Gibraltar property law is broadly consistent with the UK, however, there are certain quirks and points worth noting for buyers of Gibraltar property. We asked Sarah Miles, Managing Associate of local law firm ISOLAS LLP, to provide some guidance.
LEASEHOLD
LEASEHOLD
The majority of property in Gibraltar is held on a leasehold basis. i.e. property is owned for a certain number of years. An underlease term typically granting 150 years less a few days, 149, 146 or 99 years.
WHAT HAPPENS WHEN THE LEASE EXPIRES?
The reversionary interest in an underlease that is held by the lessor / management company means the lease term would revert to the lessor at the expiry of that term, unless the term were to be extended.
There is no automatic right to renewal or an extension of the term in Gibraltar. The current practice is to grant renewals to holders of expired leases for a premium, such premium to be agreed with the lessor / management company and split between the number of apartment owners.
THE OFF-PLAN BOOM
The last few years have seen a large increase in new developments. There are various incentives for someone to purchase off-plan, the main being:
The last few years have seen a large increase in new developments. There are various incentives for someone to purchase off-plan, the main being:
The ability to plan ahead if you don’t want an immediate move (especially in the case of those living outside Gibraltar thinking of relocating / retiring here over the next few years or where the buyer needs time to save towards the purchase price of the property). New builds in Gibraltar typically take 3-4 years to build from start to finish;
The contractual ability to “flip” the property- i.e., invest speculatively if you are not sure you want to proceed all the way to completion and own the property. Most off-plan contracts will contain an assignment provision, allowing you to sell on to a third party after the exchange of contracts, but before completion, upon paying the developer a percentage of the original purchase price for their consent in allowing this (typically around 1% but can sometimes be a set amount, regardless of purchase price);
The ability to rent out once built, with tax relief. Under the Income Tax Act, property constructed from the 1st July 2016 to 31st December 2018 will receive a tax credit equal to the tax payable on the profits earned on the first two years, if rented for residential purposes;
By buying a new build, you are not ‘inheriting’ any issues from previous owners such as alterations made without planning permission, damp or issues with pipes and general wear and tear, as the contractors for the developer will make sure the apartment is handed over with brand new fixtures and fittings and to a good standard of workmanship on the completion date; and
Once the new build has been constructed and finalised, a Certificate of Fitness will be issued for the building by the Department of Town Planning, providing the assurance that it has been inspected and approved as meeting the requisite fire safety and building standards before you move in.
STAMP DUTY ATTRACTIONS FOR FIRST AND SECOND TIME BUYERS
In order to encourage people to get on the property ladder in Gibraltar, first or second time buyers only pay stamp duty on purchase prices of over £260,000 (rather than the standard rate of £200,000 upwards), which results in a saving of £5,550.
SELLING ON
There is no CGT (Capital Gains Tax) in Gibraltar, so subject to estate agent and legal fees, the proceeds of sale are yours.
THINGS TO CHECK WHEN BUYING:
In order to encourage people to get on the property ladder in Gibraltar, first or second time buyers only pay stamp duty on purchase prices of over £260,000 (rather than the standard rate of £200,000 upwards), which results in a saving of £5,550.
SELLING ON
There is no CGT (Capital Gains Tax) in Gibraltar, so subject to estate agent and legal fees, the proceeds of sale are yours.
THINGS TO CHECK WHEN BUYING:
what the unexpired residue of the lease is (how many years left of the lease term);
ongoing costs - check how much service charges and rates will be, so that you know what the annual running costs will be;
what is set to be built in the surrounding area in the next few years? Case law in Gibraltar has established that lessees do not have a right to light. This means that, subject to planning permission, third parties in adjoining properties can build nearby, even if it affects or diminishes the light or air enjoyed by your property. Land is limited in Gibraltar, so you may have a view one day and not the next
rules and regulations regarding keeping pets at the property. Some developments have a strict prohibition in this regard;
alienation clauses- are there any restrictions on selling or renting? Or, if buying a flat with two car parking spaces, are you allowed to sell one of those spaces on and if so, must it be to another owner in the same development?
“BUYER BEWARE”
The common law principle of caveat emptor applies in property law, meaning “let the buyer beware”. This means that the onus is on the purchaser to find out everything he / she wants or needs to know about a property before buying it or becoming committed to buy it.
For this reason, it is advisable to carry out a survey and to instruct a law firm you can trust, to ensure you are fully informed about the decision to be made and in order to acquire good title to the property.
This article is for informational purposes only and does not constitute legal advice. No warranty (whether express or implied) of any kind is given and no responsibility is assumed for any liability, loss or damage of any kind arising from reliance in any way of the information contained in the article.
Contributed by Sarah Miles