USA - IOWA Law and Practice Contributed by: David M Erickson, Robert J Douglas, Jr, Christopher S Talcott and Amy S Montgomery, Dentons Davis Brown
Residential Property In the residential context, attorneys may assist or facilitate in obtaining or reviewing the manda - tory disclosures or forms that will accompany the title transfer documents. The bulk of any true due diligence is usually carried out, however, by the purchaser and the purchaser’s home inspec - tor. The primary exception to this general rule is with regard to examination of title. 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. Converse - ly, in the commercial context, the attorney may take a more active role in reviewing due diligence materials other than those affecting title, such as surveys, inspector reports, rent rolls and the like. 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 applicable Iowa law man - dates certain disclosures in the commercial real estate context. Instead, the scope of any repre - sentations and warranties is driven by negotia - tion between buyer and seller, and buyers will typically rely upon 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 typi - cally negotiate 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 multi-family housing transactions, the seller will typically demand a cap on liability, which is often a relatively small percentage of the pur - chase price. Buyers may seek to negotiate an escrow holdback of a portion of the purchase price for breaches of representations and war - ranties discovered post-closing, but this is not typical in Iowa transactions. Representation and warranty insurance is also not typically used in Iowa real estate transactions. 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 pur - chase through an investment entity, in order to avoid exposure to personal liability for matters such as environmental contamination or prem - ises liability as well as to facilitate issues of com - mon ownership that are cumbersome through co-ownership via a tenancy in common. The costs of Iowa land transactions tend to be lower than many states, as a result of the typical avoid - ance of title insurance as well as nominal record - ing 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 con - tamination on the acquired real estate, unless the buyer qualifies for an innocent landowner defence under applicable environmental 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 environ - mental risks. The allocation of risk of environ - mental liabilities as between buyer and seller is
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