PUERTO RICO Law and Practice Contributed by: Antonio Santos, Donald Hull and Paola Canino, Pietrantoni Mendez & Alvarez LLC
edies for breach of representations include rescission and damages. 2.6 Important Areas of Law for Investors Purchasers of real estate in Puerto Rico should always consider the tax consequences of their investment and the type of investment vehicle utilised. It is also important to consider the impact of environmental laws if contamination is present or suspected. In the case of new construction and development, it is essential to account for possible land use and zoning Under environmental laws applicable in Puerto Rico, a buyer may be held liable for the environmental pollu - tion or contamination of real property unless the buyer can establish that such contamination is not attribut - able to its action or inaction. It is therefore important for the buyer to establish a baseline of the environ- mental condition of the property prior to acquisition by undertaking a thorough environmental assessment conducted by a qualified expert. In addition to local environmental laws, US federal environmental laws and regulations are also applicable in Puerto Rico. 2.8 Permitted Uses of Real Estate Under Zoning or Planning Law restrictions affecting the real property. 2.7 Soil Pollution or Environmental Contamination Real property in Puerto Rico is classified by the Puer - to Rico Planning Board (or, in certain cases, by the autonomous municipalities) under publicly available land use and zoning classifications, which determine the uses permitted for the property. Under certain cir - cumstances, project-specific variances may be grant - ed by the relevant permitting authorities in accordance with established procedures (which, among other things, may require public hearings). 2.9 Condemnation, Expropriation or Compulsory Purchase Public taking or condemnation of private property is possible in Puerto Rico for public purposes. The pro - cess requires the government to establish the value of the property in order to determine just compensation for the taking by means of an independent appraisal. Upon depositing the corresponding amount with the expropriation court, title is automatically transferred
to the condemnation authority. However, the prop - erty owner has the right to contest the valuation in a judicial proceeding and – if successful – to recover a higher value if accepted by the court. 2.10 Taxes Applicable to a Transaction Stamp taxes, recording fees and notarial fees are typi - cally applicable in a transaction for the purchase and sale of real property in an asset deal. Unless the par - ties reach a different agreement, the transferor of real property will typically pay the stamp taxes with regard to the original of the deed of purchase and sale, and the transferee will pay the stamp taxes with regard to the certified copy of the deed and the applicable recording fees. Stamp taxes and recording fees are not applicable in the case of a transaction for the total or partial transfer of shares or other equity interests in a property-own - ing entity. In addition, a partial exemption for stamp taxes and recording fees may be available in the case of tourism development projects. The Internal Revenue stamp taxes for the original of the deed of transfer are calculated at the rate of USD2 for the first USD1,000 or fraction thereof, and USD1 for every USD1,000 thereafter, based on the purchase price of the real estate. The Internal Revenue stamp taxes for the certified copy (which is the document that is actually filed for recording) are calculated at the rate of USD1 for the first USD1,000 or fraction thereof, and USD0.50 per USD1,000 thereafter. Legal Assistance stamps are also required to be affixed to the deed and are calculated at 0.0001 times the pur - chase price for the original of the deed of sale and half of that amount for the certified copy. The fees for recording a deed of purchase and sale in the Registry of Property are calculated at the rate of USD2 per USD1,000 (or fractions thereof) for the first USD25,000, and USD4 per USD1,000 for amounts in excess of USD25,000, plus a filing fee of USD15.50. The calculation of recording fees is based on the greater of the purchase price of the real estate and the sum of all the amounts that are secured by the mortgages that encumber the real estate at the time of the sale.
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