Are you presently considering buying real estate in Grenada? If so you may find this article worth reading. It may assist you when budgeting to avoid the mistake prospective purchasers of real estate sometimes make. The mistake being to focus only on the price requested by the seller. However this is not the complete picture. There are other incidental costs. There would be legal costs, taxes and other expenses associated with the purchase. These additional costs can amount to significant sums. Look out for them.
Let’s look at an example of the purchase of a house for $350,000. Once the purchaser decides to purchase it is strongly recommended that they should get a lawyer to represent them before signing anything. Sometimes purchasers put the cart before the horse by signing agreements to purchase property and only going to a lawyer after. This often leads to difficulties.
Based on the Grenada Bar Association recommend fees, the legal costs that a lawyer should charge for representing a purchaser, which includes preparing the deed, checking that the seller can pass good title and checking other documents related to the sale, is 2% of the sale price or in our example here $7,000.00. In addition to their fee, a lawyer may incur expenses such as the cost of a title search which typically costs $150.00. These are referred to as disbursements and are payable by the purchaser in addition to the attorney’s fees.
Mortgage
If the purchaser has to get a mortgage they would have to pay the legal fee for the mortgage deed even if it is the bank’s deed and it is prepared by the bank’s lawyer. The legal fee for preparing the mortgage is half of the fee the purchaser pays their lawyer. That sum in our example would therefore be $3,500. 00.
Stamp duty
On every transfer of property the government has to be paid a tax in the form of stamp duty. Based on the Stamp Act, the sum payable by the purchaser is 1% of the purchase price. This amounts to $3,500.00. And the sum payable on the mortgage deed would be $1094.25. The mortgage deed is the bank’s deed but this sum would be included as part of the loan.
So in practice, a house which the purchaser agrees to pay the seller $350,000.00 would in reality costs plus $365,000, if the purchaser has to obtain a mortgage.
Non-Grenadian Purchaser
If the purchaser is not a Grenadian, in addition to the above costs they would have to obtain an Alien Land Holding Licence. The legal fee associated with the application for the licence is $2,000.00. The licence itself costs $25.00 which is payable to the government of Grenada.
If the licence is obtained and the purchase proceeds, the alien purchaser will have to pay 10% property transfer tax. The transfer tax is calculated on the sale price of the property less $20,000. In our example therefore the property transfer tax will be 10% of $330,000 or $33,000.00. Hence for a non-citizen who has to get a mortgage in Grenada, instead of $365,000 the total coast would be plus $398,000. If the alien does not require a mortgage then his costs would be plus $393,000.
Miscellaneous expenses
In addition to the above costs, there may be issues connected with the property which could cause the purchaser to incur costs. For example, if the purchaser is buying a portion of a larger parcel of land, they may be required to have a survey done to obtain a plan.
Or there maybe issues regarding boundaries with an adjoining land owner and the purchaser properly advised would consider it prudent to do a survey.
Or the property may not have been sold with vacant possession and the purchaser has to incur legal expense to obtain vacant possession.
In conclusion, the additional costs for a typical Grenadian purchaser of a property for $350,000.00 could be plus $15,000.00 meaning that the actual costs of a property for which the seller is asking is $365,000.00. And in the case of a non-Grenadian purchaser, the additional costs of a property for $350,000.00 could be plus $40,000.00. These are minimum costs. Additional issues which may require the purchaser to do a survey or take other measures would lead to even greater incidental costs.
Prepared for KALINA Property Solutions by Joseph Ewart Layne.
Joseph Ewart Layne is a graduate of Hugh Wooding Law School; he holds an LLB (Honours) and an LLM (Corporate & Commercial Law) from London University and a LLM (Legislative Drafting) from UWI, St. Augustine. He also holds a BSc. (First Class Honours) in Applied Accounting from Oxford Brookes University and is an ACCA Affiliate.
This article is for general information purposes only. Its contents do not constitute legal advice. Before you act on any matter in this article, seek advice from an attorney-at-law.
