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Returning residents, young urban professionals, and REITs have created a seemingly insatiable demand for housing options across Jamaica. There has been a steady and gradual growth in areas like Kingston and other metropolitan areas in Jamaica namely, Portmore, Montego Bay, Spanish Town, and even Drax Hall / Priory in St. Ann. Currently, about 56.65 percent of Jamaica’s population lives in urban areas. The completion of highways to Mandeville and St. Thomas means that these areas are ripe for continued development as well.

This fiercely competitive climate for real estate has meant that more and more purchasers are buying units before construction is complete – and sometimes even before ground has been broken on a project.  But entering into an agreement for sale for a pre-construction property comes with special considerations: construction delays, cost overruns, escalation clauses, etc., and buyers typically have little to no leverage to negotiate terms with developers.

Why consider Pre-Construction Strata properties

Sometimes, it’s the availability; other times, it’s the lower price. In most cases, the choicest units will sell off quickly, so the earliest purchasers will have their pick of the units. It is also usually significantly cheaper to purchase pre-construction units. This is because developers offer discounts to meet sales quotas set by their lenders/investors, which may require a percentage of units to be sold before issuing a construction loan. Some buyers are motivated to act swiftly to secure the “first mover’s advantage”.

The reality of the situation

Many purchasers of pre-construction properties feel pressure to sign an (AFS) agreement for sale quickly, to lock in their choice of unit. But there are some special considerations for pre-construction properties that purchasers should take into account before inking a deal, including:

Delays. Construction inevitably takes longer than anticipated – and even reputable, experienced developers contend with materials shortages and logistical issues that can push projects over deadline. Delays can impact a purchaser in at least three ways: 1. If you are planning to live in the unit you are purchasing, do not make concrete plans to move until you have keys in hand – or, at a minimum, until the Certificate of Practical Completion has been received (indicating that a unit is nearly complete). 2. If you are getting a mortgage, you and your attorney need to keep track of the date on which the Letter of Undertaking expires, so that you can seek an extension if necessary. 3. Significant construction delays can result in increases in the cost of building materials and labor, triggering the escalation clause in your AFS, and meaning that the cost of your unit could increase 3-5% or more, depending on your specific circumstances. You will need to be able to find this cash in order to close.

Escalation. Almost all pre-construction / construction agreements for sale include an escalation clause, which allows the developer to adjust the purchase price upwards at completion to account for inflation, increased costs in materials or labor, etc. Sometimes the escalation clause can include a provision that requires a purchaser to match a later, higher bid received by the developer for the unit. As noted above, you will want to be  sure you have enough cash on hand to cover any escalation costs.

Parking. This is a consideration common to ALL strata properties that are often overlooked by purchasers: how many parking spaces is your unit entitled to? Are they deeded (they belong to you) or assigned (they are marked for your use, but form part of the common property of the strata)? If a 2-3 bedroom unit has only one assigned parking space, it means there will be fierce competition for visitor’s spots and residents may park outside of marked spaces.

Utilities. Another consideration common to ALL strata properties: does the development have water storage and a backup generator, or do you need to install your own? If you are responsible for installing your own backup systems, make sure you account for the cost of doing so in your budget, as water and power outages are common across Jamaica, and rapid rate of development in certain areas of Kingston in particular has outpaced the ability of the utility companies to provide reliable service. Similarly, if you are purchasing in a high-rise (3 stories) does the development have provisions for a water pump to carry water to the higher floors? NWC is only obligated to supply enough pressure to reach the second floor – which may leave some residents high and dry.

Approvals and Permissions. Has the developer gotten planning permission, and are they building in compliance with that permission? If not, they could be subject to lawsuits or stop work orders imposed by local planning authorities that could delay construction indefinitely.

In addition, pre-construction purchasers should also take into consideration all of the regular issues that can arise in stratas: what do the by-laws say? Are pets allowed? Are short-term rentals (e.g, AirBNB) allowed? What is the recourse against owners who fall into arrears with their monthly maintenance fees? Are there any breaches of restrictive covenants that need to be addressed? Have you taken into account the various additional costs and fees that it will be necessary to pay in order to close?

Conclusion

If you are flexible with timing, and budget for contingencies, pre-construction purchases can be attractive investments. But purchasers should do their due diligence and be prepared for the special contingencies involved. Seek the advice of experienced legal counsel, who will take the time to go through the AFS with you, and explain the various provisions, so that you don’t get caught flat-footed.

-Nathanael Amore and Sarah Hsia

Rockstone Legal

Disclaimer: The views expressed in this article are those of Rockstone Legal and do not constitute legal advice.

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News

Ownership of master sound recordings has been a hotly contested issue in Jamaica throughout the history of Jamaican music. The Copyright Act of Jamaica seemingly addresses the issue head on: section 22(1) states that the author of a work is the owner of the copyright in that work unless there is an agreement to the contrary, and defines the author of a sound recording as “the person by whom the arrangements necessary for the making of the recording or film are undertaken.”


Local industry custom and practice has adopted a default rule that the producer owns the masters, but until now there has been little guidance from the courts as to what the language of the Copyright Act means in practice: what does it mean to “undertake the arrangements necessary” to make the sound recording? The lack of clarity on this issue, and changes in technology and production of music have led to continued disputes between producers and artistes.


The recent judgement given in the case, Cabel Stephenson v Doreen Hibbert et al [2022], is a rare example of a local decision that sheds a bit more light on this area. Although the overall claim involved a number of other legal issues, the Court looked in detail at the question of copyright ownership of master sound recordings. In the end, the Court found that not only did Mr. Stephenson own the physical hard drive, but as the project’s executive producer, he was also seen as the first owner of the drive’s content. However, Justice Stephane Jackson-Haisley did not designate Mr. Stephenson as the only owner of the masters but left room for the possibility that he was a co-owner of the masters, along with Droop Lion and Toots.


So, why did the court decide in Mr. Stephenson’s favour? Firstly and most importantly, the judge relied on the wording of Jamaica’s Copyright Act. The Act explains that the executive producer should be considered the first owner of a work and its content. To decide who is the justified executive producer, the judge relied on defining the true ‘visionary’ of the project. That individual is ‘described as the person with the vision, the individual who conceptualised the project and therefore the person by whom the arrangements necessary for the making of the album were undertaken.’ Since Mr. Stephenson was found to be the true executive producer by the court, it therefore means that he is also the owner of the album content on the hard drive at issue.


Along with the Act, Justice Jackson-Haisley also looked at previous cases from the United Kingdom, with similar facts. They lay out that all contributors have some claim to ownership of a project, which they worked on. However, the court finds it important to highlight that by collaborating on this project, they understood that ‘they mutually understood their separate roles and responsibilities,’ and should then understand what does and does not belong to them. And because of this, the Hibbert estate is not able to claim that all of the works and content on the drive belonged exclusively to Toots. Further to that, the court emphasised that because Mr. Hibbert made such an effort to be part of this project before his death, he must have impliedly given his permission for his previously recorded sounds to be used. The court found that because Toots gave that permission, his estate can’t now take that permission back to claim it as their property.

So what does this mean for you?
There are a number of different takeaways from the outcome of this case, depending on your role in a project. Producers, artistes, managers, engineers, etc will all have different lessons from the judgement, but it still serves as an overall ‘wake-up call’ for all. No matter the role played in creating a project, everyone should ensure their portion of the content ownership is established early on.


For producers, for example, it is important to keep detailed records and receipts to rely on, if needed. Keep receipts of payment for studio time, musicians, vocalists, engineers, equipment, etc. to use as evidence if needed. If possible, communicate with project participants by email and save your correspondence. Don’t be caught unprepared if and when your role and contribution to a project is questioned.


Along with producers, there are also multiple lessons that can be learned by artists. For starters, if you are the visionary behind a project then you have to make an effort to protect your art by establishing some ownership. Make it clear from the outset of working with a producer that you expect to own the master at the end of the day. Have the difficult conversations and save your receipts!


At the end of the day, music is a business. Work with your team to communicate clearly, get receipts and keep receipts to head off disputes down the road.

– Leah Goldson and Sarah Hsia

Disclaimer: The views expressed in this article are those of Rockstone Legal and do not constitute legal advice.


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