Companies Act: Stand up or sell out?

Last Friday, the OBA amended the Companies Act of 1981. This allowed both international and local companies to purchase Bermudian properties and undeveloped land.

Previously, non-Bermudian ownership was restricted to individuals. Purchases were limited to condominiums and homes with an established minimum Annual Rental Value (ARV). The minimum ARV for houses is $177,000 and $32,400 for condominiums, equating to approximately $3.5m and $700,000 respectively.  Non-Bermudians were not permitted to purchase undeveloped land and could only own one home.   

This amendment now allows companies to purchase undeveloped property regardless of value and own an unlimited number of the restricted condos and homes. Under these amendments, the OBA cabinet alone will have supreme control over decisions pertaining to restricted business activity and corporate land holding.  It will no longer be brought to the HoA to be voted on.

The OBA has granted (pun intended) themselves the right to amend past and future decisions made regarding land-holding by companies.  

The amendment also gives Dr. Gibbons wide-ranging discretionary powers and therefore direct control over Bermuda’s land. What does this mean for Bermudians?

• Bermudians could face higher rents due to reduced supply;

• The trickle-down effect generated from guest workers paying rent will be slowed significantly; 

• Less open land available for Bermudians; 

• Many Bermudians landlords will lose tenants as they will be housed by their employers.

In 2012, real estate & rents contributed 17.3% to the GDP. This amendment will have a negative effect on GDP as money will not get into the economy once the number of renters in the locally-owned property market is cut.

Companies could potentially become Bermuda’s largest property owners.

In January 2014, the Bermuda Monetary Authority estimated in Q3 2013 non-performing loan balances rose to an unprecedented level of 11.7%. How many Bermudians will face possible foreclosure as a result of this amendment? Arguably, banks could be less inclined to re-finance mortgages if there was a potential to sell these properties to exempt companies.

“Strengthening the bond that companies have with the island”, — Dr Grant Gibbons, Royal Gazette March 22, 2014.

Bermuda has one of the highest per capita incomes in the world but only 50% of residences in Bermuda are owner occupied.  Compare this to the US (69%) and UK (70%).

Let’s focus on “strengthening the bond” that Bermudians have with the Island.  

Currently, it is estimated that 2,350 or 38% of our 6,000 acres of residential-zoned property is owned by non-Bermudians. Compare this to our population profile of 79% Bermudian and 21% non-Bermudian; there is already an imbalance.

“The government should consider having a commercial immigration programme that offers residency” — MP Sylvan Richards, Bermuda Sun March 26, 2014

OBA plans to potentially introduce commercial immigration and grant status to children born in Bermuda to non-Bermudian parents. Throw in the issue of PRCs and loosening their restrictions to purchase property? 

Where is a National Plan on land sustainability that factors in long-term economic, social and environmental needs? Dr. Gibbons admitted that there are concerns about the accuracy of non-Bermudian ownership statistics. Sound policies cannot be made without the relevant data.

The following statement sums up the OBA plans for this island: “And If I have to make it easier for rich white people to own land in Bermuda that is fine!” — MP Bob Richards HoA, March 1, 2013.

Feedback: [email protected]