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
2.8 Permitted Uses of Real Estate Under Zoning or Planning Law As in all jurisdictions, the cities and counties in Iowa restrict the use of real estate through zoning ordi - nances. Given the differences in designations and permitted uses across counties and municipalities, the most efficient mechanism for determining the permitted uses of any particular tract of real estate is by requesting a zoning report from the local zoning authority. Developers of real estate may find it advis - able to enter into development agreements with the locality (and are quite frequently required to do so). These development agreements can serve as useful mechanisms to attempt to effectuate a change in zon - ing designations for particular parcels of property. The change in zoning designation will, however, almost always require the consent of several levels or depart - ments of local government, after notice and public hearing regarding any change in zoning designation. 2.9 Condemnation, Expropriation or Compulsory Purchase Condemnation or eminent domain are possible in the State of Iowa through a statutory process. The state, city or county identifies properties affected by a par - ticular project, inspects and values the property, and makes an offer to the owner. If the property owner does not accept the government’s offer, a quasi-judi - cial process unfolds, including determination of “just compensation” by an appointed county commission. Either party may appeal the determination of the com - missioners. The appeal is heard by ordinary judicial process. 2.10 Taxes Applicable to a Transaction Iowa imposes a transfer tax, which is collected at the time the conveyance document is recorded with the county recorder. Transfer tax is incurred at the rate of 80 cents for every USD500 of consideration paid in excess of USD500. Transfer tax is typically paid by the seller. Aside from transactions in which consideration is less than USD500, there are a host of exceptions, includ - ing transfers to newly created business entities or as part of reorganisation of business entities. Note that
transfer or sale of shares of a company which owns real estate does not trigger the obligation for payment of transfer tax in Iowa. Conversely, real estate taxes are usually prorated between buyers and sellers as of the date of pos - session of the property. In Iowa, property taxes are incurred on a fiscal calendar (ending June 30th) and are paid in arrears (the first half payable September 30th and the second half payable March 31st of the following calendar year). Because of this, some care is required when it comes to payment and responsibility for payment of real estate taxes between buyers and sellers. In a typical real estate transaction, the seller will pay the cost of transfer tax, preparation of the instruments transferring title, and the cost to update the abstract for review by the buyer’s attorney. The seller will also generally be responsible for the preparation and recording fees related to any instruments necessary to cure defects in the seller’s title. Buyers will typically pay the cost related to examination of the abstract, the recording fees for the instruments conveying title, and the cost for updating the abstract post-closing to reflect the transfer and any mortgage. 2.11 Legal Restrictions on Foreign Investors While not numerous, there are some important con - siderations for foreign persons investing in real estate in the State of Iowa. Chief among them is an Iowa stat - ute that generally prohibits non-resident aliens, foreign businesses, foreign governments, or an agent, trus - tee or fiduciary thereof from purchasing or otherwise acquiring agricultural land in Iowa. There are several exceptions. For example, an interest in agricultural land, not to exceed 320 acres, acquired for an immediate or pend - ing use other than farming, is permitted. Pending the development of the agricultural land for a purpose other than farming, the land shall not be used for farm - ing, except under lease to an individual, trust, corpo - ration, partnership or other business entity. Recent changes to Committee on Foreign Investment in the United States (CFIUS) regulations have not yet had a major impact in Iowa.
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