Aruba has experienced a surge in condominium development since the early 2000’s. This despite or perhaps just because of the relatively late development of condominium complexes in Aruba compared to other islands in the Caribbean.
Condominium units have become a popular choice for second-home owners who want to buy a piece of paradise in Aruba. The development of condominium units for local buyers on the other hand has yet to take off.
This article will primarily focus on and analyze the process of establishing condominium rights in Aruba and the rights and obligations of condominium owners on the island.
Aruba has two basic concepts of land ownership: freehold (“eigendom”) which means having full ownership of the property or leasehold (“erfpacht”) which gives you the legal right to live in or use a building or plot of land for an agreed period of time. The latter is by far the most common type of property existing in Aruba. Both types of properties can be developed into condominium projects, but the latter will require approval from the lessor which is the local government.
In general, any building developed
on one of the two property types
will be subject to rights of accession. In other words, the owner of the property is automatically the owner of the land. This basic property law principles creates a problem when the owner intends to sell separate units in a building as property rights. To ensure that each unit can be sold separately and transferred of title to a buyer a special deed of partition needs to be executed through a local civil law notary. Besides giving a detailed description of each unit, this deed will include the incorporation of a homeowner’s association with articles of incorporation and the rules and regulations that will apply to each individual owner. The condominium developer is also required by law to draw up detailed partition plans showing all of the units to be created and delineating the private areas from the common areas.
All owners are required by law to become a member of the homeowner’s association (HOA)
upon acquiring title to a condominium unit. The association will establish an annual operating budget, which will cover certain costs that affect all owners. These costs consist mainly of maintenance fees for the outside of the building, the common areas and facilities such as pools and fitness rooms, building insurance, landscaping, security, and a reserve fund for incidental expenses.
Any purchaser should inquire about the amount of the monthly HOA fees since these can vary greatly between different projects. The reserve fund is also an important aspect when buying a condominium from an older project. How much funds does the association have available to pay for incidental and unexpected expenses? Although Aruba is out of the ‘hurricane zone’ unexpected maintenance issues can always occur in any project.
All condominium rights in Aruba can be encumbered with mortgages and are freely transferable to another party. Any transfer of a condominium will be subject to a 6% transfer tax and civil law notary deed-recording fees. These fees, depending on the value of the condominium, can vary from approximately 1.5 to 2% of the purchase price.
Condominiums will also incur an annual property tax of four per-mille (4‰) of the property value minus an exemption of approximately US $33,000. If the condominiums have been developed on a long leasehold property, which is often the case in Aruba, the entire property will be subject to an annual leasehold fee. This fee will be assessed through the homeowner’s association and will be added to the annual budget.
All owners in a homeowner’s association in Aruba have the right to vote in an annual meeting and under certain conditions can request the board of the association to hold an extraordinary meeting.
Any changes that are to be made to the existing rules and regulations of the condominium project, will require a qualified majority of 80% of all homeowners and need approval of all mortgagees who hold a mortgage on a condominium in the project. In other words, making alterations is not an easy process in Aruba. To avoid these obstacles, certain rules and regulations can be furthered in detail in bylaws, but in general these bylaws may not include rules that would contravene the existing rules and regulations or restrict a homeowner even more.
As mentioned in the beginning of this article, Aruba has not experienced any significant development of condominiums for the local market as of yet. Similar to other countries in the developed world, the demographics in Aruba have been showing that Aruba is currently experiencing an ageing of the population. Therefore, it seems very likely that this group along with other local buyers who are not looking to purchase a large residence, will increase demand for more (affordable) condominiums in Aruba. As of today, the government has not developed specific housing policy objectives in this regard or actively encouraged this development for the local market, but this may change in the future.
Condominium units have added a new and exciting dimension to the local property market and all indications are that the amount of available condominiums on the island will steadily increase.