Option

The acquisition of right of long-term land lease (leasehold) for a plot of domain land for commercial, tourism or industrial projects takes place via an option procedure. The right of option gives the option holder the right to have first choice to a leasehold agreement with “Land Aruba” (government of Aruba) as regards a particular plot of land for a specific project under certain conditions. This option is regulated in Chapter IA of the National Ordinance Issuance of Properties (Landsverordening Uitgifte Eigendommen AB 1989 no. GT 21) and is effected by a ministerial decree.

Granting of an option

Applicant must first send a request to the attention of the Minister entrusted with infrastructure, via the Director of the Department of Infrastructure and Planning, in order to obtain the right to leasehold land. The following points must be addressed in said request.

1. Description of the project (two A4 pages);
2. Type of project (timber company, supermarket, condominium, hotel, etc.);
3. Size of the required plot (in square meters);
4. Location preference (two alternatives);
5. Required investment (in Aruban Florins);
6. Method of financing (Letter of intent from a local bank);
7. If possible architectural (sketch) drawings.

After receipt of the request, an evaluation and administrative control will take place according to the FIFO system (order of handling according to submission date of the request) based on the information provided in the request. After the evaluation and administrative assessment it will determined whether the request can be granted. Thereafter a Ministerial Decree granting the option for the plot of land will be drawn up. The right of option will expire;

• if the option decree is not collected within 1 (one) month after the date of the decision;
• if all the required documents are not submitted as stipulated in the (option) decree;
• in the event the submitted documents are rejected.

Duration of option

The right of option is tied to a certain period in order to give the option holder the opportunity to work out his/her plans and to make the necessary preparations. The duration of the option is stated in the ministerial decree granting the option. In principle, the option has a duration of six (6) months. Additional extension of the option period, with a maximum of two (2) times six (6) months is only possible depending on the project, and if the extension takes place before the expiration of the first and / or second option period. If the option holder does not extend the right of option, the right of option period will expire by law after lapse of the option period, with the result that the long-term lease land right will not be granted.

Conditions for the granting of long lease land by option holder

Under article 25a of the National Ordinance Issuance Properties the Minister entrusted with infrastructure is authorized to grant options on the issuance of long-term land lease under the conditions to be stipulated by the Minister in each particular case. In case of non-compliance with the conditions/requirements, the right of option will void and the long-term lease will not be granted.

Required documents

Within the first option period the following documents must be submitted to Minister of Infrastructure for approval.

1. Layout of the project;
2. Detailed construction drawings (floor plans) required for the application for a building permit which must prove that the project in question fits into the surroundings, all in consultation with the Public Works Department (PWD) (see below other requirements);
3. Feasibility study of the project;
4. Specification of the required investment for the project;
5. Description of the financing method of the project and supporting documentation providing authentic guaranteed proof of Financing*;
6. Construction schedule that clearly indicates startup and completion date of construction;
7. An Environmental Impact Report (EIR)**;
8. A Social Economic Impact Assessment (SEIA) **
   * Foreign financing will not be accepted;
   ** Applicable for large projects such as hotels, condominium, waste management companies, etc.

Other requirements

Option holder must take care of any and all other relevant permits which are required for the construction and operation of the project. The building request to obtain any building permits must be submitted to the DOW within the granted option period. Proof of submission of the building permit application and a copy of the construction plans required for obtaining the prospective building permits should also be submitted within the option period to the Director of the Department of Infrastructure and Planning (DIP).
The option holder is obliged to make a social contribution to a social entity in the community of Aruba of at least 5‰ (five per thousand) of the project investment. The option holder can not derive any rights thereof.

The project preparation, namely as regards the design and detailing of construction plans - and actual construction should be carried out wherever possible by local businesses. Construction and technical drawings drawn up abroad must be certified by a local architect and/or engineer.

Bank guarantee

The right to long-term land lease will still not be exercised, even after all the conditions and requirements are met, until the option holder has handed an irrevocable bank guarantee for the amount of  ten percent (10%) of the investment for the construction of the project in the name of the legal entity “Land Aruba”. The irrevocable bank guarantee must be issued by a local bank.

The original guarantee must be handed to the Director of the DIP for approval no later than two (2) weeks prior to the execution of the notary deed of long-term land lease.

Costs

All (preparation, measurement administrative and other) costs related to the right of option must be covered by the option holder.

Option fee

In accordance with Article 25 C of the National Ordinance Issuance Properties, the option fee amounts to 3% of the land value on an annual basis, to be paid within one month after the decision to grant the option.

For more information please contact:

Department of Infrastructure and Planning (DIP)

For the legal text see National Ordinance Issuance Properties (AB 1989 no. GT 21).
*   Foreign financing will not be accepted;
** Applicable for large projects such as hotels, condominium, waste management companies, etc.