At the property legal clinic I held throughout March, I heard a range of issues from people who attended. Interestingly I found that many people raised the same two issues, namely lost title deeds and conflicts involving parental property.
These two problems cannot be easily fixed, yet they can be easily avoided. I suspect many people in Bermuda face similar problems, so I want to highlight these two pitfalls.
Lost title deeds
To prove ownership of a property, you must hold title deeds going back at least 20 years. You cannot sell or mortgage the property without the deeds so they are a valuable asset and just as important as the actual bricks and mortar.
The deeds therefore must be kept in a secure place at all times. I recommend storing the deeds in one of three places, being a bank safety deposit box [a fee would be payable], your attorney’s office [which should be free] or a fire proof safe at your home. If you do not have a safe at home then there is a real risk of losing the deeds or the deeds being damaged.
If the deeds have been lost or damaged, then you will have to go through a lengthy process of recreating title. This is a legal process to establish ownership and involves contacting previous owners to prove the chain of ownership over the years. This can be problematic where past owners have died or moved off Island. Needless to say this will incur legal costs.
Thankfully Bermuda will be moving away from the deeds based system to the long awaited land registration system where ownership details will be centralized. However, you will still need your deeds to prove ownership before your property can be put on the central register.
Parents may wish to add a child onto title to avoid paying stamp duty upon their death. Not only would this incur legal fees and stamp duty but also the parents lose control of the property.
Once a child is an owner then the parent cannot sell, mortgage or rent out the property without the child’s consent. The better course of action is to leave the property to the child in a will. That way the parents retain control of the property and they avoid paying legal fees and stamp duty upon death if they elect the property as their primary homestead.
Leaving property via a will presents its own problems however where several children are involved. The children may disagree on what to do with the property once they inherit it. One child may want to sell, whilst the others may want to occupy or rent it out.
There is also the problem of some refusing to contribute towards the cost of maintenance and outgoings. The result is that the property is left to decay whilst the owners argue amongst themselves.
The property price reduces and eventually it becomes one of the many eyesores around the Island, a result clearly not intended by the parents. Court action can be taken to sell the property but again this will incur unnecessary legal costs.
This can all be avoided. The parents could state in their will that the property must be sold upon their death and the proceeds divided amongst the children. Alternatively, the children could agree amongst themselves in advance what will happen to the property and each person’s responsibilities. This should be formally recorded in an agreement to avoid future disputes.
The problems highlighted here can lead to significant legal costs and family fallouts, all of which are avoidable. Spending some time and money today could prevent expenditure and problems in the future.
- Mathew Kelly, a director at Chancery Legal Ltd, is a property attorney with over 15 years experience.