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Published Articles on Real Estate - Anguilla Life Magazine



Anguilla has recently seen what other countries have been seeing for quite some time now--the public auction of property that had been pledged as collateral on loans which have gone into default. Auctions are unpleasant events--I know, I lost a condominium I pledged as collateral for a mortgage in the United States. However, pleasant or not, economic conditions and existing debt on Anguilla have now reached the point where additional auctions appear to be inevitable. As such, the fundamental question to be addressed is: how do we maximize the return on auctioned property?

On Anguilla, one may equate tourism with cash flow, real estate with capital. It has been real estate which has provided the capital for indigenous development--whether that capital was realized through property sale or lease, on the one hand, or through bank financing, on the other. On Anguilla there is a commendable reluctance to sell property without necessity. As such, real estate has increasingly been the pledged capital underpinning most of the local loans made by the banks over the past few years. It has been those local loans which kept the world recession from our shores--the home improvement loans, construction loans, business loans, etc., kept our economy liquid even as tourism arrivals and expenditures slowed or leveled off, and as foreign funded capital intensive tourism projects were completed.

It is in everyone's interest to avoid a "credit crunch" on Anguilla--and such a "credit crunch" will arrive (perhaps has arrived) due to the fact that our banks are under increasing pressure to refuse real estate as pledged collateral for local loans. This refusal is inevitable in light of the fact that thus far the auction process has not been responsive--i.e. the auctions which have been held have not resulted in sales, and therefore have not provided the remedy required by the banks to retire loans in default.

Whereas I am convinced that the first step in all cases of loans in default should be a renegotiation of terms--especially with regard to decreasing the interest rates charged by banks on the loans that they make to an internationally acceptable increment over the interest rates those banks pay on the deposits that they hold--I am equally convinced that the auction process, if it must be invoked, needs radical revision to protect land values.

The driving force behind land values on Anguilla has been the expatriate, and, therefore, a special effort must be made to include the expatriate in the auction process. Insofar as there is a social cost to an auction which puts a downward pressure on land values (especially in a community as small as Anguilla's whereby everyone knows the owner of the land under auction) the effort made to include the expatriate community in the auction process will strengthen distressed land values. In the context of this analysis, strong land values are in everyone's interest -they protect the foreclosed owner by making it more likely that auction proceeds will exceed his debt obligations; they protect the bank by ensuring the value of their collateral; they protect the community by avoiding the prospect of a "credit crunch".

In my next article, I shall explore various alternatives to the existing public auction process--from silent private offers made with the consent of the land owner to contractual protections for the potential purchaser, from an analysis of pro-active planning permission to an in depth review of the potentially very positive role of my proposed "non-site specific" alien land holding licence.


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