USA – SOUTH CAROLINA Law and Practice Contributed by: Matt Norton, Parker Havis and Aaron Lay, K&L Gates
2.11 Legal Restrictions on Foreign Investors Foreign investors should be aware of certain laws that affect real estate investors. Under the Foreign Invest - ment in Real Property Tax Act, up to 15% of the pro - ceeds from the sale of real property by a foreign seller may be required to be withheld and applied to the seller’s federal income tax liability. A purchaser of agricultural land may be required to make a filing under the Agriculture Foreign Investment Disclosure Act of 1978. If the foreign purchaser conducts a US business enter - prise in connection with the property, a filing with the US Bureau of Economic Analysis, an agency of the US Department of Commerce, may be required. The pur - chase of property located near critical infrastructure or sensitive government facilities may require approval from the Committee on Foreign Investment in the Unit - ed States. Under South Carolina law, a single foreign purchaser may not own more than 500,000 acres of land in the state. 3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate Acquisition of commercial real estate is generally financed by mortgage lenders, who may be either institutional lenders or private equity funds, by way of a joint venture investment or some combination of the foregoing. In addition, mezzanine financing is becom - ing more common and may be used in conjunction with the more traditional mortgage loan. Many loans of income-producing property are structured to the rat - ing agency requirements for inclusion in a commercial mortgage-backed loan package. Larger real estate portfolio acquisitions are frequently financed by private equity or multi-lender loans. 3.2 Typical Security Created by Commercial Investors Most real estate financing is secured by a mortgage, which will grant to the lender a lien on the subject real property. Upon default by the borrower, the lend - er may institute judicial foreclosure proceedings and
ities the zoning classification of the property or obtain a property zoning report from a third-party supplier. Zoning ordinances and maps are publicly available, and the property’s zoning classification and the result - ing permitted uses and restrictions can be directly determined. For appropriate projects, most local authorities will enter into development agreements to facilitate devel - opment of property deemed desirable by the local authorities. Development agreements may modify or supersede existing zoning provisions and facilitate development in accordance with the peculiarities of the specific project. 2.9 Condemnation, Expropriation or Compulsory Purchase Condemnation is permitted in South Carolina, and it may be exercised by states, counties, municipali - ties and utilities. Property may be taken only for true “public uses”, such as roads, airports, ports and util - ity facilities; condemnation for the benefit of private enterprise or general redevelopment is not permitted. 2.10 Taxes Applicable to a Transaction South Carolina imposes a transfer tax on real property conveyances. The amount of the tax is USD1.85 for each USD500, or fractional part thereof, of the value of the property transferred. The calculation of the value of the property transferred, however, is fairly technical and dictated by statute; the value is sometimes (but not always) based on the consideration paid. The transfer tax is also subject to a number of techni - cal exceptions, and it is sometimes possible to struc - ture the transaction so as to avoid the imposition of the transfer tax entirely. The transfer tax applies only to transfers conveyed by way of a deed, and it generally does not apply to economic changes in ownership resulting from equity transfers by the title-holding entity. Some local jurisdictions, however, require that notice of an equity transfer be given to the local taxing authorities; this notice may trigger a reassessment of the value of the property in the year following the equity transfer, resulting in an increase in annual taxation.
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