The sale of the US Consul General's luxury mansion may have been stalled by red tape.

And confusion over strict laws governing the buying and selling of property by non-Bermudians could affect plans to dispose of the Paget property as part of a US Government cost-cutting drive.

The Royal Gazette understands the US was exempted from strict 1956 legislation restricting overseas ownership of property by a special Act of Parliament when the Americans took over Chelston in the 1960s.

But it is believed approaches to then-Attorney General Elliott Mottley by the US State Department asking him for clarification on the rules governing any sell-off of Chelston, whether complete or in sections, were rebuffed.

According to a Government insider, Mr. Mottley refused to advise the US government, claiming it was a conflict of interest because he is the prime legal adviser to the Bermuda Government.

And it is understood that direction on whether the property, or parts of it, could be sold to non-Bermudians is crucial to US decisions on the future of the house.

The sale of plots of land or the entire 14-acre estate to an overseas buyer or buyers would generate far more cash than if the offer was restricted to Bermudians only.

But it is understood the US -- the only public owner of property on the Island outside the Bermuda Government itself -- are convinced the special law passed when they bought Chelston gives them exempt status from the usual restrictions governing the sale of property to non-Bermudians.

Bruce Berton of the US Consulate yesterday declined to discuss whether there were problems with offloading the house.

But he confirmed: "The property is not on the market at present -- that's not to say it won't be.

"The US Government is still contemplating the sale of either the entire estate or a portion of the estate, meaning we would keep the house.

"But we have to sort ourselves out in terms of what our legal obligations are, as well as what is a fair market value for the property.'' The future of the Consul General's official home has been under threat since 1996, when NBC targeted it in a special report on the cost of America's diplomatic representation called "The Fleecing of America''.

The market value of the house and estate -- which comes with private beach and beach house -- was then estimated to be $12 million -- with running costs of around $100,000 a year, plus major repair costs.

Last year, it was revealed around ten interested parties from Bermuda and overseas had been shown around the property and the US Consulate General confirmed replacement houses had been looked at.

Among those thought to have expressed an interest is Esmond Rothermere, a member of the multi-millionaire family which controls the top-selling UK Daily Mail and the Associated Press media empire.

US CONSUL VIP