Jamaica's Ministry of Tourism responded aggressively to the global economic downturn with its Destination Jamaica program. This initiative is more than a marketing campaign. The broad initiative has provided funding for urban planning in the resort destinations of Negril, Montego Bay and Ocho Rios, reduced import duties to spur property refurbishment and implemented a revised airlift strategy that has attracted air service from 12 new gateways despite the financial deterioration of Air Jamaica.
Another goal of Destination Jamaica is to re-introduce the concept of vacation ownership to the Jamaican market, which the Ministry of Tourism believes is essential to penetrating the luxury tourism market. To accomplish this, the Jamaican government has recently approved changes in The Registration (Strata Titles) Act, which serves, in part, as Jamaica's condominium law. The amendments, titled The Registration (Strata Titles) Act, 2009 (the "New Legislation"), targeted structural weaknesses in the law that made it difficult for Jamaican owners associations (or "strata corporations") to enforce property covenants and assessments. The ineffective enforcement regime contributed to an overall assessment delinquency rate estimated by some at 95% of all strata property owners.
The New Legislation, which applies to all new and existing strata developments in Jamaica, contains many measures to enhance covenant enforcement. However, the most significant measures are directed at enforcement of those covenants related to the obligation to pay assessments. The New Legislation creates an implied covenant on the part of a unit owner and the owner's successors to pay assessments. Assessments also now "rank in priority to existing mortgages or charges" on the unit. As a consequence, if a mortgagee effects a sale of a unit, the mortgagee must deduct the full amount of assessments owed from the sale proceeds and remit those funds to the strata corporation.
If a unit owner fails to pay assessments within 30 days of the due date, the New Legislation authorizes the strata corporation to provide the delinquent owner with a written notice specifying the amount of assessments owed, the amount of interest accruing on the assessments owed, and the right of the strata corporation to exercise a power of sale with respect to that owner's unit. If the delinquent owner fails to pay the full amount owed within 30 days following receipt of the notice, the strata corporation may petition the newly created Commission of Strata Corporations ("Commission") for a certificate authorizing the strata corporation to sell the delinquent owner's unit. The strata corporation may also petition for an order allowing the strata corporation to rent that unit prior to sale. The strata corporation is entitled to retain from the sale or rental proceeds any costs associated with and incidental to the unit's sale or rental in addition to an amount equal to the unpaid assessments and accrued interest.
These enforcement rights are subject to some significant consumer protection provisions. First, to ensure that the unit is sold "at the best price reasonably attainable," a strata corporation must obtain two separate valuations for the unit from a "duly qualified person" approved by the mortgagee, if any. The results of those valuations must be provided to the delinquent owner and, if applicable, the mortgagee prior to any sale. Second, the Commission will only issue a certificate authorizing the unit's sale if the Commission is satisfied that the strata corporation "has taken all reasonable steps" to notify the delinquent owner of the proposed sale and to obtain payment of the outstanding debt. Third, the late payment notice must inform the unit owner that he or she may appeal the amount owed to a Strata Appeals Tribunal ("Tribunal"). The appeal is contingent on the unit owner paying "at least fifty percent of the amount owing" to the strata corporation. If the Tribunal determines that the assessments charged are excessive, the Tribunal may order the strata corporation to refund to the appealing unit owner all or part of the assessments and interest paid.
In addition to these procedural protections, the New Legislation also contains several substantive requirements intended to ensure that strata corporations operate effectively for the benefit of their members. For example, the New Legislation requires strata corporations to inform unit owners of any lapse or cancellation of insurance that results from a failure to pay premiums.
Rather than focusing solely on mandated disclosures, the New Legislation also achieves its consumer protection objectives through the broad regulatory authority granted to the Commission. Every strata corporation has an obligation to submit the following information to the Commission on an annual basis: (i) audited financial statements or a copy of accounts prepared in accordance with generally accepted accounting principles; (ii) an income and expenditure statement; (iii) a copy of a current certificate of insurance; (iv) a list of current executive board members; and (v) a report of activities from the past financial year, including meetings held by the strata corporation and the passing of resolutions adopting a budget.
Armed with this information, the Commission can audit a strata corporation's records "in any case where it considers that the circumstances so require," with related expenses being the obligation of the strata corporation. The Commission is also empowered to facilitate the resolution of disputes between strata corporations and unit owners. Pursuant to this authority, the Commission may vary assessments and the interest rate on late payments when the Commission deems the same to be "excessive or inadequate." The Commission may also determine that a resolution of the strata corporation will have "no effect" where the voting rights of an owner have "been compromised" and force the strata corporation to call a general meeting for the election of an executive committee. Commission activities are funded through a number of fees payable by strata corporations, including an annual registration fee, dispute resolution fees and power of sale certificate fees.
There is no question that the egregious assessment delinquency rate required the Jamaican government to tackle the structural deficiencies in The Registration (Strata Titles) Act. Victor Ziadie, a Jamaican real estate lawyer based in Kingston, believes that the New Legislation has the potential for reducing the inefficiencies plaguing strata corporations, which in turn could shore up residential real estate values throughout the country.
However, questions remain as to whether the New Legislation does enough to create an investment environment attractive to shared ownership development. Will timeshare developers find the new power of sale effective given the upfront expenditures necessary to meet the valuation requirement? Will owners of higher-end fractional properties find that they can effectively circumvent the New Legislation by appealing assessments to the Tribunal? Will the uncertainty surrounding the Commission's broad authority deter developers from creating new shared ownership product in Jamaica? These are only some of the questions that must be resolved before the Ministry of Tourism can determine whether the New Legislation reinvigorates vacation ownership in the Jamaican market.