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Jurisdictions covered

The following 18 jurisdictions are covered in this report:

Australia; Austria; Chile; Cyprus; Germany; India; Japan; Kenya; Mexico; Monaco; Myanmar; Netherlands; Romania; Slovenia; Switzerland; Thailand; Turkey; United States.

Questions

The set of questions relating to the topic of real estate and answered by the guide for each jurisdiction covered include:

General

• • How would you explain your jurisdiction’s legal system to an investor?
• • Does your jurisdiction have a system for registration or recording of ownership, leasehold and security interests in real estate? Must interests be registered or recorded?
• • What are the legal requirements for registration or recording conveyances, leases and real estate security interests?
• • What are the requirements for non-resident entities and individuals to own or lease real estate in your jurisdiction? What other factors should a foreign investor take into account in considering an investment in your jurisdiction?
• • If a non-resident invests in a property in your jurisdiction, are there exchange control issues?
• • What types of liability does an owner or tenant of, or a lender on, real estate face? Is there a standard of strict liability and can there be liability to subsequent owners and tenants including foreclosing lenders? What about tort liability?
• • How can owners protect themselves from liability and what types of insurance can they obtain?
• • How is the governing law of a transaction involving properties in two jurisdictions chosen? What are the conflict of laws rules in your jurisdiction? Are contractual choice of law provisions enforceable?
• • Which courts or other tribunals have subject-matter jurisdiction over real estate disputes? Which parties must be joined to a claim before it can proceed? What is required for out-of jurisdiction service? Must a party be qualified to do business in your jurisdiction to enforce remedies in your jurisdiction?
• • How do the laws in your jurisdiction regarding real estate ownership, tenancy and financing, or the enforcement of those interests in real estate, differ between commercial and residential properties?
• • How does your jurisdiction control or limit development, construction, or use of real estate or protect existing structures? Is there a planning process or zoning regime in place for real estate?
• • Does your jurisdiction have a legal regime for compulsory purchase or condemnation of real estate? Do owners, tenants and lenders receive compensation for a compulsory appropriation?
• • Are there any circumstances when real estate can be forfeited to or seized by the government for illegal activities or for any other legal reason without compensation?
• • Briefly describe the bankruptcy and insolvency system in your jurisdiction.

Investment vehicles

• • What legal forms can investment entities take in your jurisdiction? Which entities are not required to pay tax for transactions that pass through them (pass-through entities) and what entities best shield ultimate owners from liability?
• • What form of entities do foreign investors customarily use in your jurisdiction?
• • What are the organisational formalities for creating and maintaining the above entities? What requirements does your jurisdiction impose on a foreign entity? Does failure to comply incur monetary or other penalties? What are the tax consequences for a foreign investor in the use of any particular type of entity, and which type is most advantageous?

Acquisitions and leases

• • Describe the various categories of legal ownership, leasehold or other occupancy interests in real estate customarily used and recognised in your jurisdiction.
• • What are the typical pre-contractual steps?
• • What are typical provisions in a contract of sale?
• • Who takes responsibility for a future environmental cleanup? Are clauses regarding long-term environmental liability and indemnity that survive the term of a contract common? What are typical general covenants? What remedies do the seller and buyer have for breach?
• • What are typical representations made by sellers of property regarding existing leases? What are typical covenants made by sellers of property concerning leases between contract date and closing date? Do they cover brokerage agreements and do they survive after property sale is completed? Are estoppel certificates from tenants customarily required as a condition to the obligation of the buyer to close under a contract of sale?
• • Is a lease generally subordinate to a security instrument pursuant to the provisions of the lease? What are the legal consequences of a lease being superior in priority to a security instrument upon foreclosure? Do lenders typically require subordination and non-disturbance agreements from tenants? Are ground (or head) leases treated differently from other commercial leases?
• • What steps are taken to ensure delivery of tenant security deposits to a buyer? How common are security deposits under a lease? Do leases customarily have periodic rent resets or reviews?
• • What due diligence should be conducted before executing a contract? Is any due diligence customarily permitted or conducted after contract but before closing? What is the typical method of title searches and are they customary? How and to what extent may acquirers protect themselves against bad title? Discuss the priority among the various interests in the estate. Is it customary to obtain government confirmation, a zoning report or legal opinion regarding legal use and occupancy?
• • Is it customary to arrange an engineering or environmental review? What are the typical requirements of such reviews? Is it customary to get representations or an indemnity? Is environmental insurance available? Is it customary to get representations or an indemnity? Is environmental insurance available?
• • Do lawyers usually review leases or are they reviewed on the business side? What are the lease issues you point out to your clients?
• • What other agreements does a lawyer customarily review?
• • How does a lawyer customarily prepare for a closing of an acquisition, leasing or financing?
• • Is the closing of the transfer, leasing or financing done in person with all parties present? Is it necessary for any agency or representative of the government or specially licensed agent to be in attendance to approve or verify and confirm the transaction?
• • What are the remedies for breach of a contract to sell or finance real estate?
• • What remedies are available to tenants and landlords for breach of the terms of the lease? Is there a customary procedure to evict a defaulting tenant and can a tenant claim damages from a landlord? Do general contract or special real estate rules apply? Are the remedies available to landlords different for commercial and residential leases?

Financing

• • Discuss the types of real estate security instruments available to lenders in your jurisdiction. Who are the typical providers of real estate financing in your country? Are there any restrictions on who may provide financing?
• • Is financing available for ground (or head) leases in your jurisdiction? How does the financing differ from financing for land ownership transactions?
• • What is the method of creating and perfecting a security interest in real estate?
• • Are third-party real estate appraisals required by lenders for their underwriting of loans? Must appraisers have specific qualifications?
• • What would be the ramifications of a lender from another jurisdiction making a loan secured by collateral in your jurisdiction? What is the form of lien documents in your jurisdiction? What other issues would you note for your clients?
• • How are interest rates on commercial and high-value property loans commonly set (with reference to LIBOR, central bank rates, etc)? What rate of interest is legally permissible in your jurisdiction and what are the consequences if a loan exceeds the legally permissible rate?
• • How are remedies against a debtor in default enforced in your jurisdiction? Is one action sufficient to realise all types of collateral? What is the time frame for foreclosure and in what circumstances can a lender bring a foreclosure proceeding? Are there restrictions on the types of legal actions that may be brought by lenders?
• • Are lenders entitled to recover a money judgment against the borrower or guarantor for any deficiency between the outstanding loan balance and the amount recovered in the foreclosure? Are there time limits on a lender seeking a deficiency judgment? Are there any limitations on the amount or method of calculation of the deficiency?
• • What actions can a lender take to protect its collateral until it has possession of the property?
• • May security documents provide for recourse to all of the assets of the borrower? Is recourse typically limited to the collateral and does that have significance in a bankruptcy or insolvency filing? Is personal recourse to guarantors limited to actions such as bankruptcy filing, sale of the mortgaged or hypothecated property or additional financing encumbering the mortgaged or hypothecated property or ownership interests in the borrower?
• • Is it typical to require a cash management system and do lenders typically take reserves? For what purposes are reserves usually required?
• • What other types of credit enhancements are common? What about forms of guarantee?
• • What covenants are commonly required by the lender in loan documents?
• • What are typical financial covenants required by lenders?
• • What are the requirements for creation and perfection of a security interest in movable property? Is a ‘control’ agreement necessary to perfect a security interest and, if so, what is required?
• • Do lenders require that each borrower be an SPE? What are the requirements to create and maintain an SPE? Is there a concept of an independent director of SPEs and, if so, what is the purpose? If the independent director is in place to prevent a bankruptcy or insolvency filing, has the concept been upheld?