USA Law and Practice Contributed by: Richard L. Rosen, Leonard S. Salis and Dennison Marzocco, Rosen Karol Salis PLLC
• Fee simple ownership – full ownership rights over the property, including selling, leasing, devising or mortgaging the property. • Leasehold ownership – exclusive rights to possess the property for a set term. Leaseholds are gov - erned by a combination of contract law and state- formulated landlord-tenant statutes, which typi - cally include protections such as rules governing eviction procedures and security deposits. In many states, a leasehold interest can also be assigned or subleased unless the lease prohibits or restricts it. • Occupancy interest (licence) – permission to use the property for a specific purpose. Unlike a lease, a licence generally does not create a property interest and can often be revoked by the property owner. • Easement – a non-possessory interest allowing another to use the property for a specific purpose, which typically “runs with the land” and can be transferred. 2.2 Laws Applicable to Transfer of Title States have enacted real property laws that set forth the requirements necessary to transfer title to real property. Typically, a transfer of ownership is com - pleted upon the delivery of the deed by the seller and acceptance of the deed by the buyer. The recording of the deed is essential to protect property rights of the transferee, as unrecorded deeds may be deemed void against subsequent bona fide buyers. Local govern - ments set the recording rules and procedures. Many states and local governments have enacted laws that impose a transfer tax (known as a deed, stamp or recording tax) on the sale of real estate. Some jurisdictions impose additional taxes, such as “mansion taxes”, which are based on the selling price of residential properties. Title to real estate may also be transferred pursuant to the common law principle of adverse possession, in which a trespasser may claim title to another’s land, or portion thereof, if certain conditions are satisfied. The conditions, typically set by state statutory law, generally require that a trespasser occupy the prop - erty in an “open and notorious” manner for a defined period of time. Additionally, many states have property
condition disclosure laws in connection with the sale of residential properties. While the general transfer rules apply across prop - erty types, certain categories are subject to additional requirements. Federal law requires lead-based paint disclosures for pre-1978 residential homes, and many states impose additional disclosure requirements for residential sales. Buyers of industrial or commercial properties should also be aware of potential liability for pre-existing environmental contamination under federal and state law. 2.3 Effecting Lawful and Proper Transfer of Title A lawful transfer of title to real estate is typically effect - ed by first entering into a written contract of sale. Most US states have a so-called “statute of frauds”, which requires that agreements pertaining to the sale of real property be in writing and signed by the parties. It is common practice for buyers of real property to obtain title insurance which insures the buyer against loss, in the event that the seller did not have market- able title at the time of the transfer. It also protects the buyer from incurring expenses in connection with any lien that may have been recorded prior to the buyer recording the transferred deed. 2.4 Real Estate Due Diligence A contract for the purchase of commercial real estate typically provides for a due diligence period in which the prospective buyer may engage in the following activities: • inspection of the physical property, including an environmental inspection; • review of financial information pertaining to both income generated by the property and the costs and expenses of operating the property; • review of tenant leases and other rights of occu - pancy, such as a licence or easement; • obtaining a title search and survey; • reviewing local zoning and land-use regulations; and • judgment and lien searches.
706 CHAMBERS.COM
Powered by FlippingBook