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.

There are some circumstances in which a bank will offer a homeowner the option to pursue a deed in lieu of foreclosure rather than a short sale or other foreclosure alternative. In this process, a person hands over the deed to their home to the bank, bypassing the standard foreclosure process.

You may wonder why it’d be beneficial to hand over the deed to your home rather than go through a short sale, especially as there are cases in which the deed in lieu can favor a bank more than a homeowner. If you have equity in the home you can try to sell the home before you consider a deed in lieu, but there are some sellers who have a mortgage that is underwater, which means the amount owed is worth more than the value of the home.

A property does not necessarily have to be in foreclosure for a deed in lieu to begin. The lender does not necessarily need to have filed a default notice, or begun any official foreclosure proceedings in court. However, banks are also not under any obligation to accept deeds in lieu of foreclosure. Situations in which they’d be likely to decline a deed in lieu as an option include:

  • The action would not be profitable for the bank;
  • There exist tax liens, judgments or junior encumbrances on the property that would stay with the property and become the responsibility of the lender after the transfer of the deed;
  • There were unacceptable terms of the deed in lieu, such as the borrower being asked to make financial contributions in exchange for acceptance of the deed in lieu that the borrower rejects;
  • Servicing guidelines in existence that prohibit a deed in lieu from being used.

A deed in lieu is not always beneficial

While transferring a property through a deed in lieu and avoiding some of the worst parts of the foreclosure process can be beneficial in some cases, this is not always true. Here are some examples of some of the drawbacks associated with a deed in lieu:

  • It affects your credit: A deed in lieu does show up on a credit report, and it is not likely to be much better for your credit score than a full foreclosure, so don’t expect this to be a route to save your credit score.
  • It affects your ability to purchase another home: You’re not going to be able to transfer your deed and turn around and buy a new home. It may take at least four years before you’re able to get a mortgage again.
  • It doesn’t always release you from liability: You should make sure that any deed in lieu to which you agree releases you from liability for your loan, because this language isn’t always included in such agreements. If you’re still going to be pursued for mortgage money, there’s no point in handing over the deed.

For more information about the benefits and drawbacks of deeds in lieu, contact a skilled real estate attorney at BoltNagi PC in the U.S. Virgin Islands.

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.

A commercial lease is an important part of your business operations — favorable terms on such a lease will put your company in a better position to succeed. Leases are almost always prepared by a landlord in a way that favors the landlord, but that doesn’t mean the terms of that lease are completely non-negotiable.

With this in mind, here are some tips to help you negotiate a commercial lease that can benefit you, and not just the property owner.

Look into what other businesses pay in rent for comparable properties

The amount of rent you pay is a compelling factor in your ability to be profitable and increase your margins on an ongoing basis. For this reason, you should do plenty of research into what other businesses pay in rent for similar properties in your area.

A portion of your rent negotiations should include future rent increases. Landlords often like to increase rent for every additional year of the lease term.  To keep your rent affordable, it is useful to discuss these increases at the outset of the agreement and work out a cap on these increases. You can also negotiate the amount of your security deposit and other lease terms.

Uncover hidden costs and negotiate them

Are all costs included in your rent, or are there extra costs that you will have to pay in addition to your rent? The terms of your lease may, for example, make you responsible for maintenance or upkeep of common areas on the property. Be sure to get information about all these potential costs up front, and to negotiate these terms so they are as favorable for you as possible.

Less-obvious hidden costs might arise in the context of extra costs that you will have to incur due to the nature of the property itself.  Will the location or condition of the property increase the cost of obtaining an affordable commercial liability insurance policy for your business?  Is the property a historic building with uneven floors, steps, and door thresholds?  Does the property have vulnerabilities that will require you to pay for extra security?  Will you have to install more advanced networking infrastructure to handle the telecommunication needs of your business?  These considerations can be part of your negotiations, either to lower your rent or secure the landlord’s commitment to address your needs (thereby lowering operating costs that you would have incurred elsewhere).

Finally, if a commercial space is too big for your current needs, consider asking the landlord to loosen or waive any restrictions on subletting.  The additional rent from a sublessor can be applied to a lease payment that might otherwise be too steep for you.

Consider the length of the lease

One of the first issues you should discuss with the property owner is the length of the lease. Generally, a small business that is just starting out should aim for a one – or two-year lease with an option to renew. This will prevent you from being tied down for too long in the early phases of your business, but it still gives you an option to stay in the same location if you choose. Shorter leases are also better if you think you can find a comparable location without too much trouble in the event this particular arrangement does not work out.

There are some businesses, however, that are extremely location-dependent, such as restaurants or bars.  In those cases, a longer lease term can offer more stability.

Consider the termination clause for your lease

Finally, make sure you carefully read what the lease says about terminating the agreement.  Note the provisions that set the number of days from the end of the lease (e.g. 30 days, 60 days, etc.) before which you must give notice of your intent either to vacate the property or to extend the lease.  Also note the due date for rent payments and negotiate any grace period that suits your cash flow.  You should ideally have a clause in place that gives you sufficient time to cure a default before the landlord can initiate eviction proceedings for delinquent rent.  You should also seek to negotiate penalties that the lease has in place for early termination if you decide to leave before the lease expires.

For more information about negotiating your business’s commercial lease, contact an experienced real estate attorney at BoltNagi PC in the U.S. Virgin Islands.

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

When a commercial property goes into foreclosure, the lender will do everything in its power to preserve the value of the property, as well as ensure that any rental income generated by the property is put toward maintaining the property and paying off the loan.

How does the lender ensure this? By seeking the appointment of a receiver immediately after a commercial loan goes into default. The receiver is a third-party individual or entity appointed by the court who is tasked with preserving the property that secures the loan when the lender can demonstrate that there is a risk of damage to the property or a loss of rental income from the property.

Here’s an overview of what you need to know about commercial receivership in the U.S. Virgin Islands.

The elements of commercial receivership

Different courts have different tests for appointing receivers, but the common elements are a clause in the mortgage that provides for the appointment of a receiver upon the borrower’s default, and an actual default under the loan itself.  Other elements might include the solvency of the borrower, whether the value of the property is enough to satisfy the loan debt, whether waste has been committed on the property, and whether the property is in danger of being foreclosed by the government for payment of back taxes.

The procedure for appointing a commercial receiver

Usually, a lender will commence an action for the appointment of a receiver as part of its foreclosure action. The receiver will then be in charge of managing the property throughout the duration of the litigation.

Although an order appointing a receiver can be tailored according to the circumstances of the litigation, a receiver will have the following general responsibilities and powers:

  • Where the property is under construction, completing that construction in a commercially reasonable manner;
  • Where the property is occupied by tenants, managing existing leases, entering into new leases,  and collecting rental income;
  • Where the property is vacant or abandoned, securing the property to protect it from potential vandalism, or (where occupied) damage purposefully inflicted by tenants;
  • Arranging for any necessary repairs or maintenance to keep the property in reasonably good condition;
  • Obtaining insurance and paying any taxes associated with the property;
  • Managing any bank accounts associated with the property; and
  • Selling or otherwise disposing of the property, with the consent of the court and (depending on the circumstances of the litigation) the lender, borrower, and/or lienholders.

Throughout the receivership process, the receiver is responsible for honoring and upholding the contractual rights of the tenants in the commercial property, who likely are innocent third parties. Receivers must safeguard the welfare of all tenants and guests, and continue to manage ongoing operations and expenses, while making all commercially reasonable efforts to maximize profitability from the property.

Receivers are also responsible for generating and submitting periodic reports to court, the lender, and the borrower, including regular accountings of financial transactions associated with the property. These reports generally include detailed information about specific actions taken in managing the property, the amount of income received from the property, any amounts spent to maintain or improve the property, and other relevant information.

Receiverships can be terminated or set aside only by court order.  Circumstances that warrant the termination of a receivership include a change in circumstances surrounding the property, such as the sale or bankruptcy of the business; the reinstatement of the delinquent loan; or the settlement or completion of the underlying litigation.

For more information about commercial receivership in the U.S. Virgin Islands and the benefits of having a receiver manage a commercial property that has gone into default, contact an experienced real estate lawyer at BoltNagi PC.

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