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THE ALIEN LAND HOLDING LICENSE

An often heard Government complaint in the real estate world on Anguilla concerns the fact that Alien Land Holding Licenses are applied for and issued, but then either not registered or not honored--not registered insofar as transfer tax / stamp duty is not paid, not honored insofar as the time table for construction is not followed.

The problem is a real concern for all of us for two primary reasons:

1. It is important that Government be able to pace License issuance with job creation requirements in an effort to ensure that construction activity is sufficient to keep Anguillian contractors in work, without overheating the market thereby creating the necessity of importing labor.

2. It is important that Government remain comfortable with issuing new licenses, for any discomfort in issuing new Licenses punishes new applicants as a result of the inappropriate behavior of previous applicants.

I believe both problems can be overcome by the creative reallocation of existing fees, taxes, and stamp duties.

Currently, the Alien Land Holding License Application fee is EC$665, an amount which is so low as to encourage the simply curious to apply, an amount which is easy to forfeit if an applicant changes his mind, an amount which does not cover Government's costs in reviewing the Application.

A more reasonable approach would be to drastically increase the application fee, whereby a portion of that fee would be refunded if the License was refused, or applied to transfer tax / stamp duty when an approved License is registered, or forfeited if the License is approved but not registered within a given time period, at the termination of which time period the License is null and void.

As an example: a US$5000 application fee, whereby US$2500 would be returned if the License was refused, or US$2500 would be credited to transfer tax / stamp duty if the License was approved and registered within 90 days, or US$5000 would be forfeited if the License was approved but not registered within the 90 day life of the registration period.

Furthermore, the penalties which are currently in place to encourage adherence to the terms of the License are so low as to invite applicants to ignore their construction schedules.

Currently penalty fees begin 18 months after License approval, and are EC$500 per month for the first 12 months after the 18 month grace period, with penalties of EC$1000 per month for the next 6 months, with forfeiture to the Government possible after the 18 months of penalties (a forfeiture process which has yet to be implemented).

However, for the penalties to have real bite they should begin after a longer initial time period, but then be increased and made more specific--they should allow time for the applicant to progress steadily, but provide remedy for Government that is swift and secure if such progress is not made.

As an example: the time schedule for construction should be increased to 24 months from the date of License registration, but the penalty should be increased to a monthly amount of 10% of the performance deposit currently required, with auction of the property to commence after the performance deposit is depleted (i.e. in 10 months after the 24 months allowed).

In order to achieve these goals, Government should register both a charge and a caution on alienated property at the time the applicant registers the land into his name. Such a policy would enable Government to more easily exert control over the property as per the Registered Land Ordinance, for as the holder of a charge the Government can auction the property or appoint a receiver if the owner of the property does not perform (i.e. does not submit an authorized certificate of occupancy or substantial completion), and as the holder of a caution the Government can control all activity of the property with regard to sales, leases, or additional charges.

This combined impact of creatively increased application fees and penalties would not deter the serious participant, would discourage the speculator, and would smooth out the real estate cycle for us all.

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