Bermudians with non-Bermudian spouses could find themselves unable to buy a home on the Island because of the way a piece of proposed legislation has be drafted, it is claimed.

And even Bermudians who are gifted money from a non-Bermudian parent to help them get on the property ladder are likely to find themselves in a “no go” position. Exempt companies seeking to lease land are also thrown into a legal grey area.

Those are amongst the tricky situations theoretically possible if Government pushes ahead with the Bermuda Immigration and Protection Amendment Act 2007, according to the Bermuda Bar Association.

Labour and Immigration Minister Derrick Burgess is seeking a way to put an end to the practice of “fronting” where Bermudians illegally “front” trusts to buy and hold land on behalf of non-Bermudians.

But the new legislation is likely to catch within its net many innocent Bermudians with non-Bermudian spouses or who receive money from non-Bermudian parents to help them buy real estate.

The Bermuda Bar Association has studied the new Bill, which is itself a redrawn attempt at putting in place anti-fronting legislation after a previous Trusts of Land in Bermuda (Registration) Act 2006 was withdrawn last year after warnings it could do serious harm to the Island’s trust business.

More tweaking is required, according to the association, which has put its concerns down on paper in a letter signed by its president Robin Mayor.

It warns the Bill, which has been tabled in Parliament, if allowed to proceed in its current terms will severely prejudice Bermudians.

Mr. Mayor said the association welcomed any opportunity to assist in amending the Bill without “opening more avenues for foreign ownership of Bermuda land through ‘fronting’ or any similar device”.

But he warns the Bill “creates huge uncertainty for legitimate Bermudian purchasers — particularly those that may have non-Bermudian relatives or friends who wish legitimately to assist them by means of loaning or gifting money”.

One of the biggest challenges created by the legislation is the need for non-Bermudian to obtain a licence or a deferral certificate in order to hold or acquire land in Bermuda.

The Bermuda Bar Association has asked what this means for a couple comprising a Bermudian and a non-Bermudian spouse who own a home. The Bill’s definition of a trustee could be argued to encompass the non-Bermudian spouse in this instance, according to the association.

Would that then lead to a Bermudian spouse being subjected to a “land holding charge?” asks the association.

If the young couple, one Bermudian and the other not, buy their first home would they be disadvantaged by the requirement to obtain a licence — a process that can take three or four months — and so lose out because the property vendor wants a quicker sale and so sells to a buyer who does not need to wait for a licence?

The association points out there are two distinct categories, one for those couples with a home already bought and secured with a bank mortgage prior to the new legislation, and those couples who are attempting to buy a home under the terms of the new legislation.

Of those that fall in the first category, the non-Bermudian spouse would have to apply for a licence and pay legal fees of $2,500 and stamp duty, which on a typical $1 million home would tot up to $14,500. A hefty drain on a young couple’s household finances.

In the second scenario the association foresees a non-Bermudian spouse being excluded from a bank mortgage “combined income” application therefore making it impossible for the Bermudian partner to obtain the necessary mortgage.

If a Bermudian with a non-Bermudian spouse seeks to buy a second property as an investment they run into a rule that prohibits a bank lending money for a property purchase to the non-Bermudian spouse. Even if a bank loan was not needed the Bermudian would hold the second property under a constructive trust in favour of their non-Bermudian spouse, again contrary to the Bill.

A wedding gift to a young Bermudian couple who wish to buy property, if it comes from a non-Bermudian parent, might also warrant a licence and if so would it be allowed?

The association points out that a non-Bermudian parent wishing to settle money to Bermudian children using a trust to protect it from misuse by the children or claims of future spouses faces a problem.

“The trustees may legitimately wish to invest the whole or part of the settlement in real estate but, since the non-Bermudian parents will be deemed to have the intention of appropriating land in Bermuda, the non-Bermudian parent and trustees must obtain a licence or the Minister’s prior written approval.”

Questions of confidentiality and privilege are also raised in the eyes of the association.

For exempt companies, the issue of leasing land is unclear under the proposed rules and the Bermuda Bar Association concludes no transaction would be enforceable through the courts and “no attorney would recommend to his client that he should enter into any such transaction including; any mortgage by a non-Bermudian, any lease to a non-Bermudian or any lease to an exempt company”.

Mr. Mayor states: “We urge Government to reconsider some of the provisions of this Bill in light of the difficulties the current draft will give rise to for Bermudians, potentially discriminating against those that have foreign connections, and in particular, foreign spouses and Bermudians children who may have a non-Bermudian parent.”

The Bill is not scheduled to be debated by MPs until the House of Assembly resumes in May.