An interest in land can either be held under fee or leasehold ownership. Fee ownership is the highest category of ownership in the US and effectively confers absolute ownership. Leasehold confers rights of exclusive possession and use of land for a limited period of time.
A real estate owner can also give exclusive and non-exclusive rights, known as easements and licenses, to third parties to use the land, such as granting a right of way. Recorded easements are binding on any successors in title to the property, whereas licenses are typically for a shorter duration.
Last modified 22 Mar 2024
There are no blanket prohibitions on foreign ownership of US real estate, but various US laws impose restrictions and requirements applicable to foreign investors in certain cases, including:
Other US laws can affect ownership by foreigners. Foreign investors should also keep in mind:
Last modified 22 Mar 2024
Pre-emption rights are generally not imposed by statute. However, property owners can grant rights so that a particular party must be offered the property before it is sold to another. For instance, a property owner can grant an adjacent landowner, and a landlord may grant its tenant, a right to purchase the fee interest in its property before the property owner sells it to a third party, and in some cases a particular class of land (eg former railroad land) may be subject to statutory provisions requiring the land to be offered to certain parties before it is sold to another. Investigation into possible purchase rights should be done as part of due diligence investigations respecting title and survey review and can be addressed through title insurance.
Last modified 22 Mar 2024
Each state has its own law, consisting of case law and statutes, applicable to property transactions; local regulations are also applicable to aspects of property ownership, such as zoning compliance and building codes. In addition, federal laws may be applicable.
Last modified 22 Mar 2024
Not generally, although certain state laws may be targeted at specific classes of property. For instance, special environmental disclosure laws apply in some states with respect to certain categories of industrial property and some states impose protections for the security deposits of residential tenants upon a transfer of title by their landlord. Additionally, almost all states have laws specific to the sale of residential properties, typically between end users and typically involving required disclosures by sellers.
Last modified 22 Mar 2024
Fee ownership is transferred by a deed complying with the requirements of applicable state law. Leases, licenses and easements are entered into or granted by written agreement.
Last modified 22 Mar 2024
There is no single property register for all properties in the US. Each county within each state maintains its own property records. Transfers of title are typically recorded; however, leases and licenses may not be recorded. Title insurance is common.
Last modified 22 Mar 2024
After reaching agreement on the purchase price and other fundamental terms of the transaction (which are sometimes but not necessarily summarized in a term sheet), the parties negotiate a sale and purchase contract reflecting those agreed points and providing further detail regarding the transaction. There will usually be two intervals in the contract: (i) an interval between the date of the contract and an agreed upon date, during which the buyer will carry out its due diligence and (ii) an interval between the end of the due diligence period and the date when the title transfer takes place, called closing.
Last modified 22 Mar 2024
Yes. In many but not all localities in the United States it is customary for the buyer to be entitled to a period after signing the contract, known as a ‘due diligence’ period, in which to conduct investigations of the property and during which the buyer may withdraw from the transaction. The contract should specify the length of the due diligence period (usually in the range of 30 to 90 days) and the scope of documents and information that must be provided by the seller to the buyer before or during this period.
If the contract does not provide for a due diligence period, the buyer should conduct its due diligence investigations prior to signing the contract. As part of its due diligence investigations the buyer will, with the aid of its counsel, review the following items:
Last modified 22 Mar 2024
Consent is required from anyone who has lent money to the seller and has a security interest in the property being sold unless the mortgage is to be paid off in accordance with its terms at closing (which is, in fact, the most common scenario). Consent may be required from the landlord if the land is leasehold. The holders of any rights of first offer or first refusal affecting the property will have to waive or fail to exercise their rights. State law will mandate whether any special consents are required from occupiers of residential property. Spousal consent is required for a transfer of property if the spouse’s name is listed on the deed. Depending on a jurisdiction’s estates laws, spouses may have consent rights over sales of property even if the spouse is not listed in the deed. Additionally, consent/authority is typically required under the seller’s authority documents and title companies will require evidence of such consent/authority before issuing title insurance to the buyer.
Last modified 22 Mar 2024
The contract must be in writing, signed by the parties, and must identify the property to be sold and the material terms of the transaction. State law will mandate any further particular requirements for the contract.
The sale and purchase contract usually describes:
Last modified 22 Mar 2024
Seller’s warranties are generally not provided under statute and the seller and buyer will negotiate the extent of any seller’s representations and warranties when negotiating the SPA; although as discussed above, many states have mandatory disclosures by sellers of residential properties.
Last modified 22 Mar 2024
The SPA will provide for the extent of remedies available to the buyer if the seller makes a misrepresentation. Typically, the buyer’s remedies will be limited to termination of the SPA and refunding of the deposit if the misrepresentation is discovered prior to closing and, if discovered after closing, to monetary damages which may be limited in amount by the terms of the SPA.
Last modified 22 Mar 2024
Zoning, construction and environmental laws may all apply and should be investigated with the assistance of counsel. As part of its due diligence, the buyer will wish to confirm that the property is being used in compliance with any certificate of occupancy issued by the applicable local governmental authority and that the property is not subject to any notices of violation issued by any such authority.
Last modified 22 Mar 2024
The responsibility of property owners for prior contamination is governed both by federal law and by the State law of the property in question. The federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) imposes strict liability on owners and operators of contaminated property, even if they did not cause the contamination. However, ‘innocent’ purchasers who perform prescribed levels of due diligence prior to acquiring the contaminated property (known as ‘All Appropriate Inquiry’) and who take reasonable steps to cooperate with environmental governmental agencies and avoid exacerbating the contamination after the purchase, can avoid CERCLA strict liability.
Liability under state law can vary, with some states imposing strict liability similar to CERCLA and other states imposing liability only against parties who caused or contributed to the contamination.
The primary federal environmental authority, the US Environmental Protection Agency (EPA), has entered into agreements with several states under which EPA allows state agencies to manage the remediation of most contaminated sites in their jurisdictions, with EPA intervening only in certain extraordinary cases (eg sites that present a relatively higher risk to public health or the environment).
Last modified 22 Mar 2024
Typically, the seller will deliver a copy of the certificate of occupancy confirming the permitted use or the title insurer or another consultant will obtain a copy of the certificate from the municipality. In some localities, certificates of occupancy are not issued or additional investigation as to permitted uses may be required and, in such cases, a zoning report should be obtained or other appropriate investigation completed to confirm the permitted use. In addition, if the buyer is planning to change the use or to perform construction at the property, further investigation of the zoning regime applicable to the property should be undertaken as part of due diligence investigations.
Last modified 22 Mar 2024
When a real estate development is proposed to be constructed upon real estate owned by a governmental entity such as a city, county or redevelopment agency, the governmental entity typically will require that the developer enter into a development or redevelopment agreement that governs the conveyance (or ground lease) of the real estate, payment of any consideration and construction of the development according to local entitlements and approvals as well as local codes and ordinances.
The redevelopment agreement will often deal with financial incentives provided by the governmental body for the benefit of the development (eg tax increment financing, governmental loans or guarantees), impose requirements on the developer such as minority/women owned business contracting requirements and set forth governmental process for zoning and plan approvals and issuance of development permits.
Last modified 22 Mar 2024
Yes. The federal and state governments' inherent power to take land for public purposes so long as compensation is paid to the land owner is commonly known as the power of ‘eminent domain’ or ‘condemnation’ in the United States.
Last modified 22 Mar 2024
Depending on where the property is located the following may be payable:
The types and rates of these taxes vary depending on locality, property type and purchase price
In most instances, the applicable state, or the county in which the property is situated, has established customs for the allocation of:
In some parts of the country the transfer tax is customarily paid by the seller. and tThe mortgage recording tax is customarily paid by the purchaser borrower (ie the borrower obtaining the mortgage loan).
The SPA should comprehensively describe how costs are to be allocated between the parties.
Last modified 22 Mar 2024
The answer to this question varies from state to state. State and other local laws of the property in question will determine whether transfer taxes and other taxes are payable in a share deal. Typically, a change in control of an owning company will trigger the payment of city, county and state transfer taxes and also a reassessment of property taxes.
In most instances, the applicable state, or the county in which the property is situated, has established customs for the allocation of:
The SPA should describe the allocation of those costs between the parties.
Last modified 22 Mar 2024
What are the normal steps involved in a real estate transaction?
After reaching agreement on the purchase price and other fundamental terms of the transaction (which are sometimes but not necessarily summarized in a term sheet), the parties negotiate a sale and purchase contract reflecting those agreed points and providing further detail regarding the transaction. There will usually be two intervals in the contract: (i) an interval between the date of the contract and an agreed upon date, during which the buyer will carry out its due diligence and (ii) an interval between the end of the due diligence period and the date when the title transfer takes place, called closing.
Last modified 22 Mar 2024