Property Rental Guide
- September 21st, 2018
- in PROPERTY
Many properties in the BVI feature self-contained apartments or guest cottages, and are therefore well suited for rental purposes.
Currently, there is a healthy demand for rental property in the BVI, both on a long and short-term basis. This is partly a consequence of a lack of supply with a number of properties currently undergoing repair following the hurricanes of last year.
The recent return of large cruise ships to the BVI, heralds the approaching 2018/19 winter tourist season with the hope that renewed confidence, repaired infrastructure, and attractions will result in an increase in the number of visitors to the BVI, further expanding the demand for suitable accommodation.
Many property owners are keen to capitalise on the opportunity to rent their properties, either on a long or short-term basis, but they should make sure that they understand the legal and regulatory environment in the BVI before doing so to ensure that they do not run into difficulties.
Non-Belongers Land Holding Licences
Property owners that hold their properties under a ‘non-belongers land holding licence’ should check the terms of their licence carefully; this is to determine whether it contains any conditions restricting their ability to rent the property.
While older licences may contain no conditions relating to rental at all, it is quite common for more recently granted licences to contain terms that restrict the basis on which a property may be rented.
In some cases, the licence will include a requirement that any rental must take place through a designated property rental agent.
In other cases, the licence will include a requirement that the owner of the property obtains a trade licence as a pre-condition to being able to rent it.
The imposition of these conditions is partly to ensure that the requisite hotel accommodation taxes are paid to the Inland Revenue—where such taxes apply—by a named and therefore accountable person. They are also partly to regulate competition in the property rental market to protect the interests of local property owners.
Some property owners will discover that their ‘non-belongers land holding licence’ contains a prohibition on rental without the prior consent of the Cabinet of the Virgin Islands. In such situations, an application to the Ministry of Natural Resources and Labour for the grant of the requisite consent, must be made before the property can be rented. Where consent is granted, this may take the form of a letter from the Ministry of Natural Resources and Labour confirming that the property may be rented, or alternatively there will be a requirement for the existing ‘non-belongers land holding licence’ to be amended so that the consent may be included in it.
Before a person is able to engage in any operation of a commercial character in the BVI—whereby goods or services are provided to customers for a fee or a reward—that person must first have applied for and been granted a trade licence.
Property rental will not necessarily constitute an operation of a commercial character and will not always require a trade licence, but this will depend on a careful examination of the particular circumstances in each case.
In some situations, a trade licence will be required before a property owner is able to rent his or her property, irrespective of whether the intended property rental will constitute an operation of a commercial character. This is because some ‘non-belongers land holding licences’—typically more recent licences—include a condition that the owner of the property must obtain a trade licence before the property may be rented.
To apply for a trade licence, the appropriate application form completed in duplicate must be submitted to the Department of Trade and Consumer Affairs, together with the required supporting information.
An application for a trade licence is likely to take between 7-12 weeks to be processed. Trade licences are granted for a calendar year and therefore must be renewed at the beginning of each year. The Government fee for the trade licence is payable annually, on renewal.
Owners of leasehold properties should check their leases carefully to ensure that they are entitled to rent their property and if so, the basis on which such rental may be undertaken.
It is not uncommon for leases to contain restrictions on subletting without obtaining the consent of the landlord. The lease might also prescribe that certain terms are included in any sublease of the property.
Many properties are located on residential estates on which homeowners’ associations have been established to manage and maintain the common areas within those estates. They also enforce rules and regulations that govern the residential estate for the benefit of all homeowners.
In such scenarios, property owners are likely to be subject to the terms of a declaration of covenants that regulates the relationship between an individual property, the remainder of the properties on the estate, and the homeowners’ association. Some of these declarations of covenants contain provisions that restrict to some degree the extent to which an individual property owner may rent his or her property, or may direct that properties must be rented through a specified rental company.
Property owners should ensure that any guests and tenants are familiar with the declaration of covenants and any applicable rules to avoid breach of them.
Properties Subject to Mortgage Security
Property owners who acquired their property with a mortgage, should review their loan documentation carefully before renting their property since the loan documentation might contain restrictions on property rental without lender consent.
Hotel Accommodation Tax
Property owners who wish to rent their properties should consider the provisions of the Hotel Accommodation—Taxation—Act to determine if the provisions are relevant in their particular circumstances.
If the Act does apply, then the property owner must remember to collect the relevant tax from the persons renting the property and remit it to the Inland Revenue within the requisite timescale to avoid the imposition of penalties.
Harneys Private Client team regularly advises clients on the acquisition of BVI real estate, including devising ownership structures to satisfy the tax, regulatory, succession planning, and other needs of each client. For more information on these solutions or any other matters relating to acquiring property or a yacht, registering a business, or planning for future generations, please contact Sheila George, Johann Henry, or Paul Mellor.