All questions

Real estate ownership

i Planning

Zoning plans and schemes exist that are supposed to guide the development of each locality in Ghana. In practice, however, there is limited compliance with the zoning rules in many areas, particularly in Accra, which has resulted in the proliferation of commercial, residential and light industrial developments, all within areas earmarked for residential development only. Under the zoning law, a local plan is required for each specific physical development. Within a local plan, each individual parcel of land is prescribed a permissible use. A vendor or lessor of land must ensure and demonstrate that the land is zoned for the specific purpose which the lessee or buyer requires the land by attaching evidence of the approved land use to the instrument of transfer. Estate developers are also required to draw up local plans according to approved standards. Developers seeking to set up real estate development in phases must prepare a local plan for the area concerned. A local plan should be drawn up and adopted before the approval of a development scheme in respect of the layout of land for more than 20 individual plots, each of which is not less than 110 m2 and for major redevelopment schemes in urban areas.

A developer may apply to change the use of all or part of a parcel of land by applying to the town and country planning division of the local district authority. The request must be accompanied by a report prepared by a professional planner. A change of use must not significantly alter the original intention of the plan or zone, and not cause disruption to the surrounding land uses by way of significantly increasing traffic generation or increasing noise or odour, or increasing the risk of fire or explosion or undermining the image of the area or being a risk to public health, etc. The process of re-zoning can take a significant amount of time, and as such investors must take this into consideration in acquiring properties that must be re-zoned prior to development.

ii Environment

To obtain a building permit from the local district authority for large-scale and significantly impacting activities, an environmental assessment registration form, together with a site plan and zoning letter from the town and country planning department of the authority, must be submitted to the Environmental Protection Agency (EPA). Following submission, the EPA will, within 25 days, request that the applicant conduct a detailed environmental impact assessment study (EIA) to fully understand the environmental impacts of the proposal and how any negative impacts will be mitigated. A decision on the EIA is made with the assistance of a cross-sectoral technical review committee within 50 days of submission. Large-scale and significantly impacting activities listed in the Environmental Assessment Regulations 1999 (LI 1652) include housing; resort and recreational development; and power generation and transmission.

A building permit will not be issued for the development of environmentally contaminated land until the levels of toxicity on it are remediated to levels acceptable to the EPA. The party responsible for the remedying of contaminated land is subject to agreement between the vendor and purchaser. The EPA shall issue penalties for operating large-scale activities as above-mentioned, without the requisite permits.

iii Tax

Stamp duty is payable on all documents conveying interests in land. The duty assessable is a function of the value of the property conveyed. For properties valued under 10,000 cedis, the duty is assessed at 0.25 per cent of the value of property conveyed. For properties valued between 10,000 cedis and 50,000 cedis, duty is assessed at 0.5 per cent of the value, and for all other properties the duty is assessed at 1 per cent of the value. Any instrument by which property is conveyed must be presented for stamping within two months of its execution.

Following recent amendments to the law, all commercial rent and other charges such as common area maintenance charges and utility charges are subject to VAT at a rate of 12.5 per cent. However, a supply of any property used or intended for use as a dwelling is exempt from VAT. Although the VAT is an end-user tax that may be passed on to the tenant, the landlord is liable for the collection and payment of the tax. The landlord is, however, permitted to offset the aggregate VAT paid on certain goods and services acquired by the landlord in providing his or her services (input VAT) against the VAT collected on rent and utility payments from tenants (output VAT), and is only required to pay the excess of the output VAT over the input VAT. The payments are made on a monthly basis, along with the submission of a return. In addition to VAT, commercial rent and other charges are also subject to NHIL and GETFund levy at a combined rate of 5 per cent. The NHIL and GET Fund Levy are no longer deductible as input taxes.

Withholding tax is also payable on commercial rent received as investment income at a rate of 15 per cent. As such, in the absence of a withholding tax exemption, commercial tenants that are legal persons are required to deduct withholding tax from their rent payments and to provide the landlord with a withholding tax certificate issued by the Ghana Revenue Authority as evidence of payment of the amounts withheld.

iv Finance and security

Large-scale real estate transactions are typically financed using term loans with comprehensive security packages, including a mortgage, a charge over the shares of the project or asset owning company, fixed and floating charges over any other assets of the project company and assignments by way of security of the various project development agreements. Mortgages must be in writing, properly attested before the registrar of the High Court, stamped and registered at a number of registries to be enforceable.

The mortgage, as well as any other security, will need to be registered at the Collateral Registry within 28 days of creation. Where the mortgagor or chargor of the security is a company incorporated in Ghana, the mortgage and other charges must be registered at the Registrar Generals' Department within 28 days of the creation of the charge; and last but not least, all mortgages must be registered under PNDCL 152 or Act 122, depending on whether the mortgaged property is situated in a registration district.

The registration of a mortgage is mandatory for the presumption of validity of the mortgage instrument and to give effect to the charge created. The courts have held that, in the absence of registration, a mortgage is ineffective and unenforceable and the possession of the title deeds or part performance by the mortgagee does not create an equitable mortgage.