Buying Cayman Real Estate
Buying:
Buying a property in the Cayman Islands has many advantages, not least that if you are staying for some time, mortgages tend to work out cheaper than rents over a three to five-year period. There are no restrictions on foreign ownership of real estate if the property is for personal use and there are no annual property or capital gains taxes. If the property is rented out as an investment then no tourist tax is payable if the property is rented to residents. Cayman’s Land Registry office is well-run and modern, enabling transfers to be relatively quick and simple. Every piece of property is registered under a unique block and parcel number, which means every owner is registered and the Government guarantees the right of ownership. A potential purchaser may examine the records regarding any piece of property to check whether there are any liens, charges, or restrictions on it.
Unless stipulated within the covenants for a particular development, there are no time deadlines for building on raw land. Indeed, the land can be held undeveloped indefinitely and many families are land banking for future generations. Planning approvals are valid for five years following the grant of planning permission. Building time in Cayman is relatively fast and most homes up to 3,500 sq ft can be built within a six to eight-month period from the commencement of construction. Allowing four to six months for your architect to design and obtain planning approvals and prices, you can expect to be able to design and build a home in just over a year. It is very important however that you take local legal and real estate advice when buying land in Cayman, particularly if you are buying from a company that is based somewhere other than the Cayman Islands. It has been known for Cayman land to be sold at international property fairs at a much higher price than you can buy it for locally. Therefore, if you are thinking of buying land in Cayman do your due diligence and check that the prices they are quoting you per acre are accurate.
- Water Bills: Make sure the final water bill on the property has been paid by the previous owner. Though technically both water companies cannot hold you responsible for any outstanding balance, unpaid bills can cause problems.
- Air Conditioner Servicing: Another thing worth checking is whether the property owner has been regularly servicing the a/c units. A lack of regular maintenance will greatly reduce the life expectancy of air conditioning condensers and new systems can cost thousands of dollars. As a condition of the sale, request that the seller have the property’s units serviced and provide a report on their condition.
- Pest Control: It is worth checking if the previous owners have had the property sprayed regularly for ants, roaches and other pests. If you do not have your house sprayed regularly, you will quickly find you have an ant or even worse, roach infestation problem. If you are buying a wooden house, you absolutely must get the house checked for termites by a professional before you buy the property. A severe termite infestation might render the property unsalvageable.
- MEP Report, Home Inspections, and Site Surveys: As a condition of purchase it is very important that you get a Home Inspection and/or an MEP report (Mechanical, Electrical, Plumbing) done on the property before you finalize the sale. Significant problems can reduce the value of the property. If you are purchasing raw land then a Conditions Site Survey is recommended by a qualified engineer who will assess, among other things, whether your new house will need to be built with pilings, thus hugely increasing the cost of the building. For more information on what the technician does, why it is important, and a list of recommended vendors, please visit the Home Inspections and Site Surveys page.
- Planned Special Assessments: If you are buying a condo, a good realtor will request a report from the strata’s property management company that confirms whether any special assessments are planned on the apartment complex. Special assessments may involve considerable costs and you might well be able to get the existing owner to pay for them (or have them deduct it from the sale price).
- Hidden Costs: Ask your realtor to request a breakdown of the monthly costs of running the property in the summer and in the winter months. It is not uncommon for a four-bedroom house on a 1/3 acre (particularly in a windy position) to have an average water bill of CI$650 per month and an average monthly electricity bill in the region of CI$1000-CI$1500+ depending on the month of the year, size of the house and whether the property has been well insulated. If the house has Icynene spray foam insulation in the attic, it will not only significantly reduce your electricity bills but help hold your roof together in the event of a major hurricane.
Stamp Duty & Other Charges:
Stamp duty, which is payable on all real estate transfers and purchases (other than those between close family, aka ‘by love and affection’), is 7.5%. However, the first time Caymanian buyer will pay no stamp duty if the property is below CI$300,000 (2% if it is over CI$300k but does not exceed CI$400k) and is going to be owner-occupied. Stamp duty on bare land purchases by first time Caymanian buyers are set at 2% for land that is valued above CI$100k but does not exceed CI$150,000. There are some zoning exceptions.
Stamp Duty is paid by the buyer on the purchase price or market value, whichever is higher (as assessed by the Lands and Survey Department), but NOT on chattels purchased with the property. The Duty must be paid within 45 days of a contract being signed.
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Other charges associated with purchasing typically include:
- A 1% charged on mortgages of less than CI$300,000 and 1.5% on mortgages of CI$300,000 or higher. You should budget up to 1% for legal and registration fees. Visit the Legal Conveyancing page for a list of attorneys and law firms that specialize in real estate transfers.
- When building a house, provided that stamp duty is paid before construction begins, duty is payable only on the land value and not on the building after it has been built. There are building permit fees that are charged according to the square footage of the property being built.
- When purchasing with bank financing, the bank will require a report on the ‘Market Value’ of the property. Each lender has its own rules but the report will usually need to be prepared by an approved firm of professional valuation surveyors. Aim to pay in the region of CI$400 for this report.
For more detailed information about fees, administration, exemptions, chattels, etc. the Lands and Survey Department of the Government has a very useful website at www.caymanlandinfo.ky or call (345) 244 3420 and they will be happy to discuss your specific circumstances.
Know Your Client/Customer (KYC)
Please keep in mind that the sale or purchase of real estate in the Cayman Islands constitutes as Relevant Financial Business for the purposes of Cayman’s anti-money laundering measures.
As part of the Know, Your Client/Customer (KYC) requirement, your real estate agent or any professional acting in relation to a real estate transaction are required by the Cayman Islands Government to collect your identification details such as passport or driver’s license numbers and source of funds (by way of a bank statement) as well as other relevant information to finalize the transaction.
Mortgages & Borrowing
A number of banks and financial institutions offer mortgage packages. Interest rates are quoted based on the KYD and USD prime rate published in the Cayman Islands by the retail banks. The prime rate in Cayman normally fluctuates in accordance with changes in the United States Government Federal Reserve rate, also referred to as the “New York Prime Rate.” Banks usually ask for deposits of between 10%–35% as a contribution towards the purchase price or construction cost. Unlike the UK, interest-only mortgages do not exist in Cayman. Mortgage amortization terms are normally offered from 15-30 years and can be taken out in CI or US dollars. It is worth comparing what kind of deal the different banks will give you, as a variance of 1% or even 0.5% on your interest rate will make an enormous difference. Banks will usually charge between 1-3% above the prime rate, giving the lower percentage rate to those with a greater deposit. Banks also charge a commitment fee of up to 1% of the loan amount and some charge an early repayment penalty. It is recommended that you establish a meeting with your chosen bank to determine the best possible rate and terms that can be offered. Cayman’s banks have historically been very cautious when lending money.
For more information on mortgages and a list of local banks, see our Money, Banking and Mortgages page.
Insurance Required for Mortgages – Life Insurance
Many banks will require a life insurance policy to be collaterally assigned to them for the amount of your mortgage. Your bank loan officer will advise if such a policy is needed for your mortgage purposes. With life insurance, as with any product of this nature, it is definitely worth your while to shop around and check quotes, coverage terms, reputation and customer service strengths of several providers. This ensures that you are comfortable getting the best rate possible, rather than simply settling on your bank’s built-in provider, which often ends up costing significantly more than alternative options. There are numerous providers who offer life insurance in the Cayman Islands but an independent broker will do the shopping around for you.