Published On:Friday, December 11, 2009

By NEIL HARTNELL

Tribune Business Editor

THE withdrawn Planning and Subdivisions Bill could have exposed land developers and Bahamian real estate purchasers "to an unacceptable level of risk", a law firm warned the Government, decreasing "the marketability of land" and resulting in financial losses if a developer's subdivision approval was revoked.

Dr Earl Deveaux, minister of the environment, yesterday told Tribune Business that these recommendations and concerns, submitted to the Government by the Sharon Wilson & Co law firm after the Bill had been due to pass the House's committee stage, coupled with late suggestions by the Bahamas Real Estate Association (BREA) and others, had prompted the Ingraham administration to withdraw the legislation currently before Parliament.

The substitute Planning and Subdivisions Bill, which will now be redrafted to accommodate a number of recommendations and suggestions received by the Government, will be presented to the House of Assembly when it returns in the New Year, on January 10, 2009. The second reading, or debate, will be held on January 20.

In its 15-page letter to the Government, a copy of which has been seen by Tribune Business, Sharon Wilson & Co echoed a number of concerns that had also been raised by BREA, especially when it came to the absence of Land Use Plans for each islands and National Land Use Development Policies.

The letter, drafted by Sharlyn Smith, wife of MP Frank Smith and daughter of well-known real estate developer and Arawak Homes chair, Franklyn Wilson, noted that under the current Bill, all applications coming before the Town Planning Committee had to comply with a Land Use Plan.

This, in turn, was to be based on National Land Use Development Policies, with applications also having to conform to Zoning By-laws.

Ms Smith, in her letter to Dr Deveaux, described as "troubling" the fact that the National Land Use Development Policies, Land Use Plans and Zoning By-laws had not been created, effectively backing BREA's assertion that the "meat" of the Bill was lacking.

"When the Bill becomes law, it is reasonable that knowledge as to how land can be used, and the national policy that affects that determination, would become prerequisites to the purchase and development of land in the Bahamas," Ms Smith wrote.

"It would appear, therefore, that concomitant with the presentation of the Bill, the Land Use Plan and the National Land Use Development policies must be in place."

Ms Smith also expressed concern over Clause 28 in the Bill, which implied that the Town Planning Committee need not consider any fresh information before revoking or modifying a previously-granted approval. This, she said, contrasted with applicants who, having been denied initial approval, had to provide new "compelling" information to the Committee if it was to overturn its decision.

Describing all this as having "profound" implications for developers and real estate purchasers, the letter pointed out that the Bill required utilities and services for each lot, plus a main road, to have been built before vertical construction in a new subdivision could begin.

"The developer has now to assume the risk of revocation after having spent a considerable sum putting in roads and infrastructure," Ms Smith wrote.

"Once Subdivision Approval would have been granted, lots are able to sold. We query the position of a purchaser in a subdivision who would have purchased a lot when Subdivision Approval was in place and this Approval is later revoked.

"This landowner, in accordance with Clause 56, would not be able to sell, agree to sell, convey, agree to convey, demise or agree to demise, this lot.

"Revocation may result in a decrease of the marketability of land. This would be of particular concern to the land owner and mortgagee (if any) whose security would have lost value."

Ms Smith said clauses in the existing Bill prohibited any compensation being paid for monetary loss resulting from a planning approval revocation. This seemed to imply that developers and real estate purchasers would not be compensated for expenses such as legal costs, stamp duties and realtor and bank fees.

Case

"In the case of a subdivision, Clause 70 appears to have the effect of dispossessing an individual lot owner of his or her ownership of the lot where the approval is revoked," Ms Smith wrote.

"Further, compensation would be paid in accordance with the Acquisition of Land Act. Pursuant to section 18(1) of the Acquisition of Land Act, the current rate of interest payable thereunder is 5 per cent."

Yet with the Bahamian Prime rate at 5.5 per cent, and developers borrowing at repayment rates linked to this, "even in the best case scenario, the landowner incurs a loss".

Ms Smith wrote: "Issues arise as to whether a developer and purchaser of land would find this level of risk acceptable. Further, the risk to a mortgage lender is increased substantially and may cause an increase in the cost of capital, to the extent that same would be available at all."

As for the approval process, she added: "We are concerned that the Bill provides for an approval process that causes a developer and purchaser to expose themselves to an unacceptable level of risk, is open to abuse and mischief, and is unduly and unnecessarily cumbersome."

Ms Smith also queried the existing Bill's intention to allow the Town Planning Committee to impose "a charge on the land", over and above the bonds a developer may have already lodged to guarantee he will complete infrastructure work.

"The implication of this is that the ability of a developer or land owner to obtain financing may be severely impacted, as the mortgagee [lender] may have concerns with subordinating its claim to that of the Government," she explained.

"Further, such a provision may impede the sale of land. A purchaser would not wish to purchase land upon which the Government has a charge. In any event, given the provisions of the bond itself and a Development Agreement, this appears unnecessary in the context of subdivisions."

Describing the Bill as "exceedingly vague" when it came to describing when a subdivision/real estate developer might need to produce an Environmental Impact Assessment (EIA), Ms Smith added: "A purchaser of land ought to know immediately whether an EIA will be required before the development thereof.

"This would influence the decision of any prudent developer considering the purchase of a parcel for development."