Initiative to amend Art. 12 restrictions offered

Rep. William S. Torres has introduced a Legislative Initiative that would extend the maximum term for land lease agreements from 55 to 99 years, in fresh attempts to revitalize major investment projects in the Northern Marianas.

In an interview, Mr. Torres said the move is anticipated to generate interest from foreign investors, thereby, enhancing business opportunities in the Commonwealth.

House Legislative Initiative 12-09 seeks to amend Article 12 Section 3 of the CNMI Constitution which currently guarantees that real estate properties can be leased by non-Northern Marianas descent by only up to 55 years.

Mr. Torres said the initiative will work to the advantage of landowners, real estate brokers and investors who are seen to facilitate banking and other lending institutions in funding major development loans and mortgages.

This will also improve business opportunities in the secondary market and eventually boost the current economic status of the Commonwealth, the congressman explained.

The CNMI Constitution’s Restriction on Alienation of Land guarantees that an investor has 55 years to freehold interests and leasehold interest including renewal rights except an interest acquired above the first floor of a condominium building.

Once the amendment is approved, investors will have up to 99 years of leasehold interest on the property thus allowing any investment to prosper and possibly result to additional business opportunities.

Real estate industry in the Northern Marianas has been stagnant, and is not likely to witness growth, mainly because investors see the Article 12 restriction anti-business. This is aggravated by the economic situations in neighboring Asian countries.

Because of the financial hardship, many real estate investors lose multi-million investments following the continued increase of vacancy rates and delinquent loan payments.

Officials have said that not only does restriction on land ownership here hampers the growth of the real estate market in the Northern Marianas, the issue also impedes the ability of private banks to reach the industry’s target loan to deposit ratio.

Records obtained from the Department of Commerce disclosed that the average loan to deposit ratio in the Northern Marianas is below 50 percent, a figure that is far lower than the local industry standards.

According to the Saipan Bankers’ Association, the target loan to deposit ratio in the Northern Marianas is 70 percent, which is lower than the Guam banking industry’s standard of 80 percent.

Restrictions on land ownership on the island, as guaranteed by Article 12 in the CNMI Constitution, topped the very few reasons cited by bank officials in the industry’s failure to meet the standard 70 percent loan to deposit ratio.

Private banks in the CNMI can only take the title to real estate for a limited time, which brings about difficulties in foreclosing on loans secured by real property.

Actual loan to deposit ratios at the end of 1998 were 30 percent for Bank of Hawaii and 60 percent for Bank of Guam, according to a report from the Saipan Bankers’ Association. (EGA)