoyed a brisk and expanding real estate market for many years, in recent times that market has been adversely affected by world economic conditions, by concerns over air travel and, most recently, by the effects of Hurricane Ivan in 2004. In an effort to stimulate activity the Cayman Islands government in 2001 announced a reduction in the stamp duty payable on real estate transfers to 5% throughout Grand Cayman. Given some of the very high property values in Grand Cayman, this can amount to a significant saving on some properties, and can make even the lower value transactions more attractive to purchasers. Although the reduction was originally to be a one year programme, expiring in November of 2002, the government extended the concession on several occasions and as of this date there is no expiry date on the concession and most consider that the 5% rate is the status quo at this time, although there is no guarantee the government will not look to increasing this duty as a revenue generating measure in the future. 

Real Estate Marketing 

There are a number of real estate agents operating in the Cayman Islands. Most of them are members of an association called the Cayman Islands Real Estate Board Association ("CIREBA"). While there is no legislation governing the activities of real estate agents, CIREBA has rules and regulations governing its members' activities. The rules contain a complaints and discipline process which is available to members of the public aggrieved by the actions of a realtor. Many of the agents are affiliated with the familiar international real estate firms. 

Legal Services 

Legal advice should always be obtained prior to entering into any property transaction. A lawyer will ensure that all necessary searches are conducted, all documents are prepared and executed properly according to the Law, and that at the time of completion the interests of the client will be fully protected. In the case of purchases of condominiums it is vital that a purchaser is fully aware of all liabilities they will be assuming in relation to the strata corporation, including commitments to major capital expenditure or repairs. Without proper attention to such details, a buyer or seller could be faced with unexpected and potentially disastrous results. An intervening and unexpected interest may appear on a buyer's title, seriously affecting the value of the real estate, or worse, a buyer may hand over the purchase price and receive a transfer that is improperly drafted or executed. Similarly, purchasers of condominiums may be exposed to liabilities to the strata corporation of which they were unaware. 

Completion generally occurs on an agreed possession date, and involves exchanging the Transfer of Land, and discharge of the seller's mortgage, if any, for the balance of the purchase price. For the purchaser, retaining a lawyer will help ensure that they will obtain a Transfer that will properly convey ownership of the property. For the seller, the lawyer can assist in verifiying that the purchaser has satisfied any contractual conditions and that any necessary mortgage discharge has been obtained and held in escrow for the bank pending completion. The lawyer will also prepare all the necessary transfer documents and ensure that the funds are properly paid to the vendor on completion.  

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