Real Estate 2024

Definitive global law guides offering comparative analysis from top-ranked lawyers

CHAMBERS GLOBAL PRACTICE GUIDES

Real Estate 2024

Definitive global law guides offering comparative analysis from top-ranked lawyers

Contributing Editors John Sullivan and Matt Alshouse DLA Piper LLP

Global Practice Guides

Real Estate Contributing Editors John Sullivan and Matt Alshouse DLA Piper LLP

2024

Chambers Global Practice Guides For more than 20 years, Chambers Global Guides have ranked lawyers and law firms across the world. Chambers now offer clients a new series of Global Practice Guides, which contain practical guidance on doing legal business in key jurisdictions. We use our knowledge of the world’s best lawyers to select leading law firms in each jurisdiction to write the ‘Law & Practice’ sections. In addition, the ‘Trends & Developments’ sections analyse trends and developments in local legal markets. Disclaimer: The information in this guide is provided for general reference only, not as specific legal advice. Views expressed by the authors are not necessarily the views of the law firms in which they practise. For specific legal advice, a lawyer should be consulted.

GPG Director Katie Burrington Content Management Director Claire Oxborrow Content Manager Jonathan Mendelowitz Senior Content Reviewer Sally McGonigal, Ethne Withers

Content Reviewers Vivienne Button, Lawrence Garrett, Sean Marshall, Marianne Page, Heather Palomino, Deborah Sinclair, Stephen Dinkeldein and Adrian Ciechacki

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Published by Chambers and Partners 165 Fleet Street London EC4A 2AE Tel +44 20 7606 8844 Fax +44 20 7831 5662 Web www.chambers.com

Contents

INTRODUCTION Contributed by John Sullivan and Matt Alshouse DLA Piper LLP p.6

DOMINICAN REPUBLIC Law and Practice p.221 Contributed by Guzmán Ariza

ANDORRA Law and Practice p.12 Contributed by Cases & Lacambra ANGUILLA Law and Practice p.36 Contributed by Webster Legal Trends and Developments p.51 Contributed by Webster Legal BELGIUM Law and Practice p.55 Contributed by Linklaters Trends and Developments p.83 Contributed by Linklaters

FRANCE Law and Practice p.244 Contributed by DLA Piper France LLP

GERMANY Law and Practice p.270 Contributed by Linklaters

Trends and Developments p.295 Contributed by Latham & Watkins

GREECE Trends and Developments p.304 Contributed by Sardelas Petsa Law Firm HUNGARY Law and Practice p.312 Contributed by Lakatos, Köves & Partners

BRAZIL Law and Practice p.94 Contributed by Mattos Filho Trends and Developments p.118 Contributed by Campos Mello Advogados

INDIA Law and Practice p.337 Contributed by JSA

INDONESIA Law and Practice p.363 Contributed by Assegaf Hamzah & Partners

CANADA Law and Practice p.125

Contributed by Stikeman Elliott LLP Trends and Developments p.152 Contributed by De Grandpré Chait

IRELAND Law and Practice p.390 Contributed by Maples Group

CAYMAN ISLANDS Law and Practice p.160 Contributed by Appleby

ISRAEL Law and Practice p.415

Contributed by Arnon, Tadmor-Levy Trends and Developments p.437 Contributed by Arnon, Tadmor-Levy ITALY Law and Practice p.442 Contributed by SI – Studio Inzaghi

CHINA Law and Practice p.183 Contributed by JunHe Trends and Developments p.208 Contributed by Merits & Tree Law Offices

CYPRUS Trends and Developments p.215 Contributed by George K. Konstantinou Law Firm

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Contents

JAPAN Law and Practice p.468 Contributed by Mori Hamada & Matsumoto Trends and Developments p.492 Contributed by Nishimura & Asahi (Gaikokuho Kyodo Jigyo) KENYA Law and Practice p.499 Contributed by DLA Piper Africa, Kenya (IKM) Trends and Developments p.528 Contributed by Dentons Hamilton Harrison & Mathews

PORTUGAL Trends and Developments p.712 Contributed by PLMJ

PUERTO RICO Law and Practice p.719 Contributed by Pietrantoni Mendez & Alvarez LLC

ROMANIA Law and Practice p.741 Contributed by Mușat & Asociații

SINGAPORE Law and Practice p.766

LITHUANIA Law and Practice p.538 Contributed by WALLESS LUXEMBOURG Law and Practice p.560 Contributed by Stibbe

Contributed by WongPartnership LLP Trends and Developments p.791 Contributed by WongPartnership LLP

SLOVENIA Law and Practice p.795 Contributed by Odvetniki Šelih & partnerji, o.p., d.o.o.

MALTA Law and Practice p.586 Contributed by Fenech Farrugia Fiott Legal MEXICO Law and Practice p.610 Contributed by Cannizzo Trends and Developments p.638 Contributed by Ritch Mueller MOROCCO Law and Practice p.645 Contributed by Gide Loyrette Nouel NETHERLANDS Law and Practice p.674 Contributed by Greenberg Traurig, LLP Trends and Developments p.698 Contributed by Greenberg Traurig, LLP POLAND Trends and Developments p.703 Contributed by Greenberg Traurig LLP

SOUTH KOREA Law and Practice p.820 Contributed by Bae, Kim & Lee LLC SPAIN Law and Practice p.846 Contributed by Cases & Lacambra

ST KITTS & NEVIS Law and Practice p.872 Contributed by Joseph Rowe, Attorneys-at-Law Trends and Developments p.897 Contributed by Joseph Rowe, Attorneys-at-Law

SWITZERLAND Law and Practice p.903

Contributed by Walder Wyss Ltd Trends and Developments p.923 Contributed by Baker McKenzie THAILAND Law and Practice p.931 Contributed by Duensing Kippen, Ltd.

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Contents

THE BAHAMAS Law and Practice p.957

USA - FLORIDA Law and Practice p.1146

Contributed by Graham Thompson Trends and Developments p.982 Contributed by Glinton Sweeting O’Brien TÜRKİYE Law and Practice p.987 Contributed by Hergüner Bilgen Üçer Attorney Partnership Contributed by Griffiths and Partners Trends and Developments p.1028 Contributed by Griffiths and Partners UAE Law and Practice p.1031 Contributed by DLA Piper Middle East LLP TURKS & CAICOS Law and Practice p.1011 UK Law and Practice p.1056 Contributed by Hawkins Hatton Corporate Lawyers Ltd Trends and Developments p.1081 Contributed by Hawkins Hatton Corporate Lawyers Ltd

Contributed by Berger Singerman LLP Trends and Developments p.1173 Contributed by Berger Singerman LLP

USA - IOWA Law and Practice p.1176

Contributed by Dentons Davis Brown Trends and Developments p.1202 Contributed by Dentons Davis Brown USA - LOUISIANA Trends and Developments p.1208 Contributed by Jones Walker LLP USA - NEW JERSEY Law and Practice p.1214 Contributed by Greenberg Traurig LLP USA - NEW YORK Law and Practice p.1243 Contributed by Phillips Lytle LLP

USA - SOUTH CAROLINA Law and Practice p.1272 Contributed by K&L Gates

USA - TEXAS Law and Practice p.1296 Contributed by Haynes and Boone, LLP Trends and Developments p.1318 Contributed by Haynes and Boone, LLP

UKRAINE Law and Practice p.1085 Contributed by Arzinger Trends and Developments p.1105 Contributed by Arzinger USA - ALABAMA Law and Practice p.1112 Contributed by Dentons Trends and Developments p.1137 Contributed by Dentons

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INTRODUCTION Contributed by: John Sullivan and Matt Alshouse, DLA Piper LLP

DLA Piper LLP has more than 995 lawyers in the real estate sector operating in more than 40 countries, including strongly established teams in the Americas, Europe, the Middle East, Africa and Asia Pacific. The firm is widely recognised as a market leader in the commercial real es - tate sector. It represents many of the world’s leading investors, owners, developers, lend - ers, asset managers, fund sponsors and in -

vestment advisers, and offers the full range of real estate services, including single asset and portfolio acquisitions and dispositions, single asset and multi-property/programmatic joint ventures, fund formation, operating company investments, cross-border investments, REITs, financing, construction and design, leasing, zoning/land use, public-private partnerships, environmental law, real estate litigation and tax. Matt Alshouse is a partner in DLA Piper’s real estate practice group in Chicago. His practice focuses on commercial real estate acquisitions, dispositions and financing, primarily on behalf of private equity and real estate asset management clients globally. He has counselled domestic and foreign private equity funds and hedge funds, investor consortiums, developers, asset-based and project lenders, and REITs on a broad range of property acquisitions, dispositions, joint ventures, and mortgage and mezzanine loans. Matt’s experience in recent years has included the representation of a variety of Korean asset management and other investor consortiums in their US real estate transactions.

Contributing Editors

John Sullivan is chair of DLA Piper’s US real estate practice and co-chair of the global real

estate practice. He has a broad-ranging practice that encompasses all aspects of commercial real estate, with a particular emphasis on representing public and private pension plans, opportunity funds, investment advisers and non-US investors in equity, debt, hybrid and joint venture transactions throughout North America. John has been lead counsel for many of the largest US real estate transactions. He is on the board of the Boston Chapter of the Urban Land Institute and is a member of the Pension Real Estate Association and the American College of Real Estate Lawyers. John is a guest lecturer at the MIT Real Estate Center and Columbia Business School, and is on the firm’s executive committee and policy committee.

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INTRODUCTION Contributed by: John Sullivan and Matt Alshouse, DLA Piper LLP

DLA Piper LLP 33 Arch Street, 26th Floor Boston MA 02110-1447 444 West Lake Street, Suite 900

Chicago IL 60606 USA

Tel: +1 617 406 6029 Fax: +1 617 406 6129 Email: john.sullivan@dlapiper.com

matthew.alshouse@dlapiper.com

Web: www.dlapiper.com

Overview: Despite Recent Turbulence, Real Estate’s Place as a Global Asset Class is Secure Despite recent challenges, real estate remains an important asset class for global investment. With a global value estimated by real estate company Savills to be USD326.5 trillion, real estate is the world’s largest store of wealth, more valuable than all global equities and debt securi - ties combined, and almost four times the size of global GDP. By comparison, the value of all gold ever mined is USD12.1 trillion, just 4% of the value of global property, and less than half of just the agricultural portion of the real estate market. Despite recent market turbulence, the private real estate publication PERE recently reported that private equity fund allocations to real estate were on the upswing in the second half of 2023, and a January, 2024 survey of Euro - pean fund managers and investment analysts by TIME Investments indicated that just over three quarters of investors planned to increase real estate allocations in the foreseeable future. A 2023 Investment Intentions Survey by the Pension Real Estate Association shows that

institutional investor portfolios have an average 10.2% allocation to real estate. The asset class clearly remains an important investment target for global investors. 2023 global trends and results Over the last several years, central bankers have raised interest rates aggressively in order to combat post-pandemic inflation. In the United States, the Federal Reserve raised interest rates 11 times between March 2022 and July 2023, with rates hitting a 23-year high in July of last year. At its March 2024 meeting, the Bank of England decided to maintain the Bank Rate at 5.25%, its highest level since 2008, as policy - makers awaited clearer signals indicating that the country’s persistent inflationary pressures had subsided. And during its April 2024 meet - ing, the European Central Bank maintained inter - est rates at record-high levels for a fifth con - secutive time. Because commercial real estate investors typically employ debt when acquiring real estate, this large increase in the cost of debt means that investors need lower prices in order to achieve their desired returns. Many owners,

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INTRODUCTION Contributed by: John Sullivan and Matt Alshouse, DLA Piper LLP

however, are not willing to sell at these lower values. The result has been a dramatic drop in transaction activity. MSCI Real Capital Analytics estimated that real estate sales decreased by 51% from 2022 to 2023, and the Urban Land Institute reported that global transaction activity within commercial real estate was lower in 2023 than in any year since 2012. Anyone working in this space (presumably anyone who may be reading this global guide) has seen more recent examples than they would care to of buyers and sellers starting down the road to transact but ultimately finding themselves unable to bridge the bid-ask gulf. The results, at a macro level: • Very few deals occurred. It qualifies as rela - tively good news that Asia-Pacific volume, after an uptick in the final quarter of the year, was down only 17%, with some markets such as Hong Kong and Australia actually expand - ing volume, according to real estate advisers JLL. On the other hand, property agents Col - liers reported that direct investment in major European markets in commercial real estate was down 50% from 2022 – a ten-year low. In the US, according to Altus Group, only about USD190 billion was invested in traditional property classes for the year, down by almost half from 2022, with overall transaction vol - ume down 55% from 2021, making 2023 the slowest year since 2013. • Sticking close to home: the activity that was seen in 2023 was largely focused on investing domestically. A Real Capital Analytics study showed that global cross-border real estate activity in 2023 was down 40% from its five- year average. This was most pronounced in EMEA (down 59%) and the US (off 56%), in large part due to Asian funds staying home or at least in-region. Global funds transactions among Asian investors were down 64% year-

on-year in the third quarter of 2023, accord - ing to professional services network PwC. • Banks and owners spent more time fixing their debt portfolios, and for good reason: according to a recent • Wall Street Journal article, close to USD550 billion in loans linked to commercial proper - ties matured last year. Ratings agency Fitch anticipates that almost 5% of loans in com - mercial mortgage-backed security pools will be delinquent at the end of the year, with potentially 10% of those tied to office properties in default by some point in 2025. A significant number of owners will lose out before seeing a reset in debt costs, but in the meantime, there is sufficient appetite in both the investor and lender worlds to continue extending and restructuring loans. New loan issuances, by contrast, were down 43%, according to the Mortgage Bankers Associa - tion. • Investors, seeing better returns in safer plac - es, could not be bothered. As but one exam - ple, according to JLL, among US closed-end funds, fundraising was down nearly a third in 2023 from the year prior, to just USD142 billion. Investment data company Preqin reported that less than half as many funds closed in the first three quarters of 2023 as in the year before. Private funds in Asia-Pacific play a smaller role, but even there, new fund closings were off by more than 50% from 2022. Some of this unavailability of new funds is offset by the lack of transactions clos - ing, although global commercial real estate company CBRE’s European Market Outlook for 2024 indicated that funds on the continent were sitting on USD66 billion in dry powder for European deployment alone. Value reductions in 2023 were much smaller in Asia, which may indicate an earlier bottoming

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INTRODUCTION Contributed by: John Sullivan and Matt Alshouse, DLA Piper LLP

out and start of the recovery cycle in Western markets, while investors in APAC wait out repric - ing exercises. That said, PwC reported that com - mercial volume was down 25% in the first three quarters of 2023 in China, with many funds and other players stepping out of the market indefi - nitely. The collapse of Evergrande and Country Garden, in part due to changes in central gov - ernment policy, may hamper inbound as well as domestic investment in the market for the fore - seeable future. Australia may also be an outlier, as its upward interest rate swing was steeper than in other markets in the region. Not all was grim, however. There was investment activity in certain asset classes, including data centres, housing, cold storage, medical office and life science assets. The data centre space was the best performing asset class in 2023. The rise of artificial intel - ligence, along with cryptocurrencies, stream - ing services and other heavy computing power usages, are combining to fuel the need for ever more data centre space. According to CBRE, North American deliveries increased 26% from 2022 to 2023, and current construction projects were up almost 50% from the previous year. A Cushman & Wakefield study predicts a 2.5 times increase in data centre capacity in the Ameri - cas, a two times increase in EMEA and a 2.2 times increase in APAC. Research firm Renub predicts that, within four years, the Asia-Pacific data centre market alone will be worth USD54 billion. US investment management firm PIMCO recently announced the launch of its first Euro - pean data centre fund, targeting a EUR750 mil - lion fundraise. Although the demand is strong and predicted to grow, one challenge faced by this sector is the availability/sufficiency of power and, in some markets, the availability of land.

Longer term, analysts are nearly unanimous in seeing increased activity in the housing markets. Ageing populations, especially in East Asia and Europe, lack of affordable housing in Western urban centres, and the demand for education are starting to strain current inventory, so construc - tion growth in senior, student and affordable multi-family housing, in particular, is anticipated. 2024 Outlook: Have We Reached the Bottom of the Market? There are some signs of light at the end of the tunnel. In a recent consensus forecast from the Pension Real Estate Association (PREA), inves - tors predict a gradual improvement in 2024 and beyond, and a recent CBRE survey reveals high - er purchasing and selling expectations for 2024 compared with 2023, amid growing optimism that the real estate investment market will return to normalised levels of activity in the short to medium term. A number of the largest commer - cial real estate investors have indicated that they believe that the market is close to, or already at, the point where significant investment opportu - nities will arise. For example, with Blackstone recently announcing its USD10 billion acquisi - tion of AIR Communities and its USD3.5 billion agreement to take single-family landlord Tricon private, President Jonathan Gray told investors that the firm believes that real estate values are bottoming and he expects deal activity to pick up. More generally, US transaction volume start - ed to rebound in the last quarter of 2023, ris - ing by more than a third from the prior quarter’s doldrums, according to Altus Group. European investment volumes started to pick up slightly in the fourth quarter, too, according to CBRE, with large upticks in the Nordic markets, Spain and Italy. A year ago, one of the topics of the day was distressed debt, and how resolving the difficul -

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INTRODUCTION Contributed by: John Sullivan and Matt Alshouse, DLA Piper LLP

ties in lending books was the biggest hurdle to the resumption of business as usual. How much property would banks be taking back? How much debt could be restructured? How long would it take to redeploy? As the year wore on, the markets started to address this issue. While many owners entered 2023 in “wait and see” mode, hoping that inter - est rates would come down and drive cap rates down with them, or attempted to restructure their debt and hang on a bit longer, eventual - ly time ran out for some as lenders started to move on collateral. According to real estate data source ATTOM, commercial foreclosures began climbing in the US market in the second quarter of 2023, and by January of this year reached 635 new filings, the highest level since 2015. For many who avoided turning their properties over to their lender, 2023 saw more owners com - ing to grips with writing down the value of their investments. JLL reported second quarter year- to-year value drops in 2023 of 19% in the US and 21% in Europe (29% and 31%, respectively, in the office sector). Given the higher cost of debt, in most cases, prices will have to come down in order for trans - action volume to increase. In this regard, the so-called “wall of maturities” is a double-edged sword. In the US alone, there is an estimated USD1 trillion of commercial real estate debt coming due before the end of 2025, according to data and analytics provider Trepp. The com - bination of declining values and higher interest rates will mean that many owners will not be able to – or will elect not to – refinance their exist - ing debt. Although this is bad news for owners who cannot refinance their loans, many lenders prefer not to own these assets, and so they will

price them to sell, which should result in buying opportunities and increased transaction volume. The dynamic of markets establishing new pricing in order to move forward can be seen in some recent transactions featuring prominent proper - ties in Western markets. Just a few examples: • Two towers at Detroit’s Renaissance Center, totalling close to 700,000 square feet of office space, traded earlier this year for a measly USD15 million. That is a per-square-foot price closer to the average yearly rental rate in the Detroit market. • The Aon Center in downtown Los Angeles was sold at the end of 2023 for a little over half what it previously traded for, in 2014. • 5 Churchill Place in London’s Canary Wharf moved into receivership last year and has now sold at a 60% discount. There are other signs of life emerging, as well. Along with uncertainty in the debt markets, the long-term effects of the COVID-inspired “work from home” movement have been hampering rental markets, as corporate tenants struggle to determine how much space they really need going forward. Some normalisation has started to occur, however: return-to-office mandates have taken hold at an 85% clip in Asia and 75% in Europe, according to JLL’s 2024 Global Real Estate Outlook. The US is lagging here, with just 55% of employers having taken affirmative steps to bring people back to the office, but this is widely expected to increase throughout 2024. The result is some hopeful signs starting to appear in the office leasing submarket. In the final quarter of 2023, global office leasing vol - ume was up 13%, as strong as it had been in almost two years. Logistics leasing was another bright spot towards the end of 2023. US volume,

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INTRODUCTION Contributed by: John Sullivan and Matt Alshouse, DLA Piper LLP

after a year-and-a-half of consistent falloff, was up 17%. Meanwhile, the Asia-Pacific logistics market had a record-setting year in uptake. With more and more people returning to daily routines that include spending time in central business districts, knock-on effects in retail, hospitality and tourism could begin to appear in the medium term. Inflation and interest rates As noted above, the efforts of central bankers to combat inflation by raising interest rates took a significant toll on the real estate sector. With inflation starting to get closer to central bank targets, there has been a growing expectation for interest rate cuts in 2024. However, the US Bureau of Labor Statistics (BLS) March report indicated that the US economy added 303,000 jobs in March, an acceleration in the pace of hir - ing, and other important labour market indica - tors in the BLS report, including a 3.8% unem - ployment rate and a 0.3% month-on-month rise in average hourly earnings, were also strong. In the UK, although the annual inflation rate fell in March for the second consecutive month, the fall was less than expected. These reports have generated some uncertainty about the timing and amount of rate cuts in the US and the UK. Rate cuts may come sooner in the European Union. The EU ended 2023 with a 3.2% infla - tion rate across its markets, and the rate has since gone down to around 2.6%. As a result, the European Central Bank has signalled that it could start cutting rates as soon as June.

While Asian markets tended to see far less drastic rises in their inflation rates – with China moving from around 5% before the pandemic all the way into a deflationary environment through - out 2023 – those markets have settled, as well. CBRE’s 2024 outlook for Asia anticipates enter - ing an “interest rate cut cycle” by midyear. Conclusion The global commercial real estate market has been on a roller coaster ride in recent years, with 2021–2022 representing the climb to the top, and 2023 reflecting the swift (and sometimes scary) descent. However, certain asset classes, such as data centres, continue to attract sig - nificant investor interest. More broadly, there are indications that the market may be at or near the bottom and poised for a recovery. The amount and timing of interest rate reductions will be a major factor in the market’s performance over the next 12 months, with a reduction in rates being a welcome tailwind, but any increase (or even the absence of a decrease) in rates being a significant headwind. In addition, the huge amount of low-interest-rate debt coming due over the next few years should force a repric - ing of many assets and thus spur investment activity.

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ANDORRA

France

Andorra

Andorra La Vella

Law and Practice Contributed by: Elena Redondo, Albert Hinojosa and Marc Ambrós Cases & Lacambra

Spain

Contents 1. General p.17 1.1 Main Sources of Law p.17 1.2 Main Market Trends and Deals p.17

1.3 Proposals for Reform p.18 2. Sale and Purchase p.18 2.1 Categories of Property Rights p.18 2.2 Laws Applicable to Transfer of Title p.18 2.3 Effecting Lawful and Proper Transfer of Title p.19 2.4 Real Estate Due Diligence p.19 2.5 Typical Representations and Warranties p.19 2.6 Important Areas of Law for Investors p.19 2.7 Soil Pollution or Environmental Contamination p.20

2.8 Permitted Uses of Real Estate Under Zoning or Planning Law p.20 2.9 Condemnation, Expropriation or Compulsory Purchase p.20 2.10 Taxes Applicable to a Transaction p.20 2.11 Legal Restrictions on Foreign Investors p.21 3. Real Estate Finance p.22 3.1 Financing Acquisitions of Commercial Real Estate p.22 3.2 Typical Security Created by Commercial Investors p.22 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders p.22 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security p.23 3.5 Legal Requirements Before an Entity Can Give Valid Security p.23 3.6 Formalities When a Borrower Is in Default p.23 3.7 Subordinating Existing Debt to Newly Created Debt p.23

3.8 Lenders’ Liability Under Environmental Laws p.24 3.9 Effects of a Borrower Becoming Insolvent p.24 3.10 Taxes on Loans p.24

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ANDORRA CONTENTS

4. Planning and Zoning p.24 4.1 Legislative and Governmental Controls Applicable to Strategic Planning and Zoning p.24 4.2 Legislative and Governmental Controls Applicable to Design, Appearance and Method of Construction p.25 4.3 Regulatory Authorities p.25

4.4 Obtaining Entitlements to Develop a New Project p.25 4.5 Right of Appeal Against an Authority’s Decision p.25 4.6 Agreements With Local or Governmental Authorities p.26 4.7 Enforcement of Restrictions on Development and Designated Use p.26 5. Investment Vehicles p.26 5.1 Types of Entities Available to Investors to Hold Real Estate Assets p.26 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity p.26 5.3 REITs p.27 5.4 Minimum Capital Requirement p.27 5.5 Applicable Governance Requirements p.27 5.6 Annual Entity Maintenance and Accounting Compliance p.28 6. Commercial Leases p.29 6.1 Types of Arrangements Allowing the Use of Real Estate for a Limited Period of Time p.29 6.2 Types of Commercial Leases p.29 6.3 Regulation of Rents or Lease Terms p.29 6.4 Typical Terms of a Lease p.29 6.5 Rent Variation p.30 6.6 Determination of New Rent p.30 6.7 Payment of VAT p.30 6.8 Costs Payable by a Tenant at the Start of a Lease p.30 6.9 Payment of Maintenance and Repair p.30 6.10 Payment of Utilities and Telecommunications p.30 6.11 Insurance Issues p.30 6.12 Restrictions on the Use of Real Estate p.30 6.13 Tenant’s Ability to Alter and Improve Real Estate p.31 6.14 Specific Regulations p.31 6.15 Effect of the Tenant’s Insolvency p.31 6.16 Forms of Security to Protect Against a Failure of the Tenant to Meet Its Obligations p.32 6.17 Right to Occupy After Termination or Expiry of a Lease p.32 6.18 Right to Assign a Leasehold Interest p.32

6.19 Right to Terminate a Lease p.32 6.20 Registration Requirements p.33 6.21 Forced Eviction p.33 6.22 Termination by a Third Party p.33 6.23 Remedies/Damages for Breach p.33

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ANDORRA CONTENTS

7. Construction p.33 7.1 Common Structures Used to Price Construction Projects p.33 7.2 Assigning Responsibility for the Design and Construction of a Project p.33 7.3 Management of Construction Risk p.34 7.4 Management of Schedule-Related Risk p.34 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance p.34 7.6 Liens or Encumbrances in the Event of Non-payment p.34 7.7 Requirements Before Use or Inhabitation p.34 8. Tax p.35 8.1 VAT and Sales Tax p.35 8.2 Mitigation of Tax Liability p.35 8.3 Municipal Taxes p.35 8.4 Income Tax Withholding for Foreign Investors p.35 8.5 Tax Benefits p.35

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ANDORRA Law and Practice Contributed by: Elena Redondo, Albert Hinojosa and Marc Ambrós, Cases & Lacambra

Cases & Lacambra is a client-focused inter - national law firm with a cornerstone financial services practice. With a presence in Europe and America, the firm has a tested track record in complex transactions involving the financial sector, special situations, financial markets regulations, cross-border disputes and trans - actions with relevant tax aspects. Its financial

services group comprises three partners, two counsels, one senior associate and five associ - ates, and most of the members of the team have extensive knowledge of banking and finance regulations and capital markets transactions. The firm’s practice extends to capital markets, derivatives and structured finance matters.

Authors

Elena Redondo leads the public and environmental law practice of Cases & Lacambra and heads the Andorran office. Her practice is focused on administrative law matters, including real estate

Albert Hinojosa is a partner at Cases & Lacambra, where his practice is focused on tax advice. Albert spent more than 20 years developing an extensive public sector career,

transactions and urban planning, where she has extensive experience advising private clients and public administrations. Her specialisation in urban planning, real estate, construction, public procurement and environment leads her to actively participate in the drafting of regulatory projects in such areas. Her professional practice includes due diligences processes prior to the acquisition of real estate assets of the tourism, commercial, industrial and energy sectors, as well as in the preparation and execution of all phases of the transaction.

which included time spent as head of the Department of Customs’ legal service and as director of the Department of Economy within the Ministry of Economy and Industry. From 2013 to 2021 he was head of the Andorran government’s Department of Taxation and Borders, where he introduced the current direct and indirect tax system and promoted the international network of double taxation agreements. Prior to joining Cases & Lacambra, he was President of the State Agency for the Resolution of Banking Institutions (AREB).

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ANDORRA Law and Practice Contributed by: Elena Redondo, Albert Hinojosa and Marc Ambrós, Cases & Lacambra

Marc Ambrós leads the corporate and foreign

investment practice of Cases & Lacambra in the Principality of Andorra. He has a great deal of experience in corporate and

commercial matters. Marc has advised in mergers, acquisitions, joint ventures, private equity, corporate restructuring, and refinancing, representing both Andorran and foreign clients in international transactions with Andorran interests. He advises throughout the entire transaction process, from both buy-side and sell-side perspectives, using different legal structures. He also advises companies about the project and corporate finance issues. Marc is the author of multiple articles in specialised publications about the legal environment in the Principality of Andorra.

Cases & Lacambra Manuel Cerqueda i Escaler, 3-5 AD700 Escaldes-Engordany Andorra Tel: +376 728 001 Email: andorra@caseslacambra.com Web: www.caseslacambra.com

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ANDORRA Law and Practice Contributed by: Elena Redondo, Albert Hinojosa and Marc Ambrós, Cases & Lacambra

1. General 1.1 Main Sources of Law No information has been provided in this juris - diction. 1.2 Main Market Trends and Deals As a preliminary consideration, Andorra has nei - ther a civil code nor any regulation based on civil law, to the extent that there was no codi - fication process as in other neighbouring civil law countries that are members of the European Union. Consequently, generic provisions in real estate are based on the applicable Roman Law or Digest, as are guarantee rights. Notwithstanding this, the pace of change in the Andorran society has led to the need to develop specific regulations governing land and urban planning ( Llei General d’Ordenació del Territori i Urbanisme ), real estate building, condominiums, urban leasing and emphyteutic census. Additionally, the following normative provisions are relevant in the housing sector: planning instruments, guidelines and specific regula - tions on urban planning and real estate build - ing, as well as projects of national interest and sectorial plans ( Projectes d’interès nacionals i plans sectorials ) and the Plan and the Master Plan of Urban Planning and Development ( Pla d’Ordenació i Urbanisme Parroquial – POUP) issued by the respective town halls ( Comuns ). Over the last few months, the real estate mar- ket in Andorra has been very active, although focused on smaller operations than those observed in previous years. On July 2022, the town hall ( Comú ) of Ordino definitively passed the amendment of the Ordi - nations on subsidiary regulations and building

rehabilitation of the Plan and the Master Plan of Urban Planning and Development by means of the Decree of 22 July 2022. The amendments were introduced in order to reduce the occupa - tion of the plots and the maximum size of build - ings. Likewise, Act 32/2022, 14 September, for the pro - motion of the sustainability of urban development and tourism, and of amendment of the General Act on Land Planning and Urban Planning, of 29 December 2000, and Act 16/2017, 13 July, of Touristic Lodgings has been passed to ensure the sustainable growth of urban development. By virtue of this Act, on the one hand, the Andorran government was mandated to amend the Regu - lations containing the planning guidelines and, once these amendments came into force, the town halls must draw up maximum load capac - ity studies within a maximum period of one year and adapt the Master Plan of Urban Planning and Development to the content of these stud - ies. Thus, during this period, the Act introduces a new requirement for obtaining the approval of any building permit for new construction, partial plan or urban development project, consisting of obtaining a favourable report issued by the com - petent ministries in matters of urban planning and the environment, whereby it will be evaluated whether the infrastructures and facilities of each town hall ( Comú ) can adequately cover the needs resulting from the urban development at stake. On the other hand, this Act also introduced the express suspension of the granting of new authorisations for tourist lodgings in flats and studios for a period of two years as from the entry into force of the Act. However, the Act also provides for an exception to this suspension, in so far as it allows the processing and granting of authorisations that affect lodgings for which it is

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ANDORRA Law and Practice Contributed by: Elena Redondo, Albert Hinojosa and Marc Ambrós, Cases & Lacambra

accredited that they fulfil the requirements to be classified in the five-star category. Act 42/2022, 1 December, of the digital econ - omy, entrepreneurship and innovation has also been passed and it establishes, among others, the legal framework for co-living and co-working spaces in Andorra. The real estate market in Andorra has recovered from the COVID-19 pandemic and is no longer impacted by it. Notwithstanding the above, the real estate mar - ket in Andorra has been impacted by the rising inflation and increases in interest rates, through the increase of the construction costs which caused some works to be temporarily suspend - ed, and the increase of the financing costs which caused some projects to reduce the amount financed by third parties and increase financing by equity partners. 1.3 Proposals for Reform The Andorran government is working on a law proposal to modify the current regulations regarding urban planning and development to substitute the current Act and adapt it to the actual circumstances of the country and the sec - tor. The actual regulation is from the early 2000s.

• a co-ownership, which is the right owned by more than one person over real estate; or • in a condominium ( propietat horitzontal ), the ownership of common premises is shared by the plurality of owners of each unit that makes up the apartments. On the other hand, the property right could be understood as a limited right. Therefore, in Andorran law, the following rights are recognised as limited property rights: • leasehold, which is the temporary right that includes the ability to build on the ground or in the subsoil, and the right to overhang, with the right to appropriate what has been built for a specific period; • beneficial interest, which is the right by which a person can use the property of another and enjoy its benefits, with the obligation to preserve and take care of it; and • emphyteutic lease, which is the right by which the useful domain of a real estate property is given for a period by the payment of an annual pension, whereby the assignment is made as recognition of the useful domain of the property. 2.2 Laws Applicable to Transfer of Title Titles are transmitted by the theory of the title and mode. This theory is a system of transmis - sion of ownership that requires the conclusion of an agreement, the subsequent delivery of the real estate to be transmitted, and proof before a public notary, without any aspect being enough separately. Depending on the activity to be carried out with the real estate, attention should be paid to administrative regulations. Depending on the economic sector (residential, industrial, offices, retail and hotels), different types of real estate

2. Sale and Purchase 2.1 Categories of Property Rights

The right of property can be understood as a full right or a limited right. In Andorra, the right of property understood as a full right could be: • an absolute freehold, permanent and absolute tenure of land or property, with the freedom to dispose of it at will;

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ANDORRA Law and Practice Contributed by: Elena Redondo, Albert Hinojosa and Marc Ambrós, Cases & Lacambra

would have specific regulations, but the theory of the title and mode would apply to any sector. 2.3 Effecting Lawful and Proper Transfer of Title The lawful and proper transfer of title to real estate occurs when the conclusion of an agreement and the subsequent delivery of the real estate has been made before a public notary. There is no land registry in Andorra, but each town hall has its own real estate registry for tax purposes. The transfer of title is recorded in the Andorran cham - ber of notaries. The public notaries record all the public deeds granted in reference to a real estate, including the encumbrances, modifications and other duly recorded vicissitudes of the real estate. Title insurance is not used in Andorra. 2.4 Real Estate Due Diligence Buyers usually carry out due diligence on a real estate property, undertaking an exhaustive investigation of the ownership and main charac - teristics of the real estate. The red flag aspects • the rights of third parties over the real estate, eg, if there are lease rights, if they are sub - ject to a specific licence, if the real estate is subject to any tax, or if there is some kind of foreclosure on the real estate; • whether there is any debt involved in the case of condominiums; and • whether there are any litigious procedures concerning the real estate. 2.5 Typical Representations and Warranties The parties negotiate the representation and warranties within a commercial real estate trans - action. The typical representations and warran - ties in Andorra are as follows: to analyse are the following: • titles and encumbrances;

• the buyer must obtain authorisation for any foreign investment from the Andorran govern - ment before the completion of the transac - tion; • at the time of granting the public deed of sale, the property must comply with the conditions for building on the land, being free of charges, encumbrances, tenants and occupants; • the property must be transmitted with all the rights, facilities, elements and equipment that are inherent and accessory to it; • the seller shall carry out all the necessary or agreed acts to avoid the occupation of the property by third parties so that it is free; and • although, from a legal standpoint, an environ - mental contingency certificate is not request - ed, it is highly recommended. The buyer’s remedies against the seller for misrepresentation include the resolution of the agreement, with the return of any reciprocal benefits, the compensation of damages to the buyer, or the specific performance of the terms and conditions of the agreement. Depending on the relevance of the transaction, it is customary for the seller’s representations and warranties to expire after a certain amount of time. The typical range of that survival period is usually between two to four years. On the other hand, there is usually a cap on the seller’s liability for a breach of its representa - tions and warranties, the typical range of that cap being from a limited percentage of the price to the full price. 2.6 Important Areas of Law for Investors The most important areas of law for an investor to consider when purchasing real estate could be:

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ANDORRA Law and Practice Contributed by: Elena Redondo, Albert Hinojosa and Marc Ambrós, Cases & Lacambra

2.9 Condemnation, Expropriation or Compulsory Purchase In Andorra, there is a law of compulsory expro - priation. The procedure first requires the prior declaration of the public utility of the construction project and necessitates the occupation of the property or the acquisition of the affected eco - nomic rights. In order to carry out the expropria - tion, the expropriator must develop a file, which is public information and be published in the Andorran official gazette. Later, the government transmits the entire file to the Andorran Parlia - ment ( Consell General ), with all the observations and objections received, attaching a report sug - gesting the approval or denial of the declaration of public utility and the necessity of occupation. The Andorran Parliament makes the final deci - sion, which has to be published in the Andorran official gazette and is directly enforceable. 2.10 Taxes Applicable to a Transaction Asset Deal The purchase of a property would be subject to a Transfer Tax at a rate of 4% ( Impost sobre trans- missions patrimonials ) or to IGI ( Impost General Indirecte ), which is the Andorran VAT, at a rate of 4.5%, depending on the condition of the seller. If the seller is a company or professional acting in a professional capacity, IGI will be applicable; otherwise, Transfer Tax will be applicable. Share Deal The purchaser would be subject to Transfer Tax only if at least 50% of the company’s assets are real estate located in Andorra, and that as a result of the transaction they will hold more than 20% of the company’s shares. In both cases – Asset Deal or Share Deal – capi - tal gains on the sale of a property would be sub - ject to Corporate Income Tax ( Impost sobre soci- etats ) if the seller is a company, at a nominal rate

• civil law, to have the base knowledge of property rights and the different charges and encumbrances that the real estate could have; • administrative law, in order to know the regu - lations pertaining to planning and zoning; and • tax law, to use the most beneficial tax struc - ture to acquire the real estate. 2.7 Soil Pollution or Environmental Contamination In accordance with Andorran legislation regard - ing civil liability, the liability for others’ actions must be considered. In this sense, the buyer of the real estate shall be liable for any soil pollution or environmental contamination of real estate, even if it is not attributable to said buyer. The liability for others’ actions allows the buyer of the real estate to claim the necessary expens - es to compensate for the damages against the seller since they had responded previously when it did not belong to them. 2.8 Permitted Uses of Real Estate Under Zoning or Planning Law A buyer can ascertain the permitted uses of a parcel of real estate under the applicable zon - ing and planning law by consulting the Andor - ran official gazette ( Butlletí Oficial del Principat d’Andorra – BOPA), where the permitted uses for a plot or zones are published. It is possible to enter into a specific development agreement with relevant public authorities to facilitate a project relating to, eg, the execution of a project of national interest or local sectorial plans, a project concerning the construction of roads and communications infrastructure, or the execution of the hydraulic and energy policy.

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ANDORRA Law and Practice Contributed by: Elena Redondo, Albert Hinojosa and Marc Ambrós, Cases & Lacambra

of 10% to 15%, depending on the time elapsed since the date of acquisition. On the other hand, if the seller is an individual, Personal Income Tax ( Impost sobre la renda de les persones físiques ) would apply. In this case the nominal rate would be between 0% and 15%, also depending on the time elapsed since the date of acquisition. 2.11 Legal Restrictions on Foreign Investors A restriction on foreign investment in real estate establishes that a foreign natural person has to obtain a prior foreign investment authorisation from the Andorran government to acquire real estate located in Andorra. Furthermore, foreign legal persons cannot directly acquire a property located in Andorra, so they must use an Andor - ran special purpose vehicle or SPV. The acquisi - tion or constitution of the SPV is also subject to obtaining the relevant prior foreign investment authorisation from the Andorran government if the foreign entity owns more than 10% of the SPV’s share capital or controls more than 10% of its voting rights. Finally, the Andorran govern - ment has a veto right, which enables it to deny the authorisation of foreign investment when the investment may harm, even occasionally, the exercise of public power, sovereignty and national security, public and economic order, the environment, public health or the general inter - est of the Principality of Andorra and any direct foreign investment related to sensitive goods. Law 3/2024, published in the Andorran official state gazette on 28 February 2024, has intro - duced the Foreign Investment in Real Estate Tax (FIT) in the Principality of Andorra. The newly established FIT is levied on foreign investments in real estate in Andorra, as defined in the For - eign Investment Law. This includes acquisitions of real estate or other rights in rem, concessions, participation in companies or other legal entities

holding rights over such real estate, or for urban or real estate development purposes. The FIT is levied on both natural and legal persons. The tax base is calculated on the basis of the actual value of the realised foreign investment, upon which a progressive tax rate (3%, 5%, 8% or 10%) is applied, depending on the number of real estate units involved in the investment. Fur - thermore, the FIT Law introduces a 90% rebate on the tax liability if the foreign investment is directed towards the acquisition of construction of real estate intended for the rental housing market, meant for habitual and permanent resi - dence for a minimum period of ten years. The settlement and payment system for the FIT entails an advance payment before the issuance of the favourable foreign investment resolution, in which the appropriate tax rate will be applied. Tax payment must be completed before the execution of the public deed for the foreign real estate investment and must be verified before the notary public attesting to such execution. In any case, the FIT Law delineates several exemptions, which include, among others, acquisitions mortis causa by natural or legal persons who are not resident for tax purposes in the Principality of Andorra and acquisitions intended for conducting business, professional, commercial, or industrial activities (provided that specific conditions are met) if such acquisitions are made by a non-resident or resident individu- als with less than three years of residence, or by non-resident legal entities.

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