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Rental Rights and the Real Estate Market

In following the ongoing issue of expatriate rental rights with regard to the Government's current policy of including a "no rent" clause in all new residential alien land holding licenses (a policy that precludes the issuing of waivers to those existing expatriate home owners who have a "no rent" clause in their present licenses), a number of interesting observations can now be seen insofar as the "no rent" policy has been in place for nearly one year.

While it is perhaps impossible to separate Anguilla's "no rent" policy from the international economic slowdown when discussing real estate values on island, there can be little doubt that the addition of the "no rent" policy to the general economic downturn has exacerbated the impact of both. In fact, the stamp duty paid on alien land holding licenses (which is12.5% of the assessed value of the real estate being purchased) during the first six months of 2002 is the lowest it has been for the first six months of any year since 1994 (the first year for which I have records) with the exception of 1999 (a very turbulent year in Anguilla's recent political travails).

This decrease in stamp duty revenue must be, I'd imagine, especially troubling to Government at a time when Government itself has made so many statements with regard to their budget difficulties-for not only is stamp duty on land transfers a potentially significant amount in and of itself, it is a precursor to additional potential revenue as well (primarily from customs duties levied on the importation of building and remodeling items generated by the primary construction work, secondarily from customs duties generated by the overall increase in the importation of goods fostered by steady employment).

Following from the fact that stamp duty on land transfers is at an all time low for the first six months of this year (with the exception of 1999, as noted above) is the conclusion that real estate values are correspondingly falling-as the number of transactions decrease, the pressure on sellers to lower their prices to find a purchaser increases…and this is exactly what has happened. Interestingly enough, two homes that were on the market for quite a long time both went to contract this year-however both went to contract at prices well below their initial listings…and it will be interesting to see if these deals actually close or if the reality of seeing a "no rent" clause in their license entices the purchasers to withdraw from their contracts.

Based on my experience with regard to expatriates and the real estate market on Anguilla, we attract high net worth investors that are interested in viewing their purchase not only in recreational terms (i.e. as a holiday home) but also in economic terms (i.e. as a source of rental and resale profit). Although Anguilla does have its fair share of extremely wealthy investors who may be more or less indifferent to the economic side of the equation, to safeguard real estate values it is important to protect the broader base of individual investors who are focused on the economics of their purchase. Considering that there aren't any immediate political benefits of owning real estate on Anguilla (insofar as real estate ownership doesn't bestow permanent residency, for example) it is important not to limit economic real estate rights by preventing villa rentals.

An interesting corollary to the above is the permission granted by Government to the new golf course development project with regard to the construction of "up to fifty residential estate lots on which there shall be constructed single family residences" whereby the "owners of residences who rent their properties will be required to do so as part of the hotel operation" with the stated commitment that "Government will encourage…the owners of the residences to lease their residences when not occupied by the respective owners". As such, one wonders: if Government is encouraging residential rental with regard to the private residences that form part of the golf course development, why is Government preventing the rental of private residences that are not part of that project? If the rationale is collection of accommodation tax, closing down the rental of independent residences for the sake of encouraging the rental of project protected residences doesn't seem equitable-in truth, it seems quite lopsided when one considers the negative impact that this dual policy will have on the value of independently owned real estate and the galaxy of independent businesses that service that sector (realtors, architects, valuation agents, contractors, etc.). Perhaps even more troubling are the questions that might arise as to whether or not curtailing the rental of independent residences was a policy decision taken to encourage the golf course project itself to proceed-time will tell (it always does)…


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