New restrictions on foreigners buying property in Bermuda have been introduced while Government has also pledged a crackdown on fake trusts used as a front to buy housing.

Regulations which came into effect on Tuesday will mean non-Bermudians will only be allowed to buy houses held under licence from other non-Bermudians.

There are around 350 houses in this category. Previously non-Bermudians could buy any property as long as it had an annual rental value above $126,000.

Condominiums will be exempt from this policy but non-Bermudians will only be allowed to buy units designated for the non-Bermudian market. They can no longer buy from Bermudian owners.

Many early condo developments were designated entirely for non-Bermudians while more recent developments have been half and half.

Making the announcement yesterday Labour, Home Affairs and Public Safety Minister Randy Horton said the new policy would hold for five years.

He said: “The policy change is to prevent more Bermudian land being lost to non-Bermudians while the Immigration Act is amended to allow the extent of ‘fronting' to be exposed and corrected.

“The amendments to the policy will create new offences and penalties, strengthen the investigative and prosecution tools with respect to landholding offences and modernise and harmonise the laws relating to landholding.”

Finance Minister Paula Cox said there was financial evidence non-Bermudians were using fronts to buy property because revenue for licence fees for legitimate sales have fallen from $13 million in the late 1990s to just under $5 million today.

This fall in revenue coincided with an unprecedented demand for real estate noted Ms Cox.

There was also anecdotal evidence to back this up but she said a recent court case had shown the current law to be weak.

Trusts have been used as a way of by-passing the laws restricting foreigners to expensive housing and condos and to defraud Government of sales tax.

Last year the Crown tried to prosecute an alleged sham trust which they claimed had helped buy a $3 million house in Paget whose ultimate beneficiary was tennis player Norberto Herrero.

However Puisne judge Ian Kawaley ruled the search warrants should be quashed while the Crown decided not to pursue the case.

Police believed six people had been involved in a conspiracy to defraud Government of $660,000 in sales tax.

The new law, likely to be brought in later this year, will also help non-Bermudians who legitimately wish to buy properties understand the rules and the heavy sanctions for breaking them.

That could involve a heavy financial sanction and even forfeiture hinted Ms. Cox who was reluctant to get into specifics.

Other changes announced yesterday include bars on spouses of Bermudians, children of Bermudians, permanent residents and residential certificate holders from selling to non-Bermudians who are not from one or other of those four groups.