Q&A

AUTHOR BIO

NOTICE

The information posted herein is of a general nature and is not intended to be legal advice nor to establish an attorney-client relationship. Any answers or information about case results are not misleading, depend upon a variety of factors, and the answers or results do not guarantee or predict a similar result. If you need legal advice, you should engage an attorney that practices in the jurisdiction and in the field related to your particular need.


The following story is the factual basis of questions and answers included below the story:

THE STORY ABOUT THE FARM ON THE BEACH 

In the early 1900s your great-grandfather obtained a 20 acre Crown Grant of beachfront property from the government (at that time thought to be of little value because it was not prime farm land). He farmed the land, married and had a son. His wife died while giving birth. Their son, your grandfather, had no interest in farming and moved to a distant country where he married and had a daughter. Your great-grandfather conveyed the farm to your grandfather and sent him the original Conveyance and Crown Grant in an attempt to lure him back to the farm. Your grandfather remained disinterested. He did not record the original Crown Grant. His daughter was your mother.  

Your mother was sent to boarding school in another country at an early age. She had had no contact with your great-grandfather due to the distance between them. She never told you about the family farm. Your mother died and her elderly parents came to say goodbye to their only daughter, and meet their only grandson. When discussing your mother’s legal affairs, your grandparents surprised you with a gift of the family farm. They gave you the original 100 year old Crown Grant and a new Conveyance from them. You hired an attorney and had both deeds properly recorded.

After his wife’s death, your great-grandfather had lived with a single mother who had a young man from a prior relationship. The young man helped farm the land and continued to farm it after your estranged great-grandfather’s death. The young man’s girlfriend was a paralegal and suggested he get a Certificate of Title for the land because he had farmed it as if it was his for over 12 years. The required legal notice was published in the local newspaper and since all relatives were in other countries no one challenged the young man’s application for the Certificate. The court granted the Certificate of Title and it was properly recorded in the land registry.  

Now there are two chains of title on the public record for the same land. The original one starting with the Crown Grant to your great-grandfather. The second one starting with the fresh Certificate of Title granted to the young man based on his undisturbed possession of the land. 

Subsequently, a U.S. developer approaches the young man who is still farming the land. He offers to purchase the beachfront land for an amount the young man cannot possibly make farming the land for the rest of his life. They reach an agreement. When the developer’s attorney has the land title researched, she finds a Certificate of Title in favor of the young man and stops her search there because the Certificate of Title is a Good Root of Title. The attorney never learns of the earlier title deeds in your separate chain of title and advises the developer to proceed with the purchase. The developer buys the land, records his conveyance and starts his development. The young man marries his girlfriend, moves away and lives happily ever after.  

You have a midlife crisis and decide to go back to your roots. You visit the land where your family came from because you are considering moving there and becoming a farmer. Much to your surprise the developer has started to build a resort on your land.  

Now what do you do? Who really owns the land? Can anyone have a better title than you? Can you kick the developer out of your land? Can you stop the developer from building and ruining your farm? What happens in this situation where there are two chains of title? Do they create competing ownership interests? Is the certainty of your ownership lost? How is the true ownership determined? Who has the strongest title? Can you and the developer decide what should be done? Must a court decide who owns the land? Who pays for the legal expenses of going to court?

As you consider this unfortunate situation, you remember that you have a chain of title of valid deeds from the initial Crown Grant to your great-grandfather, the Conveyance from your great-grandfather to your grandfather and the Conveyance from your grandparents to you. You are certain you have the stronger title and hire a lawyer to challenge the developer’s claim to your farm. The first question the lawyer asks you is whether you or your grandparents purchased a title insurance policy. Regrettably, your answer is no, neither of you did.


Q & A  

WHAT IS “PRIORITY” (See “When Does a Document or Matter Get Priority Over Another” below in this Q&A).

Priority can be defined as that which comes first in time or importance. It can also be defined as the order of position, time or place. More specific to our interest, priority in real estate matters has to do with who has a better or prior right in a piece of property. The Bahamas has a deeds and documents public records system (see “What is a Title Search” for a definition of “public record” and “What is the Title Recording System in The Bahamas” below in these Q&A). When a document is recorded in this system it acquires a hierarchal position that is based on when the document is recorded in relation to the other documents in the public record. The recorded document’s chronological position in the public record is set at the time the document is recorded. The document that is first recorded has precedence, or priority. Thus the old adage, “prior in time is prior in right”.

HOW IS THE BAHAMAS ENSURING COLLECTION OF REVENUE

The Bahamas Government has been making changes to facilitate the collection of revenue, including real property tax. One recent change is the enactment of the Financial Administration and Audit (Amendment) Act, 2015, which amends the Financial Administration and Audit Act, 2010 and requires payment of all monies due to the Government before one can conduct business with The Bahamas, receive a concession and to be able to register and / or record the ownership of any goods.

WHAT IS THE MAIN MECHANISM

The requirement of a “Tax Compliance Certificate” (the “Certificate”) as proof that payment of all tax liabilities and wage-related deductions are current (that all monies due to the Government have been paid).

WHAT IS THE EFFECTIVE PERIOD  

  1. A Certificate is valid for:-

(a)  6 months when the value of a related contract is less than $10,000; and

(b)  1 month when the value of a related contract is $10,000 or more.

  1. A Certificate can be revoked when the application for the Certificate is:-

(a)  materially incomplete;

(b)  false; or

(c)   likely or calculated to deceive.

PUNISHABLE OFFENSE

Anyone who knowingly furnishes information that is:-

(a)  materially incomplete;

(b)  false; or

(c)   likely or calculated to deceive; or

(d)  forges or is in possession of forged Certificate,

is liable on summary conviction for a fine not exceeding $10,000 or imprisonment not exceeding 2 years.

 HOW DOES IT WORK

 The Certificate must be obtained prior to conducting business with The Bahamas, prior to receiving concessions (such as the ones received under a Heads of Agreement) or prior to registering the ownership of goods.

A Certificate must be obtained to:-

      1. submit a tender for the award of a Government contract;
      2. collect payment for services rendered under a Government contract valued at $10,000 or more;
      3. receive a concession under any legislation; and
      4. register ownership or change of ownership of any “registerable good” on which tax is paid (“registerable good” and “goods” are defined in Section 2 of the Value Added Tax Act, 2014 and includes real estate)

HOW IS IT OBTAINED

Application for a Certificate must be made in the prescribed form to the Financial Secretary, Simon Wilson, currently at:-

Ministry of Finance

Cecil Wallace-Whitfield Centre

West Bay Street P. O. Box N 3017 Nassau, N.P., The Bahamas

Email:- financemail@bahamas.gov.bs                                         mofgeneral@bahamas.gov.bs Phone:- (242) 327-1530; (242) 327-1530/1                 Fax:- (242) 327-1618; (242) 327-1620; (242) 327-1620

WHEN IS IT ISSUED

A Certificate is issued when all monies due under the following Acts have been paid:-

  1. Business Licence Act;
  2. Customs Management Act;
  3. Immigration (Fees) Regulations;
  4. National Insurance Act;
  5. Real Property Tax Act;
  6. Road Traffic Act; and
  7. Valued Added Tax Act 2014.

PRIORITY OF PAYMENTS

  1. Where penalties, fines or interest are payable in addition to a tax, any payment made will be applied in the following order:-

(a)  the penalty;

(b)  where payment exceeds the amount of the penalty; the fine;

(c)  where payment exceeds the amount of the penalty and the fine; the interest; and

(d)  where payment exceeds the amount of the penalty, fine and interest; the tax.

  1. The following laws require various types of payments. When any type of payment is made under any of these laws, it is applied in the following order:-

(a)  Business Licence Act;

(b)  Valued Added Tax Act, 2014;

(c)   Stamp Act;

(d)  Customs Management Act;

(e)  Real Property Tax Act.

ADDITIONAL PENALTY

If the Government has to engage a collector (such as RPT Recovery Authority, LLC) to collect money owed to The Bahamas, the fee charged by the collector becomes an additional debt due from the taxpayer.

FOREIGN INVESTMENT

In addition to the above, pursuant to the International Persons Landholding Act, non-Bahamians are required to obtain a Permit or Certificate of Registration (authorization from the Government) to acquire land and to record the acquisition instrument. Real estate taxes must be paid before the Government will issue the Permit or Certificate of Registration.

The above is only a summary of provisions of the Financial Administration and Audit (Amendment Act, 2015 and portions of the Financial Administration and Audit Act, 2010.   It is not intended to be legal advice nor to establish an attorney-client relationship. If you need legal advice, you should engage an attorney that practices in the jurisdiction and in the field related to your particular need.

ARE THERE REAL ESTATE TAXES IN THE BAHAMAS (There are a number of exceptions to the following provision that are not addressed because of their detailed application requirements.)

Regardless of what you may have been told or read –

The Bahamas has a real estate tax, it is to be paid annually and on time.  Failing to pay your annual taxes, as in most other countries, will result in penalties, including the possibility of losing your property.  It is that simple. 

Now that the basic question has been answered, let’s put things in context.

An enduring mistaken belief exists about real estate taxes in The Bahamas.  Most investors / purchasers of Bahamian real estate have been mislead to believe one of three things:  1) that there are no real estate taxes;  2) that there are taxes but they don’t have to be paid (patently nonsensical); or  3) that taxes don’t have to be paid annually and can be paid at the time the land is sold.  These misconceptions have been created over time by attorneys, Realtors and other professionals in the industry because of past custom and practice, so let’s clear the air.

Although nonpayment of taxes may have been the practice in the past, it is no longer the case.  Previously, purchasers / investors (including entities) could get away with not paying their annual taxes and negotiating a reduced payment amount at the time of selling their land.  However, the Bahamian Government has put a stop to that practice by recent changes in the Real Property Tax Act, other related laws and more aggressive collection. The Government has hired various companies to assist in tax collection. RPT Recovery, LLC has been authorized by the Government to manage tax collection from non-Bahamians and various other entities to manage tax collection from Bahamians.

The Real Property Tax Act states in pertinent part, “there shall be charged, levied, collected and paid…upon all property an annual tax (to be called “Real Property Tax”…)”.  By the 15th of October of every year, the government issues annual notices with the amount of taxes due for the following year (taxes are paid in advance).  Annual taxes must be paid by the 31st of December of the same year of the notice.  However, regardless of whether the taxpayer gets the notice, it is the responsibility of the taxpayer to pay the appropriate tax.  Additionally, the taxpayer must file an annual return by the 31st of December to inform the Government of any improvements / changes to the land and the owner’s mailing address.  You can contact the appropriate agency at Ministry of Finance,  Cecil Wallace-Whitfield Centre, West Bay Street, P.O. Box N 3017, Nassau, N.P., The Bahamas; Email: financemail@bahamas.gov.bs; mofgeneral@bahamas.gov.bs; Phone: (242) 327-1530; (242) 327-1530/1;   Fax: (242) 327-1618; (242) 327-1620 and  (242)327-1620.

When taxes have not been paid after 30 days of being due (by the end of January of the following year), proceedings for the recovery of taxes can be taken against the owner of the land.  Additionally, after seven months of the taxes being in arrears (after July), the property may be sold to recover the unpaid taxes.

THE FACTS  ABOUT  REAL  ESTATE  TAXES  IN  THE  BAHAMAS

  1. The Bahamas has a real estate tax.
  2. Taxes must be paid every year.
  3. Any funds should be made payable to the “Public Treasury” by manager’s cheque or draft, or by wire.
  4. Taxes are paid in advance; that is, taxes for the following year are paid at the end of this year.
  5. Annual notices are issued by the 15th of October stating the amount of taxes due for the following year.
  6. Taxes must be paid regardless of whether or not the taxpayer gets a notice.
  7. Taxes must be paid every year (not when you sell your property) by the 31st of December of the same year of the notice.
  8. An annual return must be filed by the owner of the land to inform the Government of any improvements / changes to the land and the owner’s mailing address.
  9. The return must also be filed every year by the 31st of December.
  10. If taxes are not paid by the end of January of the year after taxes are due (the following year), proceedings can be started against you to recover unpaid taxes.
  11. Failure to pay taxes on time will result in penalties.
  12. Failure to pay taxes by the end of July of the year after taxes are due (the following year) can result in the sale of your property to recover the unpaid taxes.
  13. Unpaid taxes are collected by various companies on behalf of the Government.
  14. RPT Recovery Authority, LLC is the company assisting in collecting taxes from non-Bahamians.
  15. If you are non-Bahamian you should transact your tax business with RPT, which can be reached at:

    11369 Okeechobee Blvd.

    Suite B-150

    West Palm Beach, FL  33411

    Email: service@rptra.com

    Phone: (561) 880-8865

  16. Various other entities have been authorized to manage tax collection from Bahamians.
  17. The Department of Inland Revenue has been sending letters advising when an account has been assigned to a collection entity.
  18. The collection entities have been issuing 2 demand letters.
  19. If payment is not made or an agreement is not reached with the collection entity, the government will start proceedings against the owner or sell the property.
  20. The Government can garnish moneys owed to the taxpayer, including rent, salary wages and pensions, as well as monies held by others for the benefit of the taxpayer, in satisfaction of the taxpayer’s debt.
  21. Any person who does not surrender taxpayer money to the Government will be personally liable for the amount which should have been surrendered.
  22. If you hold a mortgage secured by Bahamian land, you are also responsible for the payment of taxes.

The above is only a summary of provisions of the Real Property Tax Act.  There are a number of exceptions to the above summary that are not addressed because of their detailed application requirements.  

You can contact the Department of Inland Revenue at:

P.O. Box N 13

Palmetto & Carmichael Roads

Nassau, N.P., The Bahamas

Email: financemail@bahamas.gov.bs;  mofgeneral@bahamas.gov.bs            

Phone: (242) 461-6351             Fax:     (242) 325-5750

MUST MY CONVEYACE BE RECORDED

A common misconception is that for a transfer of ownership or interest in land / real property / real estate to be valid and recognized under the law, the transfer document must be recorded in the public record (See “What is the Title Recording System in The Bahamas” below in this Q&A for a definition of “public record”). Nothing could be further from the truth. A valid transfer document is only required to be duly executed / signed, delivered by the vendor to the purchaser and accepted by the purchaser. Recording the document has nothing to do with its validity. But, recording does have everything to do with establishing the priority of ownership (See “When Does a Document or Matter Get Priority Over Another” below in this Q&A).

In The Bahamas, the Indenture of Conveyance (Deeds) is the legal document that transfers the property ownership rights of real property from one party to another. Generally speaking, a transfer of ownership is valid and considered complete once the Grantor signs the Conveyance, a witness or more affirms the Grantor has duly executed the Conveyance and a Bahamian attorney, who also serves as the notary, acknowledges the witness’ signature. Conveyances are most commonly used when a home is sold. However, they can be used at any time to add or remove a person from the title of the property (see “What is a Land or Real Estate Title (and Why Does It Matter”) below in this Q&A for a definition of “title”). Technically, the transfer of ownership is effective without the need to record the Conveyance. However, recording the Conveyance does have an importance; it is the only way to let the rest of the world know that there has been a change in the title ownership.

Although recording the Conveyance is not required by law to legitimatize the transfer of ownership, the Conveyance should be recorded after it is signed. Recording a Conveyance in the public record alters the public chain of title (see “What is the Significance of the Effective Date of a Title Insurance Commitment” below in this Q&A for a definition of “chain of title”) to show the purchaser as the legal owner. If a Conveyance is not recorded, others will not know that the change in ownership has occurred and this can bring complications and dispute in the future.

THE FOLLOWING REQUEST WAS SUBMITTED TO IDM/COMPUTITLE:-

PLEASE EXPLAIN “GAP COVERAGE”

Title insurance covers the history of a title to a piece of land (See What is Title Insurance” and “What is a Land or Real Estate Title (and why does it matter)” below in this Q&A). Title Insurance Commitments have an Effective Date (See “What is a Commitment of Title Insurance” below in this Q&A).  That date is the date of the last search done of the public records concerning the title to the piece of land (See “What is the Title Recording System in The Bahamas” below in this Q&A for a definition of “Public Record”).  The search is done from that date back into history.  The Commitment will show what is discovered during that search, including any adverse matters (which the insurance company will usually not protect the Insured against because they are known risks).  A Commitment is a reflection of what the record evidences such as the current owner, any mortgages encumbering the piece of land, judgments against owners of record, etc… (See “How  is  a  Commitment  of  Title  Insurance  Created” below in this Q&A).

The “Gap” is the period between the last time the public record is searched (the Effective Date) and the recording of the document that conveys title to the piece of land (e.g., a Deed or Conveyance) to a new owner.  That period is called the “Gap” because: 1) there has been no search of the public record for that period of time; and 2) priority of ownership is usually established by recording; that is, once the conveying document is recorded, any adverse matter against the prior owner will not affect the new owner and the new owner’s title to the land (See “When Does a Document or Matter Get Priority Over Another” below in this Q&A).

An insurance company will know of the adverse matters before the Effective Date because of the search of the public record accomplished before the issuance of the Commitment. Insurance companies (or anyone else) do not know if any adverse matters will surface during the “Gap Period”.  However, for payment of additional premium insurance companies will also insure the “Gap Period”.  Although some adverse matters may surface on the public record during the “Gap Period”, the insurance companies are willing to take that risk.  “Gap Insurance” provides coverage for the benefit of the Insured for matters that may appear in the public record during  the “Gap Period”.

For a better understanding of the “Gap Period” read “The Story About the Farm on the Beach” posted above at the beginning of this Q&A.  In that story, the “Gap Period” would be the time between when the developer’s attorney has the land title researched and finds the Certificate of Title in favor of the young man and the time when the developer records his conveyance.

HOW DO I FIND OUT IF THE PROPERTY I’M BUYING HAS MORE THAN ONE CHAIN OF TITLE / OWNERSHIP

(To better understand this particular Q&A, please read “The Story About the Farm on the Beach” posted above at the beginning of this Q&A, along with the 4 prior posts in order:  “Can There be Two Title Chains (that Represent Different Ownership) for the Same Property;” “One Property, Two Chains of Title: How Can This Happen;” “What is the Problem with Multiple Chains of Title;” and “Can I Buy a House with a Recorded Chain of Title and Still Not be the Owner.” )

The short, practical answer is that you hire the most experienced and knowledgeable research company to do your research and due diligence; and that sometimes you can’t find an existing second chain and only when someone else tells you they own your land do you learn about it (this is when you’re really glad you bought title insurance). However, in The Bahamas you have a good chance of finding out, if you use the right research company. This is not easy question to answer more fully.  This short answer requires supplementation because there are numerous factors to consider.

In the following, I will briefly mention some factors that must be considered and then mention specifics as it relates to The Bahamas. I will also make references to prior questions and answers for you to read to enable as thorough an answer as is possible in a blog. Start by reading “What is a Title Chain or Chain of Title” below in this Q&A and the other questions and answers referred to therein.

One of the contributing factor is the type of system a country uses to provide notice to the general public that a transaction has occurred or thing has happened (See “What is the Recording System in The Bahamas” below in this Q&A). Imagine the chaos if there was no public record. It would be difficult to know and difficult to prove who owned a particular property, whether a person has died or whether a company exists, which would negatively affect private rights and the local economy as a whole (to learn about the importance of titling assets in general and specifically for economic development, see “The Mystery of Capital,” by Hernando de Soto).

Then there are considerations such as: the types and number of registries; whether the registries are easily accessible; whether the registries are accurate and up to date; the types of indexes there are for the registries (e.g., grantor-grantee, field index, full text index) to the registries; the level of knowledge and experience of the researcher; whether the laws or custom and practice even require deeds and other information to be recorded, etc…

If a document is not recorded, no matter how good the public record, how thorough a search conducted or how good a researcher, the document will not be found. If you record first you will have priority over anyone who does not record. If you don’t record, your interest in the land can essentially be wiped out. That is why it is critical to get your deeds recorded as soon as possible. If need be, follow-up with your attorney to ensure your deeds are in fact recorded.

The following are some specific factors that apply to The Bahamas:

  • there is only a Grantor-Grantee index;
  • there is no requirement under the law to record a deed of conveyance of land;
  • the custom and practice has included not recording deeds;
  • the deeds and documents register (and others) has been inaccurate, not up to date and not easily accessible (i.e., the time-share register).

Given the above factors in The Bahamas, the following can occur:

  • if prior owners do not record their deeds, a person who subsequently acquires the land and records the deed will appear as the owner on the public record;
  • if prior owners do not record, a new chain of title can be started on the public record by subsequent owners;
  • if the prior owners finally record there will be two competing chains of title on record;
  • due to the limitations of the grantor-grantee index, it will be very difficult for owners in    one chain to learn about the others claiming ownership in the second chain when a title search is conducted;
  • a mortgagee can lose priority if the mortgage is not promptly recorded.

CAN I BUY A HOUSE WITH A RECORDED CHAIN OF TITLE AND STILL NOT BE THE OWNER (See “What is a Title Chain or Chain of Title” below in this Q&A.)

Yes, that is always a possibility.  Obviously, the answer to such a general question depends on the particular facts of the specific case.  But, generally speaking, yes, someone else can be the owner of the house you purchase, even in cases where the seller did not intend to defraud you.  The “Story About the Farm on the Beach” (See “The Story About the Farm on the Beach” at the top of this Q&A) is one of many situations where you think you own certain real estate, but it turns out that you may not.  

Another may be where you do not comply with certain legal requirements when buying land.  As an example, let’s use the same Story About the Farm on the Beach, but change the facts as follows:

A U.S. developer approaches the young man who is still farming the land.  He offers to purchase the beachfront land for an amount the young man cannot refuse.  To close the transaction, the developer uses his recently graduated daughter in law as his attorney.  Unfortunately, she has no knowledge about Bahamian legal requirements for foreigner’s to own Bahamian land.  Therefore, she does not obtain the required Permit from the Bahamian government as required under Bahamian law for the U.S. developer to legally own the land (See “Section 3(1), International Persons Landholding Act”).  However, she does have the U.S. developer’s deed recorded.  For the next 3 years the U.S. Developer develops the 20 beachfront acres of farmland into a multiuse resort with a boutique hotel, condominiums, residences and amenities (marina, commercial retail, etc…).

You live in Florida and go to The Bahamas for vacation.  You stay in the boutique hotel and fall in love with the resort.  You decide to buy a condominium unit as a second home and you use it frequently during the next 2 years.  Your job requires that you move to the west coast.  Due to the distance you are now from The Bahamas you decide to sell your condominium unit.  Your purchaser engages Bahamian counsel who hires IDM, Inc. to accomplish a proper title search as part of his due diligence (See “What is the Purpose of a Title Search” below in this Q&A) and finds the recorded U.S. developer’s deed, but it does not have the required Permit attached.  The purchaser’s attorney sends a letter to the U.S. developer’s daughter in law objecting on the title (See What is a Land or Real Estate Title (and Why Does It Matter) below in this Q&A).  In the letter, he claims his client cannot buy the condominium unit because the U.S. developer didn’t own it nor the land on which the condominium building was constructed when the U.S. developer sold it to you and cites the following portion of the Bahamian Act:-

  “3. (1) A non-Bahamian … who intends to acquire land … shall obtain a permit … to make the acquisition … otherwise any acquisition shall be null and void and be without effect for all purpose of law in the absence of such a permit…”

In other words, the purchaser’s attorney has told you that you do not own the condominium unit although there was a recorded chain of title consisting of the original Crown Grant, the subsequent Certificate of Title and the U.S. developer’s deed.  To add insult to injury, he also claims that it is possible that the Certificate of Title was obtained fraudulently because there is another title chain on record showing someone else as the rightful owner of the land, possibly the son of the farmer who obtained the original Crown Grant.

WHAT IS THE PROBLEM WITH MULTIPLE CHAINS OF TITLE (Read “One Property, Two Chains of Title: How Can this Happen”, below in this Q&A.)

A developer approaches the young man who is still farming the land. He offers to purchase the beachfront land for an amount the young man cannot possibly make farming the land for the rest of his life. They reach an agreement. When the developer’s attorney has the land title researched, she finds a Certificate of Title in favor of the young man and stops her search there because the Certificate of Title is a Good Root of Title (See “What is the Purpose of a Title Search” below in this Q&A for a definition of a “Good Root of Title”). The attorney never learns of the earlier title deeds in your separate chain of title and advises the developer to proceed with the purchase. The developer buys the land and starts his development. The young man marries his girlfriend, moves away and lives happily ever after.

You have a midlife crisis and decide to go back to your roots. You visit the land where your family came from because you are considering moving there and becoming a farmer. Much to your surprise the developer has started to build a resort on your land.

Now what do you do? Who really owns the land? Can anyone have a better title than you? Can you kick the developer out of your land? Can you stop the developer from building and ruining your farm? What happens in this situation where there are two chains of title? Do they create competing ownership interests? Is the certainty of your ownership lost? How is the true ownership determined? Who has the strongest title? Can you and the developer decide what should be done? Must a court decide who owns the land? Who pays for the legal expenses of going to court?

These and other questions are raised by the dual chain of title. The problem with multiple chains of title is that they create competing ownership interests. The certainty of ownership is lost. The true ownership of the land becomes unknown because of the competing claims to ownership enabled by the different chains. Either you or the developer may have the comparatively stronger title. In the unlikely event that some agreement can be reached between the competing owners, a court must decide who owns the land. Anytime you have to go to court, it will be expensive and the result is not guaranteed to be in your favor.

As you consider this unfortunate situation, you remember that you have a chain of title made up of valid deeds from the initial Crown Grant to your great-grandfather, the Conveyance from your great-grandfather to your grandfather and the Conveyance from your grandparents to you. You are certain you have the stronger title and hire a lawyer to challenge the developer’s claim to your farm.

ONE PROPERTY, TWO CHAINS OF TITLE: HOW CAN THIS HAPPEN?
(See “Can There be Two Title Chains [that represent different ownership] for the Same Property” below in this Q&A):-

Multiple chains of title (See “What is a Title Chain or Chain of Title” below in this Q&A) are enabled and/or caused by several factors including the following:-

1. outdated systems of conveyancing;
2. custom and practice of the jurisdiction;
3. recording system of the jurisdiction;
4. inadequacy of the public record;
5. poor maintenance of the public record;
6. lack of shared information between government agencies;
7. unscrupulous individuals;
8. land left vacant for extended periods;
9. land left unattended for many years; and
10. old titles (see “What is a Land or Real Estate Title (and Why Does it Matter)” below in this Q&A).

The following is a brief example of how multiple chains of title can occur:-

In the early 1900s your great-grandfather obtained a 20 acre Crown Grant of beachfront property from the government (at that time thought to be of little value because it was not prime farm land). He farmed the land, married and had a son. His wife died while giving birth. Their son, your grandfather, had no interest in farming and moved to a distant country where he married and had a daughter. Your great-grandfather conveyed the farm to your grandfather and sent him the original Crown Grant in an attempt to lure him back to the farm. Your grandfather remained disinterested. He did not record the original Crown Grant. His daughter was your mother.

Your mother was sent to boarding school in another country at an early age. She had had no contact with your great-grandfather due to the distance between them. She never told you about the family farm. Your mother died and her elderly parents came to say goodbye to their only daughter, and meet their only grandson. When discussing your mother’s legal affairs, your grandparents surprised you with a gift of the of the family farm. They gave you the original 100 year old Crown Grant and a new Conveyance from them. You hired an attorney and had both deeds properly recorded.

After his wife’s death, your great-grandfather had lived with a single mother who had a young man from a prior relationship. The young man helped farm the land and continued to farm it after your estranged great-grandfather’s death. The young man’s girlfriend was a paralegal and suggested he get a Certificate of Title for the land because he had farmed it as if it was his for over 12 years. The required legal notice was published in the local newspaper and since all relatives were in other countries no one challenged the young man’s application for the Certificate. The court granted the Certificate of Title and it was properly recorded in the land registry.

Now there are two chains of title on the public record for the same land. The original one starting with the Crown Grant to your great-grandfather. The second one starting with the fresh Certificate of Title granted to the young man based on his undisturbed possession of the land.

THE FOLLOWING QUESTION WAS SUBMITTED TO IDM / COMPUTITLE:-

CAN THERE BE TWO TITLE CHAINS (THAT REPRESENT DIFFERENT OWNERSHIP) FOR THE SAME PROPERTY (See “What is a Title Chain or Chain of Title” below in this Q&A)?

The short answer is yes. There can be different chains of title and ownership claims for the same piece of property. How is that possible, you may ask? Well it depends on a number of factors such as the law, custom and practice of the country, the quality of the public records and the type of recording system of the jurisdiction (See “What is the Title Recording System in The Bahamas” below in this Q&A for a definition of “Public Record” and/or click on the “Bahamas Land Title Registration – Join the Conversation” tab on this blog to learn about the differences between the various recording and registration systems).

As one example, the type of public record system may limit the ability to accomplish a comprehensive search of the public record to find the owner of a piece of land. For instance, in a deeds recording system with only a grantor/vendor/seller-grantee/purchaser/buyer index, as is the case in The Bahamas, it is impossible to search by the description of the land. In other words, if you know what land you are interested in, but do not have the name of a onetime or current owner of the land, you will not be able to do the following:-

1. accomplish a search for the land;
2. determine the title chain of the land;
3. accomplish a full search of the title chain of the land;
4. examine the title documents to the land;
5. accomplish an evaluation of the quality of the title to the land;
6. determine if there are more than one persons claiming ownership to the land; and
7. learn who currently owns the land.

The problem is that even if you have searched a name of one of the owners in one chain, multiple chains of title may still exist. That is because if someone outside of the first chain claimed ownership in a second chain and sold it to someone who was not in the first chain, the second chain would be comprised of a completely different group of owners. In a jurisdiction that only has a grantor-grantee index for their land records register, if you did not have the name of someone who claimed ownership in the second chain, you would never be able to discover the serious problem of the second chain.

NEW WARNING BY US EMBASSY

The US Embassy has posted a new warning on their web page urging US citizens to be extremely careful when buying or selling real estate in The Bahamas, noting that there have been instances where American citizens have lost “their entire life savings”. The Embassy recommends using a “trusted attorney to make sure there is clear title” to the property and to “look into the availability of title insurance” because “there are at least five law firms/real estate practices that offer title insurance”.

The Embassy has attempted to help its citizens. However, what the Embassy does not tell you is the relative inexperience of those law firms in the area of title insurance. The proven expert on matters of title insurance in The Bahamas is the International Data Management and Computitle joint venture, which is the most experienced agent, having been providing title insurance for almost 30 years, including supporting the vast majority of the major real property transactions in The Bahamas. Additionally, the Joint Venture has no inherent conflicts of interest because it is not affiliated with a law firm. The IDM/Computitle Joint Venture is independent, the most experienced and has offices in the US as well as in The Bahamas (See the article “Conflict, What Conflict” at the General Forum tab on this blog). It is smart to use the services of a trusted attorney when buying property overseas, but when it comes to title insurance, you may want to dig a little deeper to get to the true experts.

HOW IS TITLE INSURANCE DIFFERENT FROM OTHER TYPES OF INSURANCE

Title insurance is different from other types of insurance in that it provides the following advantages, among others:-
1. It protects your ownership of your property (See “What is Title Insurance” below in this Q&A);
2. It protects from things that have already happened (i.e, events in the history of your property; e.g., an ineffective transfer in the title chain due to a defective conveyance/deed – See “What is a Title Chain or Chain of Title” below in this Q&A);
3. Title insurance requires substantial work to be done upfront; while other forms of insurance, such as property and casualty, require little upfront work because possible future events and/or claims cannot be predicted or prevented (See “How is a Commitment of Title insurance Created” below in this Q&A).
4. The searching, examination and underwriting process done prior to the issuance of a title commitment (See “What is a Commitment of Title Insurance below in this Q&A) works to eliminate risk in advance of your purchase, rather than waiting for problems to arise after you have already purchased the property;
5. The protection continues for as long as you own the property;
6. The protection continues even after you sell your property, if you sell giving warranties of title to the purchaser (in The Bahamas there are statutory warranties of title that are implied by operation of law in most transactions);
7. Also, the protection continues after your death and your heirs are protected in the same manner as you were protected if your heirs continue to own the land by assenting to your bequest in your will or by operation of law if there is no will;
8. You pay only a one-time premium for title insurance at the closing/completion of your purchase; and not a monthly premium as for other types of insurance (See “What is the Cost of Title Insurance” below in this Q&A);
9. Except in select circumstances, title insurance does not generally protect against something that may happen in the future.

IF MY LENDER GETS TITLE INSURANCE FOR ITS MORTGAGE, WHY DO I NEED A SEPARATE POLICY FOR MYSELF

The Lender’s policy only covers the lender. It also only requires the defense of claims against the lender’s title to the property (See “What is a Land or Real Estate Title (and Why Does it Matter)” below in this Q&A). The Loan Policy only covers the amount of the lender’s unpaid principal balance on the loan, which usually is not the full value of the property. Unlike an owner, a lender will usually only have a loss that requires the insurance company to act when the claim results in the lender having to exercise its default remedies. If there is a claim against your ownership, the lender will normally not be concerned unless you stop paying the loan and the claim threatens the lender’s ability to sell the land or foreclose and recover its principal and interest. If someone sues you and challenges the title to the property, there is no provision in the Loan Policy for payment of legal expenses for an uninsured property owner (you).

When a Loan Policy is being issued, the small additional expense of a simultaneous Owner’s Policy is a bargain. Under an Owner’s Policy, the insurance company’s obligations to you are much broader. The Owner’s Policy is for your benefit, it requires the insurance company to act on your behalf, to defend your ownership and to protect you.

WHY ARE THERE SEPARATE TITLE POLICIES FOR OWNERS AND LENDERS
(see “Are There Different Types of Policies of Title Insurance” below in this Q&A).

There are generally two common types of title insurance:
1. owner’s title insurance, called an Owner’s Policy; and
2. lender’s title insurance, usually called a Loan Policy.

Both require only a one-time premium payment, which is usually done at closing/completion.

An Owner’s Policy protects the buyer/owner should a covered title problem arise. It is usually issued with an Insured Amount that reflects the market value of the property (in most cases this would be the purchase price), lasts for as long as you have an (ownership) interest in the property and also protects your heirs after your demise as long as your heirs continue to have an estate or (ownership) interest in your land. Protection is provided against possible hidden title problems such as the following and others:
• Errors or omissions in deeds;
• Mistakes in examining records;
• Forgery; and
• Undisclosed heirs.

An Owner’s Policy provides an assurance that your title insurance company will stand behind you monetarily after you buy your home. The company will protect your ownership rights. It will indemnify you if you incur a covered loss. Also, if a covered title problem arises, it will provide a legal defense.

In contrast, the Insured Amount in a Loan Policy is usually based on the amount of the loan. It only protects the lender’s interest in the property should a problem arise with the title (See “What is a Land or Real Estate Title (and Why Does it Matter)” below in this Q&A). It does not protect the owner/buyer. One important difference of the Loan Policy is that the Insured Amount decreases as the loan is paid down and eventually the protection disappears and the Loan Policy terminates when the loan is paid off.

In the U.S., most lending institutions require a Loan Policy when lending money to borrowers who wish to buy a home or other (real) property and also when refinancing a loan. In The Bahamas, more and more lenders are requiring Loan Policies because of the protection it gives them. Among other benefits to the lender, the Lender’s Policy insures that in the event of having to exercise their remedies because of a default of the loan by the borrower, the lender has a legal and perfected security interest in the (real) property. A Loan Policy will repay the balance of the loan if a claim against the property invalidates the borrower’s title to the property.

ARE THERE DIFFERENT TYPES OF POLICIES OF TITLE INSURANCE

Yes. Generally speaking, there are two that are the most common. They are the Owner’s Policy and the Loan Policy. As the names imply, each of these policies provides protection for the owner and the lender, respectively. Although there are differences between the two types of policies, the differences are based on the (ownership) interest each one (insured) has in the land and the type of loss each would suffer. The Loan Policy ceases to exist by its terms and conditions, and by operation of law upon the loan being paid in full. However, the Owner’s Policy continues in existence providing protection even to the owner’s heirs after the demise of the owner as long as the heirs have an estate or (ownership) interest in the land.

THE FOLLOWING QUESTION WAS SUBMITTED TO IDM / COMPUTITLE:-

I WAS ONE OF SEVERAL WHO PURCHASED LAND IN THE BAHAMAS USING A LEGITIMATE ATTORNEY AND OBTAINING A CONVEYANCE/DEED AND FULL FIB PERMITTING FOR MY PROPERTY. I PAID PROPERTY TAXES ON IT FOR 4 YEARS ONLY TO FIND OUT I DO NOT HAVE CLEAR TITLE! BOTH OF MY NEIGHBORS ON EACH SIDE ALSO RECEIVED FIB PERMITS, ON GROUND SURVEYS WITH BAHAMIAN SURVEYORS AND APPROVAL FOR DEVELOPMENT! AFTER 4 YEARS, THE BAHAMIAN GOVERNMENT CLAIMS THAT OUR PROPERTY IS CROWN LAND!? MY NEIGHBOR HAS PAID TENS OF THOUSANDS IN ATTORNEY FEES ONLY TO HAVE THE JUDGE KEEP POSTPONING THE COURT DATES. I WOULD MUCH APPRECIATE INFORMATION ON WHAT I’M SUPPOSE TO DO AT THIS POINT.

Although more information about the situation would be helpful to enable a full response (such as what evidence/documents shows the government may own the land, the name of the attorney who represented the buyer, the name of the seller, the legal description of the property, whether title insurance was purchased, etc.), the following should be helpful general information for anyone in a similar situation.
First, the government’s claim should be confirmed. The buyer needs to find out whether the government actually owns the land. Like anyone else, the government can’t just claim it owns someone’s land, it has have to prove it.
Second, it is also possible that this was an outright fraudulent scheme by the seller and then the situation would be a criminal matter. In that case, the buyer should file a complaint with the police.
Third, unless expressly excluded, conveyances/deeds in The Bahamas include implied statutory warranties of title. That means that the seller gives the buyer certain guarantees when the seller signs the conveyance/deed granting the property to the buyer. One of those important guarantees is that the buyer will have quiet enjoyment of the property. To the extent someone else claims they own the property and the buyer does not (e.g., the Bahamian government in this case), that claim would be a violation of that implied statutory warranty and the seller could be liable to the buyer.
Fourth, it appears someone may have made a mistake in the purchase and sale completion process. If title insurance is not purchased (more on that later) the attorney who represents the buyer gives an opinion on title to the buyer. Assuming the attorney opined there was good title and that is why the buyer closed the transaction and purchased the land, the attorney may be liable.
Lastly, in any of the above situations, title insurance would protect the buyer. If title insurance was purchased, the buyer could make a claim against the insurance company under the terms of the title insurance policy.
Unfortunately, the situation the individual asked about is a perfect example of why property should not be purchased without also getting a policy of title insurance, especially in a foreign jurisdiction. Title insurance is an effective, inexpensive means by which buyers can protect themselves against many unfortunate situations, this one being a prime example.
The individual who asked the question contacted me privately for further assistance. You too can contact me on the blog or privately with any of your questions.

MY LAWYER SEARCHED THE TITLE & I HAVE MY LAWYER’S OPINION; WHY DO I NEED TITLE INSURANCE

Title opinions from lawyers are not warranties.  The opinions will include qualifications, exceptions and restrictions, most of which may be covered by title insurance (see “Why is Title Insurance Needed & How Does it Provide Protection” below in this Q&A).  Title opinions in The Bahamas are notorious for the many qualifications, exceptions and restrictions they include because of the deficient registry system in The Bahamas (see “Are There Limitations to What You Can Search”, “What is a Land or Real Estate Title [and why does it matter]” and “What is the Title Recording System in The Bahamas” below in this Q&A).  Additionally, a law firm may cease to exist or an attorney may die, retire or stop practicing law and then you will have even more problems to deal with.  Also, the law firm or attorney may not have adequate professional indemnity insurance to cover your loss. Furthermore, a claim made against the attorney most likely will require lengthy and costly legal proceedings with one attorney suing another all at your expense. A title insurance policy buys you the peace of mind that if anybody else claims to own your property, the responsibility to defend or establish the title is passed on to the insurance company. The insurance company will have the resources and expertise to facilitate a quicker resolution, whether through litigation or settlement of the claim with you or the person claiming against you. Title insurance clearly provides better protection.

WHY SHOULD THE CHAIN OF TITLE BE COMPLETE AND WITHOUT MISSING LINKS (See also “What is a Title Chain or Chain of Title” below in this Q&A.)

An incomplete chain of title or a chain of title missing links or having breaks is an indicator of a potentially serious problem with the title to or ownership of the property (See “What is a Land or Real Estate Title (and Why Does it Matter)” below in this Q&A). Such a problematic chain of title must be analyzed very carefully by someone with sufficient experience and knowledge to determine the following:-

  1. if there is in fact a problem;
  2. the reason(s) for the problem;
  3. the consequences of the problem; and most important,
  4. how to resolve the problem to minimize or eliminate any negative consequences.

The reason for a break in a chain of title may be due to something simple and easy to correct; or, it can be due to something very significant that cannot be easily corrected. Let’s look at a purchase and sale transaction as an example. During the title search (See “What is a Title Search” & “How is a Title Search Done” below in this Q&A) a missing link is discovered. A known conveyance into and out of a known owner is missing from the chain of title recorded at the public record (See “What is the Title Recording System in The Bahamas” & “How is a Title Search Done” below in this Q&A). Such a problem may be due to several reasons. If the reason for the problem is that the lack of recording was a mere oversight and the original conveyance is available from the vendor, the fix is for the purchaser to obtain possession of the original conveyance and to correct the public record by having the conveyance recorded. If the lack of recording was due to the loss of the conveyance, the problem is a bit more serious, but can still be resolved by recording an affidavit from the owner who would have personal knowledge regarding the original conveyance and who would affirm the conveyance existed, was in the owner’s possession, but was lost. Another possibility is that the conveyance was actually recorded, but could not be readily found because it was incorrectly indexed (or recorded) in the public record (For how to resolve this bad recording problem see “Are There Limitations to What You Can Search” below in this Q&A). However, if the absence of the conveyance creates a true break in the chain of title because there is no explanation such as one of the reasons discussed above, generally speaking the seller would have a serious problem that could not be easily resolved and would hinder the ability to sell the property until it was resolved.

WHY DO TITLE INSURANCE COMPANIES TAKE EXCEPTIONS TO RISKS IN POLICIES?

All insurance companies have to include exceptions to risks in their policies to limit their exposure to claims. Otherwise, they would have to pay so much for claims that they could not be a viable business.  If exceptions were not taken, insurance companies could not exist.  One significant difference between title insurance and other types of insurance (e.g., casualty insurance) is that before committing to insure, title insurance companies search the title (See “What is a Land or Real Estate Title (and Why Does it Matter)” below in this Q&A) to find problems.  The companies limit or eliminate their risk by finding, and when possible, resolving problems before issuing a policy (See “What is a Title Search” below in this Q&A).  When title problems cannot be resolved and are an unacceptable risk to the insurance company, the policy will include the problem as an exception to coverage.  Generally speaking a title insurance company will only insure unknown risks or problems.  However, there are exceptions.  There are circumstance when a title insurance company will insure known risks.  This is done mostly in large commercial deals where a company may insure a known risk for an additional amount of premium.  The additional premium helps the company cover the potential claim.

THE FOLLOWING QUESTION WAS SUBMITTED TO IDM/COMPUTITLE:-

DOES TITLE INSURANCE COVER “UNMARKETABILITY”?

Unmarketability is such a vague term that it arguably covers any defect in title (see “What is a Land or Real Estate Title (and Why Does It Matter” below in this Q&A). That is why title insurance companies have deleted coverage against unmarketability from their Policies, especially international Policies, or limited the coverage by specifically defining the term. For example, Stewart Title Limited has included the following limiting clause in their insuring documents for international transactions:-

k) (i) “Unmarketability of the Title”: An alleged or apparent matter, recorded in the Public Records, affecting the Title to the Land, not excluded or excepted from coverage, which would entitle a purchaser of the estate or interest described in Schedule A to be released from the obligation to purchase by virtue of a contractual condition requiring the delivery of marketable Title.
(ii) The Company shall not be liable for any loss or damage by reason of the alleged Unmarketability of Title arising from any claim challenging the validity of Title so long as the Company or any other title insurance company shall be ready, willing and able to issue its policy of title insurance to a purchaser or lender, for an Insured Amount at the premium rates then in effect, and including coverage substantially the same as the Policy issued herein insuring the estate or interest.

Whereas Fidelity National Title Insurance Company, the other title insurance company registered with the Insurance Commission of the Commonwealth of The Bahamas to do title insurance business regarding Bahamian land, lists the matters included below as insured items in their International Indemnity Owner’s Policy. This list may very well include what a Purchaser’s attorney may claim makes the land/title “unmarketable” and consequently insure unmarketability in the context of such a specific claim.

1. Title being vested other than as stated in Schedule A.

2. Any defect in or Lien or encumbrance on the Title. This Covered Risk includes but is not limited to indemnification against loss from a defect in the Title caused by
(a) forgery, fraud, undue influence, duress, incompetency, incapacity, or impersonation;
(b) failure of any person or Entity to have authorized a transfer or conveyance;
(c) a document affecting Title not properly created, executed, witnessed, sealed, acknowledged, notarized, or delivered;
(d) a document executed under a falsified, expired, or otherwise invalid power of attorney;
(e) a document not properly filed, recorded, or indexed in the Public Records; or
(f) a defective judicial or administrative proceeding.

3. No legal right of access to and from the Land.

4. The violation or enforcement of any Law, (including Laws relating to building and zoning) restricting, regulating, prohibiting, or relating to
(a) the occupancy, use, or enjoyment of the Land;
(b) the character, dimensions, or location of any improvement erected on the Land;
(c) the subdivision of land; or
(d) environmental protection
if a notice, describing any part of the Land, is recorded in the Public Records setting forth the violation or intention to enforce, but only to the extent of the violation or enforcement referred to in that notice.

5. The exercise of the rights of eminent domain or expropriation if a notice of the exercise describing any part of the Land, is recorded in the Public Records.

6. Any taking by a governmental body that has occurred and is binding on the rights of a purchaser for value without Knowledge.

WHAT IS A TITLE CHAIN or CHAIN OF TITLE?

A “chain of title” is the historical documentation in successive order that traces a current owner’s interests or ownership in land. The “chain” can run from the present owner back to the original owner of the property (which is usually the government – in The Bahamas the original owner is “The Crown”) or from the original owner of the property to the present owner. It can also run from a “good root of title” to the present owner or from the present owner to a “good root of title” (see “What is a Good Root of Title” below in this Q&A). The “chain” portion of this descriptive name comes from the “sequential” nature of the collection of these documents or information about the ownership of the land. Thus the name:- “chain of title”. The chain of title can be as straightforward as one private deed of conveyance; but, it can also be very complex. A complex chain of title may consist of a large collection of documents and other information. For example, in addition to private deeds of conveyance it may include crown grants (conveyances from the government); affidavits; judgments and orders from the courts; distributions from estates of persons who have died; certificates of death; birth certificates; wills and other information from the probate of wills; foreclosure orders and/or information; information about companies; resolutions; bankruptcy orders and/or information; quieting title judgments (results from a lawsuit to prove one’s rights to land); survey plans, diagrams and sketches; government authorizations to own land (in The Bahamas, Permits and Certificates of Registration); declarations of condominium; declarations of covenants, conditions and restrictions; mortgages; debentures; satisfactions; releases; sales contracts and other documentation and information. These chain of title documents and information are critical to prove one’s rights to a piece of land. Consequently, they are usually recorded in a government’s “public records” (see “What is a Good Root of Title” and “What is a Title Search” below in this Q&A).

As the name implies, there should not be an incomplete chain of title or a “break” in the chain of title (see “What is the Purpose of a Title Search”, “When Does a Document or Matter Get Priority Over Another” and “What is the Title Recording System in The Bahamas” below in this Q&A).

THE FOLLOWING QUESTION WAS SUBMITTED TO IDM/COMPUTITLE:-

HOW CAN I LOCATE MY PREDECESSORS’ WILLS TO DETERMINE IF THEY HAD LEFT PROPERTY IN THE BAHAMAS THAT THE FAMILY MAY STILL OWN?

If any of them left a will and the will was probated (established the validity of the will in a court), the will should be in the public record (see “What is a Title Search” below in this Q&A for a definition of “public rrecord”). A report can be obtained from a search company (IDM/Computitle can provide such a report) that will show the information gleaned from the probate file, including copies of the wills and related documents. The probate documents should reference lands, if any, that your family owned (or may still own) in The Bahamas.

If any of them left a will, but no probate was done, the wills, if any, in all likelihood will not be part of the public record.

However, even if you found copies of the wills, you would still need to know whether they owned the land at the time of their death. If you don’t know with certainty whether they owned the land purported to be bequeathed (granted/gifted/left to someone) in the wills, you would be wasting your time by just finding the wills because you still would need to determine whether they owned the land at the time of their death. For instance, they could have sold the properties after drafting the wills without updating their wills before their deaths.

A more efficient way of going about this would be to start the project by obtaining a special report from a search company (IDM/Computitle can provide such a report) that will show what lands, if any, your family owned (or may still own) in The Bahamas. The report will show all documents in the public record bearing the names of your relatives that were searched. If any document shows land being granted to any of them and no document shows that the land was sold by your relatives to anyone else, there is a good chance the land is still owned by the family. Once you determine whether there is land owned by the family, you can proceed to place the land in the name of the rightful heir. Title insurance will provide an assurance of the ownership.

WHAT IS THE COST OF TITLE INSURANCE?

The cost of title insurance varies based on the value of your property, but is well worth the peace of mind and protection it provides. The higher the value, the higher the premium. Specifically, the cost will be a certain dollar amount per every $1,000 of protection. For example: If you want protection for a $200,000 property and the risk premium per $1,000 is $5.00, then the cost would be $1,000.

In the Bahamas, a company must be registered with the Insurance Commission of the Commonwealth of The Bahamas to transact insurance business dealing with Bahamian land. There are only two registered title insurance companies in The Bahamas and they both have filed the same rates. Therefore, the cost will be the same regardless of the company you choose. Also, the cost charged by one company’s representative/agent cannot be different than another representative/agent from the same company. Bahamian law assures you get the same deal from a company regardless of which of their agents you use. Therefore, your choice of agent would not be based on pricing, but would be based on the level of service, experience and expertise the agent can offer. You may want to ask how long they have been title insurance agents and you should still ask for a quote. Shop around before buying to ensure you are paying the right price and that the agent is not breaking the law by charging you a different rate. You certainly don’t want to do business with an agent who does not abide by the law. Another thing you should be aware of is whether the agent has any conflicts of interests. In other words, is the agent an independent third party or just another company owned by the same law firm (or its members) that is providing you legal services. In this regard, see my post “Conflict, What Conflict” under the General Forum tab in this same blog.

HOW OFTEN ARE PREMIUMS PAID FOR TITLE INSURANCE?

Unlike other types of insurance that require monthly premium payments, you pay only once for a title insurance policy. Payment of the premium is usually at the time of closing/completion, but you may need to pay for other costs up front such as the cost for searching and examining the title.

HOW DO I BUY TITLE INSURANCE?

You can buy title insurance from an insurance company’s duly appointed representative (e.g., an agent, sub-agent, a salesperson, a broker). In The Bahamas only individuals and companies registered with the Insurance Commission and their foreign affiliates can transact insurance business. It is a crime punishable by fine and/or incarceration to transact insurance business if you are not registered.

You can buy title insurance from us. The International Data Management, Inc. and Computitle Insurance Agents Limited joint venture meets all Bahamian regulatory requirements. Our joint venture is an independent title insurance agent, is registered in The Bahamas and represents all underwriters registered in The Bahamas. We have had a presence in The Bahamas for almost 30 years. We are the most experienced, have an industry-wide reputation for service, have superior technical knowledge and are results oriented (see “Is the Land Title Insurance in The Bahamas the Same as in the U.S. and Other Countries” below in this Q&A).

IS THE LAND TITLE INSURANCE IN THE BAHAMAS THE SAME AS IN THE U.S. AND OTHER COUNTRIES?

Yes, the same land title insurance available in the U.S. (and required by international banks), is available in The Bahamas. Even at the risk of oversimplifying, a little history is necessary to answer this question. At some point in the past all Western nations transitioned from dispersed, informal systems to an integrated legal property system. The process still continues as technological, political and other changes create new paradigms that pressure the systems to evolve. However, title insurance had its birth in the U.S. It is said that need is the mother of all invention. Like other insurance products, title insurance was developed to satisfy a need. To a large extent title insurance developed in the U.S. to provide better security to property transactions that were fraught with risk for numerous factors (young states, lack of appropriate laws, lack of the ability to enforce proper laws in large areas, lack of unity, squatters, gold diggers, armed gangs, the law of the west, illegal entrepreneurs, historical “colorful” characters, etc.). History reveals that Abraham Lincoln, former president of the U.S. and his family, lost their homes numerous times for “lack of having the correct papers”. Insurance, generally, transfers risk to a “deeper pocket” (an insurance company with lots more money than an individual). So rather than an individual taking on all the risk of a transaction, the risk is spread out over the other insureds by payment into one company of premium that is used to cover the risk of all insureds.

In the past few years, title insurance has become available from several new agencies in The Bahamas. However, the company with the most experience by far is the Computitle/IDM Joint Venture (the “JV”). It has been insuring land titles there since 1989. To be blunt, most of the others are inexperienced Johnnies-come-lately. The JV is a policy-issuing agent for both of the title insurance companies registered to do business in The Bahamas and has the distinct advantage of its own automated title plant of the property records from all of the islands that make up the Commonwealth of The Bahamas. The JV’s personnel are experts on land title and Bahamian land title matters. They have the combined experience of hundreds of years. They also have extensive knowledge of the Bahamian culture, government, business practices and legal system. In addition to all the services related to land title insurance and related settlement services, the JV also offers consultative services on The Bahamas. They can be reached at:-

IDM, Inc.
11369 Okeechobee Blvd,
Bldg B, Suite 100
Royal Palm Beach, FL 33411
Voice:- (561) 798-6645
Fax:- (561) 798-8386
http://www.idm-inc.com

COMPUTITLE
Parliament Hotel, 2nd Flr.
Parliament Street
PO Box N-4645
Nassau, NPI
The Bahamas
Voice:- (242) 322-7366
Fax:- (242) 323-3249
http://www.computitle.com

WHY IS TITLE INSURANCE NEEDED & HOW DOES IT PROVIDE PROTECTION?

Title insurance provides several levels of protection. When you buy a home, or any property for that matter, you expect to enjoy certain benefits from ownership. For example, you expect to be able to occupy and use the property as you wish, for the property to be free from debts or obligations not created or agreed to by you, and to be able to freely sell or pledge your property as security/collateral for a loan. Title insurance is designed to cover these rights you bargain for. Title insurance protects against hidden defects in title that may have existed before you purchased your property and which even the most carefully conducted title search could not reveal. Without it, you may be liable for judgments or claims brought against your new property. However, your Owner’s Policy will pay the legal cost of defending all covered claims and, should the claim prove valid, reimburse you for your actual loss up to the face value of the Policy. An additional and considerable benefit of title insurance that should be considered in the context of unmarketable title, is that a client would not have to pay legal costs associated with defending a challenge to the client’s title to the property. Title insurance policies require payment by the title insurance companies for “costs, attorneys’ fees and expenses incurred in defense of the title.” Another important benefit is that although the payment made by the insurance company on a claim is limited to the amount of the policy coverage (the unpaid loan balance), payment for legal costs is not likewise limited. There is no financial limitation on a title insurance company’s obligation to pay for legal costs. Furthermore, no judicial action would be required by the client for the insurance company to make payments in either the case of a claim or in the case of a defense of title. Only a simple communication advising the insurance company of the challenge to the title would be required.

HOW LONG DOES IT TAKE TO DO A TITLE SEARCH?

This is a difficult question to answer because it depends on many factors. A search can take several days, several weeks or several months depending on the number of pieces of land, the number of owners and the complexity of the title (i.e., is there a lot of litigation, is there a death and probate pending, is there a good root of title, etc.) It is not the same thing to search the title to a parcel of land obtained by a Crown Grant or a Certificate of Title from a court than it is to search the title for a lot in a subdivision or to search the title for a commercial transaction where there is a large tract of land comprised of several parcels of land with different owners (see “What is a Title Search”, “How is a Title Search Done”, “What is the Purpose of a Title Search” and “What is a Good Root of Title” below in this Q&A). Another thing to consider is the availability of the required information from the particular government office. If the office is closed or slow, that will have a negative effect on the research process and timing.

The best answer I can give to this question is that barring any unforeseeable problem, a simple search for a residential lot in The Bahamas should usually take between a few days and a couple of weeks.

ARE THERE LIMITATIONS TO WHAT YOU CAN SEARCH?

Depending on the reason you need to conduct a title search (see “What is a Title Search” below in this Q&A) or the source from which you obtain title information, you may not be able to readily find what you are looking for. For instance, if you want to learn who owns the land next to yours, you could not find that information in the Deeds and Documents Section of the records of the Registrar General of The Bahamas because their documents are only retrievable though a Grantor/Vendor/Seller – Grantee/Purchaser/Buyer index. So you will have to know the name of the owner of the land to conduct your search. The problem in this instance is that that is precisely the information you are looking for.

This is one of the reasons IDM/Computitle developed their proprietary databases of the land records of The Bahamas; that is, to be able to search beyond the limited scope available from the public record (see “What is a Title Search” below in this Q&A for a definition of “public record”). IDM’s/Computitle’s approach to searching title is different because of their unique databases. They do not merely rely on the government’s limited Grantor-Grantee index, but instead use their unique databases, which allow searches that can discover things adverse to an owner’s interest that a search limited to the Bahamian registry system does not allow.

For more information about the IDM/Computitle databases, click here.

WHAT IS A GOOD ROOT OF TITLE?

The technical definition of a “good root of title” depends on the jurisdiction where the land is located, but it is generally a document that by law is considered the sufficient initial proof of ownership from which title to the land has to be traced to prove the current owner has good title and from which a title search can begin (see “What is the Purpose of a Title Search” below in this Q&A). The concept of a “good root of title applies only in relation to a “deeds registration” system” or an “unregistered title” or “unregistered land” system.

In The Bahamas a good root of title is derived from any of the following three sources:-
1. a deed conveying ownership that is 30 years old or more and is recorded in the public record;
2. a Crown Grant (a conveyance from the government); or
3. a Certificate of Title issued by the Supreme Court of the Commonwealth of The Bahamas.

WHAT DOES A TITLE AGENT LOOK FOR WHEN PERUSING A TITLE?

Once a title search is completed, using experience, expert skill and extreme attention to detail, a title insurance agent and staff of professionals perform an exhaustive review of the documents, court registries (for judgments) and other records for liens and other potential problems with the property. For example, there may be unpaid real estate taxes, or someone years ago may have forged a signature in transferring title (if problems are found, to reduce your risk, require that the problems be resolved prior to closing/completing).

Without this research, your rights to your property could be jeopardized, and your collateral and equity could even be lost. Unfortunately, not all problems with a title are caught in the examination process and even the most thorough search performed by the most experienced examiner may not uncover some obscure details or “off-record” matter.

It is also possible that someone other than the vendor/property owner has a right to the property or can claim such a right. This person could claim the property outright, make demands as to its use and possession or initiate a court action against the vendor and/or the purchaser. If the claimed right can be established in law, it will strip away ownership of the land from the person who was selling the property or the new purchaser. Information found by a title agent about someone possibly having rights to the property you are about to purchase would be critical information to know.

If information that another person may have rights to the property is not revealed before a purchase and that other person takes action to strip the new owner of their rights to the property, title insurance can provide protection that would otherwise not be available. In a situation such as this, the title insurance company would hire an attorney to defend and protect the purchaser’s ownership, including defending in the courts. And if the court case were to be lost, the title company would pay the insured for their loss pursuant to the terms and conditions of the Policy.

WHAT KIND OF PROBLEMS CAN A TITLE SEARCH REVEAL?

A title search (see “What is a Title Search” below in this Q&A) should reveal everything that is deposited in a nation’s public record (for a definition of “public record” see “What is a Title Search” below in this Q&A) and can be found, retrieved and viewed using the nation’s recording system. Recording systems vary and some have more limitations than others (see “What is the Title Recording System in The Bahamas” below in this Q&A for more detailed information about the recording system in The Bahamas and click on the “Bahamas Land Title Registration – Join the Conversation” tab on this blog to learn the differences between the various recording and registration systems). Generally speaking, among the numerous documents that can be recorded and information that will be posted by the government, the following documents and/or information affecting someone’s title (see “What is a Land or Real Estate Title [and Why Does it Matter]” below in this Q&A) are some of the documents and information that should be revealed by research in the public records of The Bahamas:-
1. Deeds;
2. Conveyances;
3. Mortgages debentures, charges or other liens against the property;
4. Satisfactions;
5. Releases;
6. Agreements;
7. Affidavits;
8. Exchanges of property and or rights;
9. Condominium Declarations;
10. Easements and/or rights of way;
11. Declarations of Covenants, Conditions and Restrictions;
11. Grants (of rights, use, possession, to navigate, to go over, upon and along, to cross over,etc.)
12. Actions in courts;
13. Court judgments and orders;
14. Information about companies; and
15. Survey Plans.
Certain of those documents and information will be of particular interest to the researcher if they should be dealt with before closing/completing the purchase, are a sign of a problem or can cause a problem to the purchaser. Things like unsatisfied mortgages, court judgments against the vendor/property owner, indications of ownership by others and conditions and restrictions limiting the use of the property. These are examples of some matters that a title search can reveal.

ARE THERE PROBLEMS A TITLE SEARCH WILL NOT REVEAL?

Yes and that is one of the main reasons why you should purchase title insurance, because title insurance can protect you from such problems. There are defects in titles that cannot be found in the Public Records during a title search (see “What is a Title Search” below in this Q&A). They are so-called “hidden hazards” or “off-record” matters that can include THE FOLLOWING:-

1. a forged will or deed/document;
2. a signature by a minor or mentally incompetent person;
3. duress;
4. false affidavits;
5. fraud;
6. incorrect filing of a document by the government;
7. sellers who misrepresent their marital status;
8. undisclosed heirs;
9. unrecorded wills;
10. and others.

Title insurance is a simple and relatively inexpensive way to protect yourself against such problems and others (see “What is Title Insurance” below in this Q&A).

ARE THERE LIMITATIONS TO WHAT YOU CAN SEARCH?

Depending on the reason you need to conduct a title search (see “What is a Title Search” below in this Q&A) or the source from which you obtain title information, you may not be able to readily find what you are looking for. For instance, if you want to learn who owns the land next to yours, you could not find that information in the Deeds and Documents Section of the records of the Registrar General of The Bahamas because their documents are only retrievable though a Grantor/Vendor – Grantee/Purchaser index. So you will have to know the name of the owner of the land to conduct your search. The problem in this instance is that that is precisely the information you are looking for.

This is one of the reasons IDM/Computitle developed their proprietary databases of the land records of The Bahamas; that is, to be able to search beyond the limited scope available from the public record (see “What is a Title Search” below in this Q&A for a definition of “public record”). IDM’s/Computitle’s approach to searching title is different because of their unique databases. They do not merely rely on the government’s limited Grantor-Grantee index, but instead use their unique databases, which allow searches that can discover things adverse to an owner’s interest that a search limited to the Bahamian registry system does not allow

For more information about the IDM/Computitle databases click here:

ANNOUNCING A NEW ERA IN THE DELIVERY OF LAND TITLE INFORMATION FOR THE BAHAMAS

WHAT IS THE PURPOSE OF A TITLE SEARCH?

A title search (see “What is a Title Search” below in this Q&A) may be conducted for many reasons. However, a title search is usually done (see “How is a Title Search Done” below in this Q&A) to determine the status of the title of the land (see “What is a Land or Real Estate Title” below in this Q&A) for the purpose of buying land or when getting a loan secured by land. Ideally, when conducting the search, the researcher will establish an unbroken chain of owners from a “good root of title” to the current owner, thereby proving the current owner’s rights to the land. The technical definition of a “good root of title” depends on the jurisdiction where the land is located, but it is generally a document that by law is considered the sufficient initial proof of ownership from which title to the land has to be traced to prove the current owner has good title and from which a title search can begin (it applies only in relation to a “deeds registration” system” or an “unregistered title” or “unregistered land” system). During the title search, a researcher should also find any matters that adversely affect the current owner’s rights to the land, matters such as a money judgment against a prior owner, other liens or an unpaid mortgage on the property.

For the purpose of buying land, the primary reason you do a search is because you want to buy land from someone who really owns it. The primary reason a bank requires a title search, is because it does not want to lend money to someone who does not own the land to be used as the guarantee/security/collateral for the payment of the loan. Other examples of why a title search is done may be to find out whether your neighbor built his pool on part of your land, or whether there are restrictions on what you can do with your land, or who owns the land next to yours.

HOW IS A TITLE SEARCH DONE?

A title search may begin in several ways. It can start by obtaining copies from the vendor of the bundle of ownership title documents; obtaining an abstract of the title documents; or, directly searching in the public record (see “What is a Title Search” below in this Q&A). In either case, the person conducting the search should obtain all the documents and information that affect or impact the land in question. These may include documents and information from the Registrar General’s Department, the Companies Department, the Supreme Court, the Surveyor General’s Department, a home owners’ association and a physical inspection of the land. Title searches can be conducted by anyone, but since they require a significant level of knowledge, experience and skill to be conducted correctly or completely, they are best done by an experienced researcher or a company dedicated to providing research services, such as Computitle/IDM.

WHAT IS A TITLE SEARCH?

A title search (can also be called a real property title search or a land title search) is the methodical process of obtaining the publicly available documents and information (the “public record” – records established by law/statutes for the purpose of imparting constructive notice of matters relating to real property), and that available from private sources, about a particular piece of land, which show the ownership history of that land and that which affects the land. Such documents may include survey plans, Crown Grants, indentures / deeds of conveyance, debentures, mortgages, grants of rights of way or easements, contracts for sale, options, assignments, etc.  Also, records regarding probate, marriage, taxes and court judgments are part of the public record.  Information that affects the land would be data such as whether real property taxes are owed and whether there are court actions regarding the land.  A title search is generally done for the purpose of buying the land or when getting a loan secured by the land. Beginning with a title search, the purchaser or lender would determine who truly owns the land and the status of their title (see “What is a Land or Real Estate Title” below in this Q&A). For example, a title search would reveal whether the title to the land is encumbered by a loan, essential information for a purchaser to know before a purchase or a lender before they authorize a loan secured by the land.

WHAT IS THE SIGNIFICANCE OF THE EFFECTIVE DATE OF A TITLE INSURANCE COMMITMENT?

As most documents, a Title Insurance Commitment is dated. That date is referred to as the “Effective Date” and is generally when the title search is conducted. That date is important because the protection the insurance company agrees to provide is for the time period from the Effective Date and back in history, usually to a “good root of title”. Title insurance is different than other types of insurance. Most of the insurance we are familiar with insure against “what happens in the future”. For example, accident insurance insures against accidents that may happen in the future. Life insurance provides protection against a death that will happen in the future. But, title insurance provides protection for “what happened in the past;” that is, the current status and the history of the title to a piece of land (the so called “chain of title”). In other words, title insurance provides protection to the current owner or purchaser for his/her title to property as of the Effective Date of the Commitment, which includes the back title, but generally not what may occur in the future after the owner’s purchase.

WHAT IS THE TITLE RECORDING SYSTEM IN THE BAHAMAS?

The recording system in The Bahamas is one where various government agencies, including the Registrar General, are responsible for maintaining a register or other source of information intended to put the general public on notice about documents and information relating to (among other things) rights to property and the use of property (commonly known as the “public record”). For example, the Registrar maintains indices that are searchable by the name of the Grantor/Vendor or Grantee/Purchaser. This type of system is often referred to as a “deeds registration system” or an “unregistered title” system. In many jurisdictions, including The Bahamas, there is no requirement that a deed be recorded in order to perfect your ownership. In those cases, interests in the land vest in the purchaser upon the delivery by the vendor and acceptance by the purchaser of a fully executed/signed Indenture of Conveyance/Deed. Click on the “Bahamas Land Title Registration – Join the Conversation” tab on this blog to learn the differences between the various recording and registration systems.

WHEN DOES A DOCUMENT OR MATTER GET PRIORITY OVER ANOTHER?

Priority is generally obtained by the first document to go on the public record. In The Bahamas, there doesn’t seem to be agreement among attorneys on when priority is obtained. Some take the position that priority is obtained from the date of a document; others, from the date of lodgment (filing for recording); and still others from the date of recording. However, insurance companies take the position that priority is obtained from the date and time a document first appears on the public record to give notice to the general public (i.e., in the Deeds and Documents division, the Supreme Court Cause List Registry, the Appellate Court’s Cause List Registry, etc…). A purchaser should always ensure their deed is recorded as soon as possible after the closing/completion to limit the possibility of any adverse matter taking priority over their ownership rights.

HOW IS A COMMITMENT OF TITLE INSURANCE CREATED?

The creation of a title insurance commitment starts with a thorough search of the public title records. Some of the reasons a title search is done are:-

1. to find a “good root of title”;
2. to confirm there is a complete and unbroken chain of title documents from the good root to the present owner;
3. to determine whether there are title problems that need to be corrected;
4. to determine whether there are judgments or liens that adversely affect the title; and
5. to determine whether the title is insurable in its present condition or with specific requirements to correct any problems.

Whether a title is “good”, “clear”, “sound” or “marketable”, problematic or insurable is determined by reviewing each document in the title chain for legal sufficiency and by evaluating the title chain as a whole (see “What is a Land or Real Estate Title” below in this Q&A). The status of the title is evaluated according to an insurance company’s underwriting guidance. Any risk to the insurance company and the proposed insured due to the condition of the title is weighed and considered in the drafting of the commitment of title insurance. If it is determined that a title is insurable, a title insurance commitment is drafted using a standardized form as a start (see “What is a Commitment of Title Insurance below in this Q&A) and by adding and deleting requirements and exceptions based on certain considerations such as the status of the title, the insurance company’s guidance, the risks involved, the particular transaction being dealt with, etc. The commitment will then be issued to the proposed insured and their representative. The issued commitment will show the name of the proposed insured, the basis on which the policy to the proposed insured will be issued, and will include the requirements for the issuance of the policies and the exceptions from and conditions to coverage.

WHAT IS A COMMITMENT OF TITLE INSURANCE?

A title insurance commitment is issued to you before the title insurance policy is issued. It is an agreement to issue a title insurance policy. The policy will be issued according to the conditions and specific terms stated in the commitment document. A commitment will inform you of the state of the title to the real estate as of the effective date of the commitment (i.e., it will confirm the vendor owns the property, that there is no outstanding mortgage, etc…). It will include requirements that you must satisfy in order for the policy to be issued (e.g., a deed/conveyance granting you the property must be recorded in the public record) and will include the exceptions to coverage that will be included in the policy. A commitment has an effective life of 6 months and the requirements should be satisfied during that time period.

WHAT IS A LAND OR REAL ESTATE TITLE (and Why Does It Matter)?

Lawyers speak of good titles, bad titles, defective titles and marketable titles, yet no one has ever seen a title. A title is an abstract concept – it is not something that you can see, feel or touch, but its implications are very real. A “right” may be a term more familiar to you than the term “title”. It (a title) is a bundle of rights enjoyed by a person relative to a piece or parcel of real estate, and includes the right to possess, occupy, use, control, enjoy and dispose of it. In practical terms in modern society it is that bundle of rights which allows real estate to become an asset that may be freely traded for other assets, or monetized. It may be used as security or collateral for a mortgage by the title holder. That fungibility allows owners of real property to unlock the equity in their land and to use that equity to start businesses, finance higher education for their children or take advantage of innumerable other financial opportunities. Secure, documented and transparent title to land is key to developing and maintaining a vibrant land market that will promote the development of a stronger economy and middle class, with increased productivity, investment and Gross Domestic Product. Title insurance is particularly helpful because it facilitates the leveraging of the equity of a piece of property by giving lenders assurances that enable the borrowing of funds. Simply stated, a title is the right to ownership and possession of a home or property.

WHAT IS TITLE INSURANCE?

Title insurance is a form of insurance that provides protection of ownership for owners and purchasers of real estate (Owner’s Policy), as well as lenders when financing is used for a purchase (Loan Policy). This type of insurance is different than other more commonly known types of insurance because you pay only a one-time premium for title insurance and it does not generally protect against something that may happen in the future, such as accident insurance. It provides protection for something that occurred at the time you purchased the real estate and for things that happened before your purchase (in the past), such as the defective deed of a prior owner. However, title insurance is similar to other types of insurance in that the protection provided, the terms and conditions under which the protection will be provided and the exceptions from coverage are specifically spelled out in the policy document. A policy of title insurance is a contract of indemnity. That is, the insurance company will compensate you for a loss that you suffer which was caused by a peril the policy insured against. As with other types of insurance the company will only pay you up to the insured amount stated on the policy. The insurance company will also pay the cost for a legal defense to claims against your ownership. This ownership defense is not limited by the insured amount stated on the policy.

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