USA – NEW YORK Law and Practice Contributed by: Lindsey Haubenreich, Joseph Heins, Timothy Moriarty, Kimberly Nason and Matthew Fitzgerald, Phillips Lytle LLP
• environmental consultants; • zoning research companies; • representatives from local municipalities; and • other third parties. Sophisticated purchasers often communicate directly with the above-referenced third parties. Contracts for the purchase and sale of real property typically give the purchaser a specific time period in which to con - duct all real estate due diligence. 2.5 Typical Representations and Warranties While representations and warranties in a purchase and sale contract can vary greatly, the following repre - sentations and warranties are common in commercial transactions: • authority and capacity to execute the agreement and perform the obligations under the agreement; • no pending or threatened lawsuits against the par - ties or the subject real property; • no pending or threatened eminent domain or con - demnation proceedings against the real property; • no pending or threatened changes in the assessed valuation or tax rate applicable to the real property; • no pending or threatened changes in the zoning classification of the real property; • no known environmental defects with the real prop - erty or any actions being taken by any agency with respect to the environmental condition of the real property; and • the existence and good standing of all permits and certificates necessary for legal use or occupancy of the real property. No representations or warranties are generally pro - vided for under state or local law. This is not true of residential transactions. For instance, with respect to newly built homes, each sale is subject to certain war - ranties regarding the quality of construction under the Housing Merchant Implied Warranty. For pre-built homes, sellers are required to make cer - tain disclosures with respect to the condition of the real property in a Property Condition Disclosure State - ment. These forms require the owner to represent cer - tain facts, including general historical, environmental,
mechanical and structural information with respect to the property. Remedies and Protections The remedies against a seller that breaches a rep - resentation are typically defined in the contract, including termination of the purchase agreement, specific performance, and monetary damages for out-of-pocket costs incurred by the purchaser owed to attorneys and third parties engaged to assist with the purchaser’s due diligence. 2.6 Important Areas of Law for Investors Federal and state tax law is important for an investor to consider when determining the tax consequences of any transaction. In addition, it is important for an investor to have an understanding of the New York Business Corporation Law, the Partnership Law and/ or the Limited Liability Company Law so that the investor can properly determine which type of entity should be used to acquire title to real property. Finally, to confirm that the property is acceptable for the use contemplated by the investor, it is important for the investor to have an understanding of federal and state environmental law as well as local zoning and land use rules and regulations. If the real property is residential rental property, it is also important for an investor to have an understanding of New York landlord–tenant laws. 2.7 Soil Pollution or Environmental Contamination As an owner or operator of a real estate asset, the buyer could be held strictly, jointly and severally liable for pre-existing soil pollution or environmental con - tamination pursuant to state and federal laws. There - fore, typical allocations of environmental risk in pur - chase and sale agreements are tailored to the intent of the parties, the site conditions and the actual or potential presence of contaminants of concern. Under the federal Comprehensive Environmental Response, Compensation, and Liability Act (CER - CLA), current owners and operators of a property are, except in limited circumstances, strictly liable for all response and remediation costs regarding hazardous wastes and substances that were released on a prop - erty, unless a statutory defence is established. These
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