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Dear Sir:

The interim administration has reached a new level of high handedness with their declaration on page 21 of the VAT White Paper that owners “who have purchased condominiums for commercial purposes i.e. to let or rent will be required to rent within the pool of the establishment in which the condominium is located.”

This is another clear example of its lack of understanding of the industry and the existing rights of condominium owners or the impact that this decision will have on potential investors. This ignorance results from its failure to consult with local industry professionals in its blind attempt to railroad legislation.

The interim administration apparently believes that some individuals that rent their condo units privately or otherwise than through a “rental management pool at the establishment” are shirking their obligation to pay the existing 11% accommodation tax. They have ignored the fact that the existing legislation exempts certain properties from an obligation to pay an accommodation tax. Further, rather than deal with a perceived issue head on, the interim administration has instead chosen to not to fix the problem but to create entirely new and separate hurdles to existing and future inward investment.

It is the government’s obligation to monitor and collect this tax and it is clearly attempting to transfer its obligation (however inconvenient to it) to the private sector by trampling on the rights of owners of real estate, many of whom will be astute enough to invest elsewhere.

Many existing condominium owners will list their properties for sale and inward investment will shrink as investors seek friendlier jurisdictions with less Government interference. The interim administration’s decision to implement VAT as proposed will effectively trap some existing owners in poorly managed uneconomic management pools and deter any future investors from investing here. Real estate investors simply will not accept being told by any government that they cannot manage or freely choose the management of their condo unit and that they must rent it through a designated entity that may lack experience or integrity.

As proposed, each management company will effectively enjoy a statutory monopoly at each resort with competition eliminated. This lack of choice is worrisome as there have been several examples on Grace Bay where a rental management company has been placed into receivership or liquidation and there are many others being poorly managed.

There are over 100 strata corporations in TCI and many of them do not have a managed rental pool within the establishment. If this provision becomes law would the strata corporation be required to establish and operate a rental pool to arrange rentals, complete VAT returns and make remittances? The executive committees of virtually all strata corporations in TCI are comprised of voluntary, unremunerated condominium owners who will not accept this burdensome financial responsibility or the attendant prospective criminal liability. Accordingly a third party would need to be contracted to run the rental pool thereby inevitably increasing strata fees. This would be patently unfair to owners that do not rent their units or who rent them infrequently.

There is a provision in the Strata Titles Ordinance that prevents the bylaws of a strata corporation from restricting an owner’s right to lease. There is also provision in the Registered Land Ordinance that any limitation purporting to restrain a person dealing with his land is void.

The interim administration’s foolish proposal to fetter a strata lot owner’s right to lease his unit personally or through an agent of his choice constitutes a clear attempt to undermine these basic tenets of real estate law. Furthermore they are a myopic, anti competitive infringement of an owner’s inalienable rights over land and will stifle inward investment to the TCI as it struggles to compete internationally.

John D. Barker

Reads: 1358


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