Wednesday, March 11, 2009

Real Estate in Jamaica - Costs on Sale

Subsequent to comments from a reader I have decided to address the issues of costs to be borne by both vendor and purchaser during a real estate sale.

When a purchaser pays signficant amounts for property, perhaps his largest ever investment in his lifetime, he is sometimes stumped by the additional costs that get tacked on to the purchase price, indeed if he were not aware of these before it was actually demanded, it could lead to the sale falling through simply due to lack of ability to pay in full. Thus Purchasers need to make themselves aware of these charges prior to commiting to a purchase. Likewise Vendors have fianancial obligations when they sell property which results in them not taking home the gross purchase price and they too need to make themsleves aware of the amount they are likely to net when they are planning to sell property.

  • Transfer Tax
As stated earlier, under the Transfer Tax Act this is mandated to be borne by the Vendor. It is a capital gains tax. Fortunately for Vendors this tax has been reduced over the last year. Now this tax which is payable on on an ad valorem basis has dropped to 5.5% to be paid by the Vendor on the fair market value of properties sold under contracts dated January 1, 2009 and later.

  • Stamp Duty
The practice is for this to be borne by both parties equally and is currently set at 4.5%. It too is an ad valorem tax imposed on the contracts for sale of land.

  • Attorney's Fees

This is for you to negotiate with your lawyer but usually starts from upwards of 2% of the value of the property being sold. In addition there are extra charges for the contract and the letters of possession and to the utility companies. All of these fees attract general consumption tax.

  • Registration Fee

This is the fee payable to the National Land Agency sometimes referred to as the Titles Office and is currently 0.5% of the consideration/purchase price as displayed on the transfer. Again the practice is for this to be borne by the vendor and purchaser.