USA Law and Practice Contributed by: Richard L. Rosen, Leonard S. Salis and Dennison Marzocco, Rosen Karol Salis PLLC
2.9 Condemnation, Expropriation or Compulsory Purchase
Buyers should hire professionals to conduct a Phase I Environmental Site Assessment during the due dili - gence period, in which current and historical uses of the property are analysed to assess whether or not such uses may have contaminated the soil or ground - water beneath the property, as may occur with gas or service stations. It is often recommended that a Phase II Environmen - tal Site Assessment be conducted, in which soil and water samples are taken to be analysed for contami - nants. If contamination is discovered, the property owner is responsible for the remediation costs pursu - ant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), which is the main federal statute that regulates reme - diation of hazardous substances that pose a threat to the environment and to public health. Conducting a Phase I Environmental Site Assessment prior to clos - ing can be done to comply with the requirements of CERCLA’s safe havens for bona fide prospective pur - chasers and innocent landowners, in which liability for remediation costs can be reduced or eliminated. In addition to CERCLA, many states have enacted their own environmental cleanup statutes that may impose additional or stricter liability on property own - ers, and buyers should ensure that they understand the applicable state law requirements in the jurisdic - tion where the property is located. 2.8 Permitted Uses of Real Estate Under Zoning or Planning Law A prospective buyer can ascertain the permitted uses of a parcel of real estate by examining the property’s certificate of occupancy (or comparable instrument) and by researching the applicable zoning code and land-use regulations. It is common for developers to enter into specific development agreements with relevant public author - ities in order to facilitate a project. For example, a developer may agree to contribute to a fund to help pay for investments in public infrastructure. These agreements can help developers obtain the necessary “buy-in” from elected officials and community groups needed to proceed with a project.
Federal, state and local governments have the right to exercise the power of “eminent domain”, which per - mits the government to “take” private property, pro - vided that the property is used for a public purpose or to benefit the public. The Fifth Amendment to the United States Constitution requires the government to provide “just compensation” to private property own - ers for the “taking” of their land. Jurisdictions differ as to what qualifies as a public use. 2.10 Taxes Applicable to a Transaction Most states, counties and municipalities tax real estate transfers based on a percentage of the pur - chase price. Sellers typically pay the transfer taxes, but the parties may agree otherwise. Negotiations with respect to this issue are common. Certain types of transfers, such as transfers made pursuant to bankruptcy proceed - ings, may be tax-exempt. Some states also impose a transfer tax for indirect transfers, such as when there is a transfer of a controlling interest in a company that owns real property, and because of this the parties themselves may agree on how the tax liability will be allocated among the parties. 2.11 Legal Restrictions on Foreign Investors Foreign investors can generally acquire real estate without restrictions; the USA PATRIOT Act prohibits US individuals and businesses from entering into real estate transactions with certain individuals, entities and foreign governments. The US Treasury Depart - ment’s Office of Foreign Assets Control maintains a list of such restricted parties. Several other federal laws and regulations apply to foreign investments in real estate, including but not limited to: • the Foreign Investment in Real Property Tax Act (which imposes withholding and tax reporting obligations on dispositions of US real property by foreign sellers); • the Agriculture Foreign Investment Disclosure Act of 1978 (which requires foreign persons to report acquisitions of US agricultural land to the US Department of Agriculture); and
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