USA – IOWA Law and Practice Contributed by: David M. Erickson, Christopher S. Talcott, Amy S. Montgomery and Shannon M.H. Hasse, Dentons Davis Brown PC
inspected by a certified inspector. A copy of the cer - tified inspector’s report (“time of transfer inspection”) must accompany any deed conveying title to property that includes a septic system. The county recorder’s office will not record a deed upon the books that is not accompanied by the required time of transfer inspec - tion. Residential Property In the residential context, attorneys may assist or facilitate in obtaining or reviewing the mandatory dis - closures or forms that will accompany the title transfer documents. However, the bulk of any true due dili - gence is usually carried out by the purchaser and the purchaser’s home inspector. The primary exception to this general rule is with regard to examination of title. Commercial Property Conversely, in the commercial context, the attorney may take a more active role in reviewing due diligence materials other than those affecting title, such as sur - veys, inspector reports, rent rolls and the like. Abstracting State Iowa is an abstracting state, wherein an abstract of title is prepared for the property subject to transfer and the attorney makes an examination of the abstract to certify whether the proposed transferor possesses marketable title. 2.5 Typical Representations and Warranties In a typical commercial transaction, where there is a due diligence period, the seller will make few, if any, representations and warranties, as the buyer will be given adequate opportunity to inspect the property during the due diligence period. No generally appli - cable Iowa law mandates certain disclosures in the commercial real estate context. Instead, the scope of any representations and warranties is driven by negotiation between buyer and seller, and buyers will typically rely on their own due diligence rather than seller warranties. A breach discovered pre-closing will typically allow a buyer to terminate the purchase agreement and receive a refund of earnest money, while a breach discovered after closing will form the basis of a claim for money damages, subject to any limitations in the
purchase agreement. The seller will typically negoti - ate a limitation period of one year or less in which a buyer must bring a claim for breach after closing. In larger transactions, such as multifamily housing transactions, the seller will typically demand a cap on liability, which is often a relatively small percentage of the purchase price. Buyers may seek to negoti - ate an escrow holdback of a portion of the purchase price for breaches of representations and warranties discovered post-closing, but this is not typical in Iowa transactions. Representation and warranty insurance is also not typically used in Iowa real estate transac - tions. 2.6 Important Areas of Law for Investors Considerations for an investor in Iowa real estate are typical of investments in real estate in other states. These would include the desire to purchase through an investment entity, in order to avoid exposure to per - sonal liability for matters such as environmental con - tamination or premises liability as well as to facilitate issues of common ownership that are cumbersome through co-ownership via a tenancy in common. The costs of Iowa land transactions tend to be lower than in many states, as a result of the typical avoidance of title insurance as well as nominal recording fees, a modest transfer tax, and the absence of mortgage taxes. 2.7 Soil Pollution or Environmental Contamination In general, a buyer of Iowa real estate could face strict liability for certain environmental contamination on the acquired real estate, unless the buyer qualifies for an innocent landowner defence under applicable envi - ronmental laws. In all but the most routine residential real estate transactions, buyers are advised to obtain what is known as a “Phase I Environmental Report” to examine whether there are any known environmental risks. The allocation of risk of environmental liabilities as between buyer and seller is the subject of negotia - tion under the purchase agreement and will typically take the form of the representations and warranties – and corresponding indemnities – that a seller is willing to provide.
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