If your business is involved in a contract dispute with another party you believe did not live up to its contractual obligations, the first step to resolving the dispute is to provide a notice of breach. This notice will explain why you believe a breach exists and provides a list of actions that must be taken to resolve the issue or end the contract.

Here’s an overview of how to draft a notice of breach and the steps you can take following its delivery to resolve the situation.

  • Include the date: The notice should create a clear record as to the date on which the breaching party was informed of the breach. If your dispute goes to court, this date is important evidence.
  • Analyze the notice clause: Many business contracts contain notice clauses, which include contact information for each party to be used for communication of official notices. Failure to follow procedures laid out in this clause for delivery of official notices, such as a notice of breach, could affect your rights as the case proceeds.
  • Thoroughly describe the breach: The notice should include information about which aspect of the contract was breached. One of three things must have happened for the situation to contact a contract breach: a) the other party failed to perform according to the terms of the contract, b) the other party said it will not continue to perform its obligations in the future, or c) the other party conducted itself in a way that made it impossible for your business to live up to its end of the contract. Be thorough in describing which part of the contract was breached and how.
  • Note if it is a material breach: A material breach is an action by a party that essentially destroys the contract’s value and purpose. These are much more serious types of breaches that typically have larger penalties and stricter consequences associated with them.
  • Offer a solution: It might be too late to actually fix the problem, but your notice of breach can still include a possible “cure” to the damages that have been caused already.
  • Try to work out a deal: Either before or while you send a notice of breach, you should talk to the other party to attempt to work out a solution that will keep you out of the courtroom. You can formally end the contract, but this will require a separate agreement terminating the contract and should involve your attorneys.
  • Head to court: If you are unable to work out a deal with the other party or the other party refuses to comply with the solutions suggested in your notice of breach, litigation will likely be necessary. Your attorney can advise you with regard to how best to proceed according to the circumstances of your case.

For more information about the steps you should take if your business has been the victim of a contract breach, contact a skilled U.S. Virgin Islands business planning attorney.

Adam N. Marinelli is an attorney in the Civil Litigation Practice Group at BoltNagi PC, a full-service business law firm on St. Thomas, U.S. Virgin Islands.

On June 15, 2020, the United States Supreme Court issued a landmark decision regarding Title VII of the Civil Rights Act of 1964 (“Title VII”). Title VII is the federal anti-discrimination statute protecting employees from discrimination based on race, color, religion, sex and national origin. The decision, written by Justice Neil Gorsuch, expanded protections to employees under federal law based on the protected class of sex, ruling that “[a]n employer who fires an individual merely for being gay or transgender defies the law.”

The Supreme Court’s 6 – 3 decision examined three distinct cases and resolved the split among the federal courts of appeals as to the scope of Title VII protections for classifications based on sexual orientation and transgender status. All three cases turned on the same legal question: whether firing an employee because the employee is homosexual or transgender violated Title VII? In answering this question, the Supreme Court held that discrimination based on homosexuality or transgender status constitutes unlawful discrimination on the basis of sex.

Justice Gorsuch reasoned “[a]n employer who fires an individual for being homosexual or transgender fires that person for traits or actions it would not have questioned in members of a different sex. Sex plays a necessary and undisguisable role in the decision, exactly what Title VII forbids.” The Court reinforced that “[a]n individual’s homosexuality or transgender status is not relevant to employment decisions. That’s because it is impossible to discriminate against a person for being homosexual or transgender without discriminating against that individual based on sex.” Accordingly, Title VII now protects all employees from workplace discrimination on the basis of homosexuality or transgender status.

Ravinder S. Nagi is Assistant Managing Attorney and Chair of the Labor & Employment Practice Group at BoltNagi PC, a full-service business law firm on St. Thomas, U.S. Virgin Islands.

For companies that qualify, the U.S. Virgin Islands offers extremely advantageous tax benefits for corporations looking to improve their bottom line.  The tax structures available to corporations in the U.S. Virgin Islands offer continuity with Federal tax laws while allowing for greater tax reductions and exemptions.

Corporations in the U.S. Virgin Islands are governed by the Uniform Limited Liability Company Act of 1998 and are primarily based on the Delaware model.  As in all U.S. jurisdictions, within the Territory, corporations are treated as separate legal entities from their directors, employees and shareholders. Corporations can sign contracts, assume liability and be sued as if they were individuals.  But unlike most stateside tax regimes, the U.S. Virgin Islands offers striking economic tax incentives to companies that qualify.

Below are the three types of corporations who benefit from the tax laws in the U.S. Virgin Islands.

Domestic Corporations Participating in the EDC Program

Domestic corporations in the Territory are corporations formed and that operate in the U.S. Virgin Islands. If a domestic corporation meets certain criteria, such as employment and local vendor requirements, they can qualify for the Virgin Islands Economic Development Commission (“EDC”), which offers a range of benefits including tax reductions and exemptions.

The EDC offers qualifying corporation’s incentives such as:

  • 90 percent reduction in corporate and personal income taxes;
  • 100 percent exemption on gross receipt tax, business property tax and excise tax payments; and
  • Reduced customs duty from the standard 6 percent to 1 percent.

The EDC’s goal is to bring quality businesses and jobs to the territory and improve the economy. Corporations in industries such as manufacturing, technology, pharmaceuticals, tourism and finance are especially attractive. The United States Congress allows the U.S. Virgin Islands to grant these incentives to help the territory become self-supporting.

For those companies in the research, technology, and environmental sustainability sectors, the University of the Virgin Islands Research and Technology Park (“UVI RT Park”) also provides companies access to similar tax and economic incentive packages that become a part of their clientele program. A qualifying corporation can explore both the EDC and the UVI RT Park programs to determine which best suits their business model.

Foreign Sales Corporations (FSC)

Foreign Sales Corporations (“FSCs”) are corporations organized under the laws of a qualifying foreign country or U.S. possession. U.S. exporters establish FSCs to reduce U.S. federal income taxes on their export sales by roughly 15 percent. The U.S. Virgin Islands is home to more FSCs than any other jurisdiction worldwide.

FSCs pay no local taxes in the U.S. Virgin Islands. They also pay no income tax except for a nominal annual franchise tax and license fee. The U.S. government guarantees these benefits for up to 30 years.

There are two types of FSCs: regular and small. A regular FSC’s export sales exceed $5 million annually; export sales from small FSCs are $5 million or less. This distinction determines the amount of the annual franchise tax: regular FSCs pay a $1,000 annual tax while small FSCs pay $400 or $900 depending on the corporation’s sales volume. Regular FSCs are also required to hold an annual meeting in U.S. Virgin Islands.

Exempt companies

An exempt company is a tax-free entity established under U.S. law by a foreign national. The U.S. Virgin Islands is the only jurisdiction where this can be done. Exempt companies are also called “offshore corporations” in other jurisdictions.

Exempt companies are often used as holding companies or captive insurance companies. They are also established for aircraft registered with the U.S. Federal Aviation Administration. Exempt companies may not conduct business in the U.S.V.I. Citizens, residents and corporations in the U.S. and U.S.V.I are not allowed to own more than 10 percent of the stock in an exempt company.

To learn more about business formation in the U.S. Virgin Islands, contact a skilled tax attorney at BoltNagi PC today.

Adam N. Marinelli is an Associate Attorney in the Corporate, Tax and Estate Planning Practice Group concentrating his practice in tax at BoltNagi PC, a full-service business law firm serving the U.S. Virgin Islands.

While the U.S. Virgin Islands is not a state, it is still subject to the majority of U.S. federal laws, given that it is an unincorporated territory. A mirror federal tax code applies in the territory, but rather than being administered by the Internal Revenue Service, it is administered by the Virgin Islands Bureau of Internal Revenue.

In 1986, Congress gave the U.S. Virgin Islands legislature the authority to create tax-free companies in the territory. The territory immediately after enacted legislation that would allow for the creation of U.S. Virgin Islands exempt companies.

So what do you need to know about tax-free entities in the U.S. Virgin Islands, and what are the benefits of those types of companies? Here’s some information.

The benefits of exempt companies

Exempt companies in the U.S. Virgin Islands do not pay any federal or territorial taxes of any kind on income earned anywhere in the world other than the U.S. or the Virgin Islands, except for the $1,000 annual franchise fee paid to the territorial government. In addition, stock in exempt companies is not subject to federal or territorial gift, estate or inheritance taxes if the decedent is a non-resident non-citizen of the United States.

U.S. Virgin Islands exempt companies are also able to elect a 20-year local exemption from all taxes except for the aforementioned franchise fee. Upon a $100 payment, the territory’s Corporate and Trade Name Division of the Office of the Lieutenant Governor will issue a contract guaranteeing the benefits to the client for a period of 20 years.

Most U.S.-sourced passive income earned by an exempt company, such as dividends, as well as most types of royalties and interest would be subject to a 30 percent withholding tax at the source, the same rate that would be imposed for payments of these types of income made to companies incorporated in other countries where the United States does not have any active tax treaties.

Exempt companies in the territory come with a certain level of privacy. The only information on the public record for these companies is the names and addresses of officers and directors — shareholder identity can remain private.

Finally, the formation of these types of companies is relatively easy and inexpensive. The incorporation fee paid to the U.S. Virgin Islands government is just $400, and the actual process of incorporation is typically able to be accomplished within just 24 to 48 hours, so long as the exempt company has at least one director. The directors and officers of an exempt company do not need to be residents of the U.S. Virgin Islands. All exempt companies must have minimum initial capital of $1,000.

These are just a few of the most important elements to know about U.S. Virgin Islands exempt companies. For more information about how BoltNagi can assist you with forming such a company, contact our team today.

Steven K. Hardy is Chair of the Corporate, Tax and Estate Planning Practice Group at BoltNagi PC, a full-service business law firm based on St. Thomas, U.S. Virgin Islands.

Virgin Islands attorney Tom Bolt, Managing Attorney of BoltNagi PC, has been appointed to the Uniform Law Commission’s Study Committee on Mitigation of Public Health Emergency Business Disruptions. The ULC study committee was formed in response to the COVID-19 pandemic crisis that closed the United States economy and the need for clear and consistent guidance in key areas of large-scale crisis management.

The study committee will consider the need for one or more uniform laws addressing the special rules and procedures to mitigate the impact of an epidemic, pandemic, or other public health emergency on the operation of businesses.  The committee will consider topics such as non-liquidating receiverships, business interruption insurance, and the application of force majeure and impossibility doctrines. In particular, the committee’s scope of review and recommendation includes:

  • the use of special non-liquidating receivership programs to enable court supervision of businesses adversely affected by an epidemic, pandemic or other public health emergency;
  • a requirement that insurers allow business interruption claims based on epidemic, pandemic, or other public health emergency-related closures, with the government underwriting the insurers (and paying a fee for having the insurers act as claim processors for the government);
  • the application of force majeure and impossibility doctrines to contractual performance during an epidemic, pandemic or other public health emergency; and
  • other measures that might mitigate the impact of public health emergencies on businesses.

The study committee’s work is guided by a determination whether these subjects are appropriate for state and territorial legislation and uniformity among the various jurisdictions; whether there is a need for an act to address specific issues; whether a uniform act would provide significant benefits to the public through improvement to existing law; and whether a uniform act would maintain the integrity of well-balanced and well-settled law in areas traditionally governed by the states and territories.

The Uniform Law Commission has a record of responding quickly to large-scale emergency events. For example, in 2006 the ULC adopted the Uniform Emergency Volunteer Health Practitioners Act. Drafted in the wake of Hurricane Katrina (2005), the Act allows state and territorial governments during a declared emergency to give reciprocity to other state’s health services licensees so that covered individuals may provide emergency health services without first being required to satisfy the disaster jurisdiction’s licensing requirements. The goal of the Act is to speed medical help to those in need by removing administrative and bureaucratic hurdles, and by managing liability and risk to covered volunteer healthcare providers. The law has been enacted in 17 states, the District of Columbia and the U.S. Virgin Islands. The COVID-19 pandemic presents new and even more challenging issues in crisis response for businesses.

Attorney Bolt serves as chair of the Virgin Islands Commission on Uniform State Laws, which has been a member of the ULC from 1988. Since 1892, the ULC has provided states and territories with non-partisan, carefully conceived uniform laws. The ULC’s work simplifies life for people who live, work, or travel in multiple jurisdictions and improves local economies by facilitating interstate commerce. Each uniform act is drafted in an open and deliberative process that draws on the expertise of locally appointed commissioners, legal advisors and observers in the 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.

Tom Bolt serves as Managing Attorney and Chair of the Government Relations Practice Group at BoltNagi PC, a full-service business law firm on St. Thomas, VI.

Most adults have had to sign certain documents in the presence of a notary at some point in their lives, yet many people do not understand what the purpose of a notary is or why a document requires notarization.  The primary purpose of having a document notarized is to deter fraud. To accomplish this, the person(s) signing the document does so in the presence of the notary and proves to the notary, most often by government issued identification, that they are in fact the person(s) who are named in the documents.  The notary then officiates the document by marking the document with their seal.  A notary can also affirm that the person signing the document has sworn to the truth of the statements made within the document.  Some common examples of documents requiring notarization include deeds, mortgages, wills, trusts and affidavits.

A notary is regulated by the jurisdiction in which one resides and is required to adhere to certain formalities.  Traditionally, one of these requirements was that the person(s) signing the documents did so in the physical presence of the notary.  However, as a result of the recent COVID-19 pandemic and social distancing guidelines, this traditional requirement of signing in the physical presence of the notary has presented significant challenges. In light of this, many jurisdictions have begun waiving this requirement and have implemented procedures to allow persons to sign in the virtual presence of a notary.

On April 20, 2020, and in response to the COVID-19 State of Emergency, U.S. Virgin Islands Governor Albert Bryan, Jr. issued that certain Fifth Supplemental Executive Order and Proclamation to specifically suspend the formal requirement of personal appearance before a notary public. Currently, the provisions within the Executive Order are only effective while the Territory is under a State of Emergency. Pursuant to the Executive Order, a notary is now authorized to perform their notarial acts by utilizing live audio-video technology between the principal, notary and other necessary persons at the time of signing and notarizing. A common example of this would be the recent increased utilization of Zoom meetings. Certain conditions must still be followed, however, some of which include:

  • The person must affirmatively represent that they are physically present in the Territory of the U.S. Virgin Islands;
  • The notary must be physically located in the Territory;
  • The document must contain a notarial certificate, jurat, or acknowledgment which states that the principal appeared remotely and pursuant to the Executive Order;
  • Any person whose signature is to be notarized must display a valid photo ID to the notary during the video conference.

The recent authorization of remote notarization offers a variety of benefits, including:

  • Encourages social distancing;
  • Allows for certain commercial and legal functions to continue;
  • Provides for faster transactions;
  • Reduces operating and travel costs.

BoltNagi employs a handful of notaries and is equipped with the technology to provide remote notarization during this difficult time.  If you or your company requires notarization of documents, and would prefer to utilize remote notarization, please contact Attorney J. Nash Davis.

BoltNagi is a well-established and widely respected business and commercial law firm proudly serving clients in the U.S. Virgin Islands.

Buying or selling commercial real estate can be a complicated transaction. While electronic communications make it easier to communicate progress, they also make it harder to keep track of all the moving parts in the days leading up to closing.

Follow our tips below to ensure a smooth closing in your next real estate transaction.

Be mindful of the closing date

In a purchase and sale agreement, a closing date is usually set a certain number of days in the future (e.g. 30, 60, or 90 days). This gives parties time to perform their due diligence before closing.

When determining the actual closing date, the business day closest to the end of the stated time period is usually selected. Before agreeing to a pre-determined closing date, keep these issues in mind:

  • Avoid closing on a Friday: If your 60-day timeframe ends on a Friday, consider moving the closing day up to Thursday. While the buyer, seller, attorneys and agents will be focused on the transaction, third parties may not. Fridays are a popular day for office workers to take vacation, and those who are in the office may not be as focused on details as they would be earlier in the week. If you need a last-minute bank wire or insurance detail, you may not get what you need until the following week, thereby delaying your closing.
  • Avoid closing on a Monday: For the same reasons to avoid closing on a Friday, avoid closing on a Monday. Third parties may still be on vacation or may be playing catch-up, causing your request to land at the bottom of the pile. Closing after the weekend may mean the buyer, seller, or agent hadn’t been thinking about the deal for a few days, and there may be a mad dash to correct an oversight.
  • Set closing ahead of deadlines: When making adjustments for the considerations above, always set the closing date before deadlines. Also keep in mind deadlines like a tax exchange deadline, and set your closing date a few days before to allow time for corrections.

Make yourself available before closing

Where possible, block off your calendar in the days before closing to make yourself available for last-minute tasks. You’ll likely need to approve revisions, answer questions, gather documents and other tasks to finalize the purchase. Make sure you’re easily available via phone or email. If your availability is limited, communicate when you are free to your attorney and provide alternate methods for others to reach you.

Just as you need to make yourself available before closing, you should also be mindful to be more responsive. Closing documents go through several iterations of revisions, requiring all parties to approve changes. If you aren’t reviewing communications in a timely manner, additional delays may result. Be polite and keep the closing running smoothly by making an extra effort to be responsive.

Prepare for the worst

Even if you’re worried the deal may fall through, you need to be able to show you were ready to complete the transaction. Have all necessary paperwork completed ahead of the closing date. If you need signatures from other parties but haven’t received them, have a paper trail of your efforts to get those signatures.

A real estate attorney can walk you through the process of closing a commercial real estate transaction. Contact a skilled real estate attorney at BoltNagi PC today.

Steve Hardy is an attorney in the Real Estate & Financial Services Practice Group at BoltNagi PC, a full-service business law firm on St. Thomas, U.S. Virgin Islands.

As of March 20, 2020, the United States Treasury Department announced the following COVID-19 tax deadline guidelines, giving certain taxpayers and businesses an additional 90 days to file and pay their 2019 tax liability. The U.S. Virgin Islands have also adopted these guidelines.  Here are the key dates.

Tax return deadline – July 15, 2020. Your tax filing is now due on this date. If you need more time, you can request an extension to October 15, 2020. Read the FAQs below for details.

Tax payment deadline – July 15, 2020. If you owe income taxes for 2019, you can delay your IRS payment until this time. You will not owe interest or penalties if you pay before this deadline.

Frequently asked questions about the coronavirus tax deadline changes:

Q. Who is eligible for the tax filing and payment deferral?

A. The following types of filers are eligible to use the special coronavirus tax extension.

  • Individual Form 1040 filers
  • Corporations filing Form 1120
  • Trusts and estates filing Form 1041
  • Fiscal year partnerships, associations and companies with due dates on April 15, 2020 (uncommon)

Q. What do I need to do to delay my filing and tax payment?

A. You must file your tax return or extension by July 15 as you normally would. The 90-day tax payment deferral itself is automatic when you file, which means interest and penalties are automatically waived for 90 days and won’t accrue for qualifying taxpayers and businesses until after July 15.

Q. What if I need more time to prepare my return?

A. You must file Form 4868 to request an extension by July 15, 2020. This extension would give you until October 15 to file your return, but your payment would still be due by the extended payment deadline, July 15, 2020.

Q. What if I’m getting a refund? Does this news affect me at all?

A. It should not affect you if you’re receiving a refund.

Q. What types of payments does this deferral cover?

A. It covers income tax payments, as well as any normally associated interest and penalties, such as the failure-to-pay penalty. It also covers estimated tax payments (included payments of tax on self-employment income) due on April 15, 2020, for the 2020 tax year.

Q. How much can I defer?

A. There is no limit on the amount of tax payment you can defer.

Q. Does this deferral apply to 2020 estimated tax payments (including estimated self-employment taxes)?

A. Both the first quarter 2020 estimated tax payment otherwise due on April 15, 2020, and the second quarter 2020 estimated tax payment otherwise due on June 15, 2020 are deferred until July 15, 2020.

Other Important 2020 Deadlines

Tax Amnesty Period:  This year, the Legislature of the Virgin Islands also established an Amnesty Program aimed at those taxpayers that have outstanding Gross Receipts tax obligations as well outstanding Income Tax and Real Property Tax obligations.  This program will extend from January 1, 2020 through July 28, 2020 for Gross Receipts and Income Taxes and through July 17, 2020 for Real Property Taxes.  If outstanding Gross Receipts and Real Property Taxes are paid by that date, then all penalties and interest on those amounts shall be waived.   Delinquent Income Tax balances are also entitled to a penalty waiver, but interest will still apply.

USVI COVID-19 Guidelines

The U.S. Virgin Islands Bureau of Internal Revenue has also provided additional guidance on procedures during the current State of Emergency regarding COVID-19. Those are as follows:

  1. The Bureau’s annual Taxpayer Assistance Program, which provides free taxpayer assistance on Saturdays, will be postponed until further notice. The Bureau will inform the taxpaying community when this program will be reinstated.
  2. All face to face appointments are cancelled for the next three weeks. Our staff will be reaching out to taxpayers to provide alternate methods of communication during the next three weeks.
  3. Taxpayers who need to clear imported goods at our excise tax offices are urged to utilize the online system to clear shipments, or utilize the services of a broker to limit face to face contact. The excise tax online system can be accessed via https//:excise.bir.vi.gov.
  4. Taxpayers who need to file any tax returns are asked to file by mail, with a certified receipt, if possible. Include a copy of the return along with a stamped self-addressed envelope in order for the Bureau to return your stamped copy. All local tax returns are due on the usual due dates. Penalties will be waived on a case by case basis.
  5. The 2019 income tax returns are due July 15th. Returns filed and paid by July 15th will have no interest or penalties assessed.
  6. The Bureau of Internal Revenue’s St. John office will be closed until further notice. The St. Thomas and St. Croix office hours will be from 8:00 a.m. – 3:00 p.m. Cashiering services will operate daily from 8:00 a.m.- 2:00 p.m., until further notice.
  7. Taxpayers are asked to call the Bureau for assistance, in place of face to face visits.
  8. The Bureau’s staff stands ready to assist taxpayers via telephone, in order to satisfy their outstanding tax obligations. Please call 340-773-1040 on St. Croix and (340) 715-1040 on St. Thomas, and use the following extensions and email addresses for direct assistance:

St. Croix


St. Thomas


E-mail address
Audit 4233 2271 pcranston@irb.gov.vi
Delinquent Accounts & Returns 4254 2232 secarr@irb.gov.vi
Processing 712-2513 2223 rdavis@irb.gov.vi
Excise 778-1021 3201 ghodge@irb.gov.vi
Director’s Office 4225 4225 cwilliams@irb.gov.vi

If you have any additional questions or legal needs regarding the 2020 tax deadlines, Attorney Adam N. Marinelli, Tax Counsel at BoltNagi, PC is available at (340) 774-2944 or amarinelli@vilaw.com.

Adam N. Marinelli is an Associate Attorney in the Corporate, Tax and Estate Planning Practice Group concentrating his practice in tax at BoltNagi, PC, a full service business law firm serving the U.S. Virgin Islands.

Probate administration is the legal process through which a person’s assets are distributed after their death. These assets can include money/accounts, personal possessions, real estate or any other items of value. The probate must also account for debts. During the probate process, the administrator or executor creates an inventory of these assets, pays off debts and then distributes what’s left after paying those debts to a person’s devisees and legatees in accordance with the deceased’s will (if one exists), or to their heirs at law if there is no will.

If you’ve been strategic with your estate planning, not all of your assets will have to go through the probate process. There are a number of types of “non-probate assets” that will allow you to bypass the process in part or in full.

Here are just a few reasons why this is a good strategy to consider in your estate planning.

  • The process can drag on and on: Probate can be an incredibly time-consuming process. Depending on the complexity of the estate, it could range from months to years before it’s complete. The longer the process takes, the longer the devisees and legatees or heirs have to wait before they can receive their inheritance.
  • It’s a public process: Because probate is judicially supervised, all of the information and documents included in that process are entered into public record. This means all of the assets and debts can be reviewed in the public record. For some people this isn’t a big deal, but others value their privacy.
  • It can cost your estate a lot of money: The costs of the probate administration process vary depending on the complexity of the estate, but it can, in some circumstances, become very expensive. These include legal fees, court fees, publishing/notice fees, and administrator/executor fees. There are advantages to avoiding the probate process, or at least significantly cutting down on the percentage of your estate that is subjected to the process.

A typical way to avoid probate is to create a living trust and place assets into that trust. Such a trust allows you to maintain privacy as you pass your assets on to your heirs while also incurring as little expense as possible.

A trust differs from a will in that a will simply distributes assets after your death, whereas a living trust holds those assets “in trust” to be managed by a trustee on behalf of your beneficiaries during your life and provides for how they will be distributed after your death. Because the property and assets are held in the trust, they can bypass the probate process.

For more information about probate avoidance methods and the benefits of employing them in your estate plan, contact one of BoltNagi PC’s experienced estate planning lawyers in the U.S. Virgin Islands.

Steven K. Hardy, Esq. is Chair of the Corporate, Tax and Estate Planning Practice Group at BoltNagi PC, a full service business law firm located on St. Thomas, U.S. Virgin Islands.

When dealing with the foreclosure of a residential or commercial mortgage on a home, business, or other real property, it is crucial to have a trusted and capable attorney on hand to guide you through the process. Foreclosure laws differ in each state and territory, and local foreclosure practice can be highly idiosyncratic.  However, whether you are a lender with a portfolio of delinquent mortgage loans, a borrower who has fallen behind on payments, or a buyer who is interested in purchasing a property in foreclosure, it is important to understand what a foreclosure action involves, how the foreclosure process works in the U.S. Virgin Islands, and what alternatives to foreclosure might be better for your situation.

A foreclosure is a judicial process in which real property (usually a home or business) that a borrower has offered as security for a loan is sold by the court to satisfy the borrower’s delinquent loan debt.  The formal cause of action in the U.S. Virgin Islands may be called an “action for foreclosure of real property lien” or an “action for debt and foreclosure”.  Under either cause of action, the borrower’s rights in the property (as well as the rights of any junior lienholders) will be judicially terminated by the court, and the property will be sold at a public auction (called a “Marshal’s sale”) to satisfy the loan debt.

Here are some key points to consider regarding foreclosures in the U.S. Virgin Islands.

  • Length of time: One of the most common foreclosure questions that we receive is how long will the process take. There are actually two parts to this question:  How long will it take to get a foreclosure judgment from the court, and how long will it take to get a deed to the foreclosed property?  Although every case is unique, an uncontested foreclosure action (i.e., where a borrower does not respond to the complaint) theoretically could go to judgment in about a year.  Due to the court’s caseload and other factors, however, a timeline of between 18 and 24 months from complaint to judgment is more typical.  After judgment is entered, it takes about 90 to 120 days for the property to go to sale, and it can take at least another 30-90 days (and sometimes longer) for the sale to be confirmed by the court. Furthermore, all foreclosed property in the Virgin Islands is subject to a six-month post-sale redemption period that cannot be shortened or waived without the consent of the borrower.  All together then, it can take two or more years for a foreclosure action to go from complaint to deed.  In extreme circumstances (such as in the aftermath of Hurricanes Irma and Maria in 2017, or in the case of the COVID-19 pandemic), the process can take longer.
  • Price: The other most common foreclosure question concerns how much it will cost. Again, every case is different depending on the property and the loan in question. The short answer for a lender is that the cost of an uncontested foreclosure action will run between $3,000 and $5,000, but the cost of a contested foreclosure (especially a commercial foreclosure) can be much higher.  This is because the judicial foreclosure process in the Virgin Islands cannot be fast-tracked or avoided (except by a deed-in-lieu of foreclosure, discussed below).  Like most litigation, foreclosure is expensive for lenders and their loan servicers, and it is also expensive for the borrower, who stands to lose any accrued equity in the property (and, if the foreclosure is against a residential property, the emotional and financial cost of losing a home).
  • REO properties: In many cases, the only bidder at a foreclosure sale is the lender who made the original loan. REO (“real estate owned”) properties are properties that the lenders or their loan servicers acquire through the foreclosure process, which they generally will market and sell to new buyers in order to recoup their losses on the loan.  If the acquired properties are backed by institutions such as Fannie Mae, Freddie Mac, HUD, or the VA, the lender or servicer will convey those properties to these entities for eventual marketing and sale.
  • Deed in lieu of foreclosure: The most common method for avoiding foreclosure is for the borrower to voluntarily deed the property to the lender in exchange for a partial or complete discharge of the loan debt. A deed-in-lieu of foreclosure (“DIL”) avoids the longer and more expensive foreclosure process, and it also dispenses with the six-month redemption period.  Although a DIL can be a beneficial solution for both lenders and borrowers, it is not a feasible option in every case, such as when there are second mortgages on the property or the borrower does not meet the lenders hardship criteria for a DIL. Even where a DIL is warranted, a knowledgeable and experienced foreclosure or real estate attorney should draft the DIL and the supporting documents to avoid title issues or other conveyance problems.
  • Short sales: Short sales are a less common alternative to foreclosure, but they, too, avoid the cost and expense of litigation. Short sales occur when the lender agrees to allow the borrower to sell the property to a third party for less than what is owed on the loan. To qualify for a short sale, the borrower must meet the lender’s hardship criteria, and the buyer’s offer usually must be within a certain range of the property’s fair market value.  However, a short sale can be a long process, and short sale buyers need both patience and persistence (and a good real estate attorney) if they want to see it through.

Given the financial stakes facing both lenders and borrowers in a foreclosure action, it is critical for both parties to have skilled legal representation.  To learn more about the foreclosure process in the U.S. Virgin Islands, contact an experienced foreclosure or real estate attorney at BoltNagi PC today.

A. Jennings Stone is an attorney in the litigation practice group and concentrates his practice in the area of foreclosures at the law firm of BoltNagi PC. BoltNagi PC is a full-service business law firm in St. Thomas, U.S. Virgin Islands.