For publication October 12, 2009

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Reviewing the types of land ownership in Bermuda

There are three ways to own land in Bermuda - traditionally freehold, and leasehold, and more recently by way of legislation, condominium. Ownership of land gives the owner occupation rights and rights to the things on the defined land such as any buildings, driveways and the plants growing on it.

Freehold ownership gives the owner absolute beneficial possession of land; the freehold owner owns the land absolutely, and nobody else has an interest in the land, superior to the owner. The owner is entitled to all benefits and income in the land, to the exclusion of all others.

In theory, a freehold owner owns not only the land, but also the sky above and the soil and rocks below, to the core of the Earth. In practice, freeholders cannot exercise full ownership rights because, for example, Government has removed rights through legislation for air traffic control. Similarly, Government has taken away development rights through planning legislation.

Owners are also restricted in other ways e.g. by the law of nuisance. A neighbour affected by an owner digging a hole too close by, resulting in the neighbour's land collapsing, shall probably have an action in nuisance against the hole-digging owner.

Freehold ownership can be freely transferred from owner to another by way of gift, monetary consideration or inheritance.

A freehold owner may grant a lease (or a tenancy) of the land, to another party, known as a tenant (or a lessee). The tenant shall have what is known as a leasehold interest. The extent of a leasehold interest depends on the wording of the lease. A freeholder granting a lease is known as a landlord. A lease is over a defined area of land, for a set term and at a rent; this is known as the "demise". In theory, a tenant may carry out any activity on the defined land unless restricted by the wording of the lease. However, like a freehold owner, a tenant is also subject to practical and legislative restrictions.

A fixed term for a lease can be anything from one day to, say, 99 years. A fixed term can also roll over - for example, every week, or every month. The landlord is entitled to receive a rent set by the lease. Rent can be paid wholly in advance in a lump sum, known as a premium, or paid periodically. A periodic rent is most often paid monthly in advance by the tenant to the landlord.

If a tenant defaults on one or more of the tenant's obligations, in the lease, the landlord is entitled to take the tenant to court. The court may order the tenant to leave the land and/or to pay compensation to the landlord e.g. for unpaid rent or for damage to the land.

Leasehold ownership, provided the lease has no restriction, can be transferred from an owner to another by way of gift, monetary consideration or inheritance. However a lease often restricts a transfer, to a party and on terms that have to be first approved by the landlord in writing.

A condominium owner has ownership of a specified part of a building distinct from the building in which it is situated. The building structure, access to the condominium and other common amenities (such as gardens and parking) are generally owned and controlled by a condominium association.

The rights and obligations of a true condominium owner are set under the Condominium Act 1983 ("the Act"). However there are few true condominiums in Bermuda; most "condominiums" are in fact long leaseholds, making such "condominium owners", tenants. The reason most "condominiums" are not true condominiums is that developers often perceive the long leasehold route as being faster, less expensive and less burdensome to set up.

In addition to those set out in the Act, a condominium owner is subject to practical and legislative restrictions similar to leaseholders. True condominium ownership can be freely transferred from an owner to another by way of gift, monetary consideration or inheritance.

As the Bermuda land supply is limited, Government has restricted rights of land ownership. Rights to own and acquire land in Bermuda are more complex than in most other developed countries.

Generally, a Bermudian person has no restriction on land ownership, but there are complications when a non-Bermudian spouse or other non-Bermudian co-owner is involved, or if a non-Bermudian inherits land from a Bermudian.

A non-Bermudian person may not, except for certain limited leasehold interests, acquire any interest in land without a Government license.

A Bermudian company (i.e. with at least 60 per cent of the shares beneficially held by Bermudians), except for certain limited leasehold interests, is required to have powers sanctioned by Government for land ownership.

A non-Bermudian company, except for certain limited leasehold interests, is required to have a Government license for land ownership.

In view of complex laws and potentially uncompensated losses, anyone with an interest as landownerin land or a such a potential landowner interest should consult with an attorney, to check eligibility for land ownership in Bermuda.

Attorney Neil Molyneux is a member of the Property Practice Group of Appleby. A copy of this column is available on the firm's web site at www.applebyglobal.com.

This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.