Real Estate Glossary
Many of you have asked for us to explain the jargon that real estate professionals, builders, and newspaper advertisers use real estate. Here are some buzzwords that we've translated to plain English. Additionally, we've included other words that you will encounter during a typical real estate transaction.
United States Real Estate Glossary || Commercial Real Estate Glossary || British Real Estate Glossary
Helpful tip and rules in Real Estate in the Bahamas
Current Real Estate Legislation, Stamp Duties, and Taxes as for The International Persons Landholding Act, 1993.
The repeal on the 1st January 1994 of The Immovable Property (Acquisitions by Foreign Persons) Act drew a sigh of relief from many attorneys and real estate agents.
Registration: The International Persons Landholding Act 1993 encourages foreigners or companies owned by them to purchase a second home in The Bahamas as this area was thought to have the most significant potential. If a foreigner acquires a single family dwelling or vacant land to be used in the construction of such a dwelling then he no longer needs to obtain a permit from the Government (specifically the Investments Board) prior to the purchase. He need only register the acquisition with the Investments Board. Permanent residents of The Bahamas and foreigners who inherit property in the Bahamas are now treated more kindly. In neither case are they to obtain a permit before acquiring land but must merely register subsequently.
Permit: The foreigner will require a permit however if (1) the property is undeveloped land and of five acres in size or larger, or (2) the property is not a private residence, or it is not intended for development as such. Failure to obtain a permit will render the acquisition null and void but the foreigner will be entitled to recover all monies paid in consideration of the acquisition less any legitimate deductions. If a permit has been granted for the acquisition of land and the intended usage changes then the permit must be varied by the Board otherwise it will be invalid. A registration certificate or permit must be included along with title documents to be recorded in the Registrar General’s Office otherwise the recording will be null and void.
Mortgages: The new Act is not intended to be a stumbling block for legitimate credit transactions. It provides that licensed banks, trust and insurance companies who acquire an interest in or take possession of property under a Court Order must register that acquisition or fact of possession. Acquisition by way of foreclosure under a mortgage or of land acquired by an authorized foreign state will not require a permit but must be registered.
Leases: Foreigners are not required to obtain permits, register leases or letting agreements unless they are for trade or business purposes and the term can exceed 21 years.
Incentives: In line with its policy of actively encouraging foreign investment, the government has included in this Act a provision that a foreigner no longer pays a double rate of stamp duty. He now pays the same single rate as a Bahamian. Furthermore, a foreigner who owns a home in the Bahamas may now obtain an annual home owner resident card upon application and payment of a fee to the Director of Immigration. The Card authorizes the entry of the holder and his immediate family. Their stay in the Bahamas is authorized provided there are no restrictions for policy reasons or under the Immigration Act.
Schedule of Fees: Application for registration-$25.00, Application for permit-$25.00. Certificate of registration: (a) the value of the property is $50,000 or less-$50.00. (b) The value of the property is over $50,000 but under $101,000-$75.00. (c) The value of the property is $101,000 and over-$100.00. Homeowner resident card-$500.00.
The Government Stamp Tax on Property Conveyance: A graduated tax is payable on the conveyance of all real property in The Bahamas based on the value as follows: Up to and including $20,000 – 2%, From $20,000.01 to $50,000 – 4%, From 50,000.01 to $100,000 – 6%, From $100,000.01 to $250,000 – 8%, $250,000.01 and over – 10%. The usual practice in the Bahamas is for the tax to be shard equally between buyer and seller unless otherwise agreed upon.
Real Property Tax: The statue provides for a general assessment of real property by the Chief Valuation Officer of the Commonwealth of The Bahamas. This applies to Bahamians and non-Bahamians owing real property in The Bahamas not exempt from taxation as indicated in “Remarks”. “Bahamian” is define as a citizen of The Bahamas or as a company registered under The Companies Act in which at least 60% of the shares are owned beneficially by Bahamians. The returns are due on or before December 31 each year and must be filed with The Chief Valuation Officer of the Commonwealth of The Bahamas. Owners are required to file a Declaration of Real Property.
Remarks: The return must be signed by the owner and witnessed by an “authorized person” defined as a magistrate, attorney, registered medical practitioner, bank officer, minister of religion, justice of the peace or notary public within The Bahamas or similar person outside the Commonwealth. Such forms may be obtained from the Chief Valuation Officer. Property is assessed before October 15. The Chief Valuation Officer may, if it appears that any property subject to assessment has not been assessed, within the next 10 years, assess the property. The Chief Valuation Officer is also required to publish before October 15, (once in The Gazette and once in a daily newspaper published and circulated in The Bahamas), a notice stating: (1) Copies of the assessment lists are available to the public at the Treasury and office of the Chief Valuation Officer; (2) Assessment notices for each owner of property liable to tax are available at places specified in the notice; (3) Five days after the notice’s publication, a notice of assessment is deemed served on every owner of property subject to tax; (4) A notice of assessment may be sent by mail to any owner of property by the Chief Valuation Officer after publication in The Gazette; (5) Any other matters which the Chief Valuation Officer, with the Minister ’s approval, deems necessary.
Objections to a notice of assessment must be made in writing to the Chief Valuation Officer, within 30 days of service of the notice, stating grounds upon which the objection is made. The Chief Valuation Officer may request that the tax levied be paid in whole or part at the time of objection.
Taxes are due within 60 days of the date on which the assessment notice is deemed to have been served. Also, payments of one or more quarterly installments must be made within those 60 days. These payments should be made to the Public Treasury in Bahamian or US dollars, preferably as a bank draft or international postal order. Personal checks are not acceptable.
Rates of Taxes: The tax rate on real property set in 1994.
In respect of owner-occupied property: The first $100,000 is tax exempt. On that portion in excess of $100,000 and less than $500,000 the rate of tax is 1% of the market value of the3 property.
On the portion in excess of $500,000 the tax rate is 1.5% of the market value of the property.
In respect of unimproved property other than unimproved property exempt by virtue of Section 39 of the Real Property Tax Act: Upon that part of the market that does not exceed $3,000 a fee of $30.00. Upon the part of the market value which exceeds $3,000 but does not exceed $100,000 a tax rate of 1% per annum of the market value of the property.
In respect of any other property: Upon that part of the market value that does not exceed $500,000 a tax rate of 1% per annum of the market value; Upon that part of the market value in excess of $500,000 a tax at the rate of 2% of the market value of the property. Market value is defined as the amount the property would realize, if sold in the open market, without any encumbrances or restrictions. If the return is not filed, the owner is guilty of an offense, and upon conviction thereof, may be fined up to $3,000. Persons knowingly make false statements may be liable upon conviction to a fine of up to $3,000 or six months imprisonment, or both fine and imprisonment. If the tax is not paid on or before the last day the tax becomes due, a 10% surcharge is added. In the case of an extension of time, the Chief Valuation Officer may postpone the date on which the tax is payable in a particular case, by notice in writing.
Exemptions: Property owned by Bahamians and situated in the Family Islands is exempt from property tax. Property approval as commercial farm land (by Ministers of Agriculture, Trade and Industry and Finance) is eligible for property tax exemptions.
Also exempt from property tax are:
Unimproved property owned by Bahamians, meaning property without physical additions or alterations, or any works benefiting the land which have not increased the market value by $5,000 or more. Places of religious worship: school buildings and their gardens and playing areas; Property owned by foreign governments; Property owned by foreign nations used for consular offices or residences of consular officials and employees; Property used exclusively for charitable or public service from which no profit is derived.
Insurance Policies in The Bahamas
Leasing and Renting Definitions
Gross Lease: A gross leas is one in which the landlord agrees to pay all charges against the property leased which are normally incurred through ownership.
Net or Full Repairing Lease: A net or full repairing lease is one in which the tenant assumes payment of all property charges, including the rents, taxes, insurance, all service maintenance and repairs.
Percentage Lease: A percentage lease is one in which is measured in full, or in part, or is dependent upon business in dollars, transacted by the tenant through the use of the property.
When Commission is Earned: A commission on a lease is earned when, through the agency of the broker, the terms of the lease have been agreed upon as evidenced by cash deposit or written agreement.
Business Properties: On month-to-month, summer, winter, or yearly tenancies the rate of commission shall be 10% of the total rental. The minimum commission shall be $50.00.
a. On leases up to 30 years the charge shall be not less than 10% of the rental for the first 5-year period or part thereof; and 3% of the rental for the next 20-year period or part thereof.
b. Leases for 30 years or longer shall be treated as sales. If the lease is a net lease, the value of the property shall be the fair market value as of the date of execution of the lease, and the commission shall be the applicable rate for that type of property.
c. Net leases for under 30 years: the annual taxes and insurance on the property shall be added to the annual rental and the sum of these shall be used as the basis for computing the commission as provided in Paragraph 1 above.
d. On percentage leases with minimum guaranteed rental: The broker shall charge the same commission that would be received if the minimum guaranteed rental were a fixed, straight rental for the full term of the lease. Furthermore, the broker shall charge a percentage commission on all additional rental paid to landlord by tenant during the term of the lease. The percentage to be charged on the additional rental for any given year of the lease, shall be the percentage applied to the minimum guaranteed rental for the same year. The commission is to be paid as the additional rentals are received by the landlord.
e. Straight percentage lease without minimum guarantee: The broker shall charge a percentage commission on all rentals received in any lease year. The percentage to be charged on the excess rental for any lease year shall be the same percentage that was applied for that year to the rental on which the initial commission was computed, payable as payments are received by the landlord and an agreement covering these payments shall be made in writing at the time the lease is executed.
f. Leasing Fees-Agriculture Leases: The commission for leasing agricultural property shall not be less than 10% of the total rent. If the lease is on a crop-sharing basis, the commission shall be computed upon the cash rental value of the real property. If the Realtor elects to collect the commission when the crop-share is received by the landlord, the commission shall not be less than 10% of the landlord’s share of the gross rental.
g. Option to renew lease-within six months:
1. If the lease gives the tenant an option to renew or extend the term, and the tenant exercises said option and / or remains in the premises or leaves it temporarily for six months or less and returns beyond the time specified in the original lease then the landlord shall pay the Realtor an additional leasing commission computed at the same rate that would have applied had the renewal periods been a part of the original lease.
2.If any lease for a shorter period than 5 years does not contain an option to renew, and the tenant renews his lease or remains in the premises on a month-to-month basis, the Realtor who negotiates the original lease shall be considered the procuring Realtor for the renewal or extension period up to a total term of 5 years, and the landlord shall pay a leasing commission computed at the same rate as if the renewal period has been a part of the original term.
Option or First Refusal To Purchase: If a lease contains an option or first refusal to purchase, the Realtor shall collect the regular leasing commission and, in addition, shall have a written agreement from the landlord agreeing to pay full sales commission in the event the property is sold under the option or first refusal rights in the lease.
Cancellation Clause In The Lease: If a lease contains a clause permitting cancellation by tenant without penalty, the Realtor may charge only for the non-cancelable term of the lease. If the tenant continues in possession then the period beyond the cancellation date3 shall be considered as a renewal or extension. If the lease contains a clause permitting cancellation by the landlord, the Realtor shall charge for the full term of the lease.
Sub-Leasing: A Realtor shall handle each lease or sub-lease as a new transaction, and shall charge the established rental commission on total gross rent.
All reference is from the Bahamas Real Estate Handbook that was produced by the members of the Association.
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