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Eversheds Global Estate Management

Gibraltar

Real Estate Guide

Principles of ownership

Principles of ownership

Freehold/Ownership - land in Gibraltar is held by way of freehold or leasehold ownership. Although freeholds are relatively uncommon nowadays and held primarily in properties in the old Upper Town, freehold ownership is identical to that in the UK. It equates to an absolute ownership in land, unrestricted by time. Leasehold ownership is a form of ownership whereby the tenant (or lessee) is granted exclusive possession of land by the landlord (or lessor) with the intention that tenant (or lessee) should hold the land for a fixed period, usually for a period between 99 years and 149 years. This is less than the term initially granted to the landlord (or lessor) and is, again, married to the system widely established in the UK.

Leasehold - not applicable.

Common hold/Usufruct - not applicable.

Condominium ownership

Utilisation right - not applicable.

Joint/Co-ownership - not applicable.

Registration - registration of all land title documentation is compulsory in Gibraltar. Whilst there is no formal Land Registry as such, all title documents must be registered at the Registry of the Supreme Court of Gibraltar, under the Land Title (Registration) Rules 1991, within six months of completion. All title documentation is available to the public from the Supreme Court of Gibraltar upon payment of a small fee.

 

Restrictions on foreign ownership

Restrictions on foreign ownership

The only restriction on property ownership for a foreign individual or a foreign body corporate, is Government subsidised co-ownership schemes (or former Government subsidised or co-owned) where purchasers must satisfy a number of requirements such as being eligible to apply for Government housing, and having resided in Gibraltar for a continuous period of three years. With these schemes, local purchasers who fulfil the requirement have an option to buy between 50% and 100% of the property, the remainder being subsidised by the Government.

 

Title to real estate

Title to real estate

Investigation of title - not applicable.

Transfer of title - not applicable.

Registration - not applicable.

Information on register - not applicable.

Commercial leases - the duration of a commercial lease term is usually any period up to 21 years. The lease will usually contain provisions for the tenant to maintain and repair the interior premises. It is common for the landlord to insist on the payment of a quarterly or monthly service charge payment, which is used for the repair/decoration/general maintenance of the building as a whole. Alterations are usually permitted subject to the landlord’s prior written consent (which consent should not be unreasonably withheld) and also subject to local planning laws being followed.

 

Structure of a real estate transaction

Structure of a real estate transaction

Heads of terms – NEW POINT – are heads of terms non-binding/binding between the parties?NEDS SUPPLYING

Negotiation of terms/Agreement - not applicable.

Investigation of title - not applicable.

Purchase deed - not applicable.

Contracts - not applicable.

Completion/closing - not applicable.

Post completion - not applicable.

Leases - not applicable.

Transfer of ownership of leased property (alienation) - is applicable where the proposed sublettings and assignments are granted with the landlord’s prior written consent. Such consent should not be unreasonably withheld. It is common for alienation provisions within short-term tenancies to be restricted absolutely.

Language requirement – not applicable.

Governance of lease signature/administration – not applicable.

 

Usual commercial lease terms

Usual commercial lease terms

Summary of available lease types - not applicable.

Alterations/modifications - not applicable.

Assignment and sub/under letting - not applicable.

Destruction/reinstatement - the landlord must reinstate the leased premises if damage is caused by an insured risk. A time limit is usually imposed within the lease, within which the reinstatement should be completed. Rent and service charge payments are normally reduced or frozen during this time. If the landlord is unable to reinstate the property within the specified period provision is usually made for the termination of the lease.

Duration of lease - not applicable.

Forfeiture/irritancy - not applicable.

Insurance - the provision of insurance is obligatory within any lease in Gibraltar. Such a policy will be obtained by the landlord (through the payment of the service charges by the landlord) and will provide against a range of standard insured risks.

Rent review - usually, a statutory provision is incorporated whereby rent is to be reviewed every three years. Rent reviews in Gibraltar are generally linked to the 'open market rent' principle and are usually on an 'upward only' basis. However, it is not uncommon to include a review at a set percentage increase or associate rent review provisions with the Cost of Living Index as maintained by the Government of Gibraltar.

Repair/decoration/furnishing - not applicable.

Service Charges - not applicable.

Tenant’s duties - not applicable.

Termination/break clauses - break clauses may be incorporated at the request of the landlord or the tenant. A break clause may be imposed after six to 12 months to determine the lease absolutely with minimum notice (usually six months notice in writing or payment of six months rent in lieu of notice). After this initial period, a provision is expressly incorporated whereby the landlord or tenant can determine the lease by giving reasonable notice to the other party.

 

Increasing covenant strength

Increasing covenant strength

Lease deposit - not applicable.

Surety - a surety may be imposed by the landlord if there is genuine concern about whether rental demands or payments will be met by the potential tenant. This is also used to guarantee performance of the tenant's covenants contained in the lease. A surety is also a standard requirement where the tenant is a company.

Warranty - not applicable.

Rent deposit/bank guarantee - it is common for a landlord to insist on a deposit which usually ranges a total figure equal to three to six months' rent, usually negotiable on the strength of the proposed tenant. The landlord will be entitled to draw on the deposit if the tenant defaults. Bank guarantees are uncommon.

 

Security of tenure

Security of tenure

Security of tenure - when the agreed leasehold term comes to an end, a statutory tenancy continues under section 43 of the Landlord and Tenant Act 1983 (‘the Act’). Therefore, if the landlord wishes to terminate the lease outright and avoid the hindrance of a statutory tenancy, the landlord must serve a section 44 Notice to Quit on the tenant. Alternatively, the tenant can apply for a new lease, on the same terms as the previous lease, under section 45 of the Act.

 

Taxes

Taxes

On sale/acquisition of real estate - the vendor will provide all the title documentation for the buyer to consider Gibraltarian Land Law imposes an obligation to investigate the root of title tracking back to a minimum of 50 years (if applicable). Consequently, it is up to buyers to satisfy themselves that, on the basis of the title documentation provided, they will be buying a good and marketable title to the land. The purchase contract will be drafted by the vendor’s lawyer, incorporating the central terms of the transaction (description of the premises, length of term, agreed purchase price, time frame for completion and so on). After this, the contract is forwarded to the buyer’s lawyer for their perusal and approval along with any potential amendments that could require further negotiation. Once the purchase contract is approved exchange of contracts can take place. Although ‘Exchange’ and ‘Completion’ are often fused principles within the mechanics of Gibraltarian conveyancing with purchase contracts frequently being signed at the completion meeting along with the deed of assignment (if leasehold) or deed of conveyance (if freehold) it is advisable to exchange as soon as a good root of title has been established and once any mortgage lending has been confirmed. The buyer is entitled to take possession as of right following the execution of the assignment or conveyance, transfer of funds and receipt of keys. Post completion, the buyer is responsible for satisfying the registration process and notifying the relevant authorities of the change of ownership, along with payment of all rates and service charges (which will have been apportioned at completion) as well as all stamp duty.

Immovable property tax - not applicable.

Income tax - not applicable.

Land tax - not applicable.

Lease tax - not applicable.

Local tax - not applicable.

Mortgage - not applicable.

Other taxes - stamp duty land tax is the only tax imposed on the acquisition of land in Gibraltar, and it is calculated either on the purchase price or on the annual rent. Stamp duty is also payable on mortgages and any release of mortgage. Amendments to Schedule 1 of the Stamp Duties Act 2005 came into operation on 1 July 2010. Under the new provisions, a property with a value not exceeding £200,000.00 is exempt from Stamp Duty.

However, if the value exceeds £200,000.00 but does not exceed £350,000.00 a sum equivalent to 2.0% is charged on the first £250,000.00 and a sum equivalent to 5.5% is charged on the value of the consideration that exceeds £250,000.00. Finally, if the value exceeds £350,000.00, a sum equivalent to 3.0% is charged on the first £350,000.00 and a sum equivalent to 3.5% is charged on the value of the consideration exceeding £350,000.00.

Property lease tax - not applicable.

Value added tax - not applicable.