Fractional Ownership

“Fractional interests” in Anguilla. It was a straightforward question, “I am interested in purchasing a fractional interest in Ocean Terrace Condos. Will I get good title in Anguilla? Is it true there are no taxes?”

A fractional interest is a form of shared ownership. For years, friends have come together to purchase a holiday villa together. The resulting industry that has developed is less than 10 years old [link here]. Where it is legal to give individual titles to owners of a fractional interests in real property, each owner receives a deed, either in fee simple or for a lease. When you are ready to sell your shares, you can deed them to a purchaser [link here]. Owners are typically provided with specific rights of use and other entitlements, restrictions, and more importantly, monthly charges. This type of holiday investment has recently become popular in resorts in North America [link here]. This new industry is perfectly legal in the USA and Canada and elsewhere. Not in Anguilla. Anguilla’s legal system does not permit the granting of a freely transferable title to a fractional interest in real property. I have previously published a post on the invalidity of such titles [link here].

I went on line and searched for Ocean Terrace Condos. I found them on The Anguilla Guide [link here]. Ocean Terrace’s websites offering the sale of fractional interests are here [link here] and here [link here] . Their website states that you can purchase a month “structured as a very long term lease (97 years)”. It states that the only cost is a fee of US$250.00 to "write up a contract." I could not believe it! They were still advertising the sale of fractional interests in apartments in Anguilla! So, I went to the enquiries page for Ocean Terrace and sent them an email, “Are you still advertising and selling fractional interests?” I had a response saying that they were. I enquired why they were doing such a thing when it was not legally possible. I have not had a satisfactory answer. I did find an effusive “advertorial” page on the internet claiming that someone called “Bret and Nancy” had bought one of the condos [link here]. They claim that they are entirely satisfied with their purchase. I have not yet found any evidence of anyone purchasing a “fractional interest” at Ocean Terrace.

A further search of the internet for "fractional interests" in Anguilla came up with a number of additional pages. An early promotion from the Flag Resorts project at Rendezvous Bay indicated they would offer “fractional interests” [link here]. Further research seems to indicate that Flag is no longer offering such interests for sale. I found a page suggesting that Rendezvous Bay Hotel would be offering “fractional interests” starting at US$250,000.00 [link here]. I have asked Alan Gumbs to explain what it is he is doing, but have not received a reply. I found a page on the Anguilla Guide which indicated there is at least one real estate company that is advertising “fractional interests” for sale [link here]. When I attempted to contact them it appeared the page was dead.

It is simply not true that you can get a legal title to a fractional interest in fee simple or for a lease of a condo in Anguilla. Four or five friends can join together to purchase an apartment together. They will be registered as “joint owners” or “owners in common”. They can do a lease in the same way. This type of ownership is legal, and has existed for hundreds of years. When the owners want to sell, they all have to join together to sign the Transfer Form or Assignment of Lease Form. This is not required in the case of so-called fractional interests. With a true fractional interest, each owner can sell separately. Anguilla does not recognise such fractional interests in real property. The Registered Land Act limits the kind of interests that can exist in real property in Anguilla. Any interest in real property in Anguilla must be are registered in the Land Registry. The law guarantees the title of all registered interests.

To repeat, fractional interests are not interests that are recognised under the Registered Land Act of Anguilla. The purchaser of such an interest in Anguilla will not acquire a title that can be dealt in, as in North America. The use of a corporation to own the real estate, with the investors holding shares in the company, is not a feasible alternative. Anguilla’s laws control the ownership of real estate through the use of a corporation as strictly as it does direct ownership of the real estate.

The Aliens Landholding Regulation Act says that no non-Anguillian may hold an interest in real property in Anguilla without a Licence from the government of Anguilla. This includes holding shares in a company that owns real estate in Anguilla.

The Stamp Act says that any purchase or transfer of a freehold or leasehold interest in real property in Anguilla attracts stamp duty. Any transfer without payment of the relevant stamp duty is void and unenforceable. The purchaser is not permitted even to produce the document as evidence in court in a dispute.

I have asked the Anguilla Registrar of Lands, Gifford Connor, to explain if he is registering fractional interests. He has responded that the Land Registry is only permitting joint owners or owners in common, up to a maximum of four in number, to be entered on any one Land Register. The result is that any non-Anguillian who thinks he is purchasing an unregistered, unlicensed “fractional interest” in property in Anguilla is acquiring no property at all. The purchaser will have nothing better than a common law contract for the use of a property. If something goes wrong, there is no recourse, except perhaps to sue someone.

Any investment property in Anguilla that advertises that a non-Anguillian can purchase an interest in property in Anguilla without obtaining an aliens’ landholding licence, or paying the transfer tax, is saying something that is not true.

One would have to be brain-dead to believe that you could get legal title to property in Anguilla, or anywhere in the world for that matter, on payment only of a US$250.00 fee to “write up a contract”.

The old rule is that if it sounds too good to be true, it probably is.

Could it be simple ignorance at work here, or is it something worse?

Are investors really flying in to Anguilla, and buying these “interests” for upwards of a quarter of a million dollars United States currency, without getting legal advice?

Are they innocents who are mistakenly relying on the Government of Anguilla to shut down misrepresentative schemes, as would happen in the US and Europe?

Do they mistakenly believe that Anguilla has some kind of consumer watchdog that is looking out for their interests?

Or, do “investors” in Anguilla still check their brains at Kennedy Airport together with their baggage?