Thursday, April 3, 2008

Real Estate Transactions in Jamaica – Contract

It is recommended that all contracts for the purchase/sale of land in Jamaica be in writing. This is essential if the contract is to be enforced in the courts. There is an exception to this called “acts of part performance” but this will not be discussed here.

In Jamaica the vendor’s attorney usually prepares the contract and sends it to the Purchaser or if he has one, the purchaser’s attorney. It is recommended that the purchaser contracts the services of an attorney especially as some of the clauses in the contracts can be lengthy and require clarification. Some Purchasers use the same attorney as the vendor in a bid to reduce costs. This is often frowned upon and in any event it can cause problems if a conflict arises between the vendor and purchaser.

All contracts are governed by some basic rules and contracts relating to the sale of land are no different whether they are by private treaty or by auction. The contract must contain an offer by the purchaser and acceptance by the vendor. The acceptance in most cases is conditional on formal written contracts being signed and exchanged. An auctioneer can sign a contract as agent in a real estate transaction, but a lawyer has no such authority without clear specific instructions from his client.

The purchaser usually pays his deposit, gets his receipt and signs the contract. The vendor then usually follows suit and each person gets a duplicate of the contract. If the purchaser is abroad he should remember to seek an explanation of all the terms and conditions from his attorney before he signs or has an agent sign on his behalf. All signatures should be witnessed.

The vendor’s attorney usually then submits the contract to the Stamp Office in order to obtain the assessment for transfer tax. Transfer tax which is currently 7½% is a charge which must be borne by the vendor and is calculated on the market value of the real estate as opposed to the stated contract price. Stamp duties are based on the values declared on the face of the contract and are usually shared equally between the vendor and the purchaser.

Update: The Minister of Finance in his recent budget speech announced that effective May 1, 2008 the transfer tax will be reduced to 6%.

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