USA - SOUTH CAROLINA Law and Practice Contributed by: Matt Norton and Christian Kolic, K&L Gates
1. General 1.1 Main Sources of Law
mental regional or local development authorities; these acquisitions are generally intertwined with governmental incentives, such as real property tax abatements, cash grants, and government- provided or government-financed infrastructure granted as an inducement to site selection in South Carolina. In the financing area, private equity investors and equity fund lenders are becoming a significant source of funding for South Carolina real estate acquisition and devel - opment. 1.3 Proposals for Reform The Biden administration’s 2023 proposed limi - tations to the 1031 like-kind exchange rules were not enacted; however, the Biden administration’s budget for fiscal year 2024 again proposes lim - its on 1031 like-kind exchange deferrals. It can be expected that 1031 like-kind exchanges will continue to be targeted as a “loophole” by Con - gress. In 2023, South Carolina reduced its top mar - ginal income tax rate from 6.5% to 6.4%, with a stated goal of reducing such income tax rate annually until such rate is reduced to 6%. Like other states in the southeast, these lower state income taxes are expected to continue to attract retirees from higher income tax states.
Real estate law is established by federal stat - utes, state statutes, and common law. General principles of contract and property law govern real estate transfers and ownership, and formali - ties related to such matters can vary by state and locality. 1.2 Main Market Trends and Deals The industrial/logistics asset class remained strong in the wake of the COVID-19 pandemic, and the uptick should continue in acquisitions and assemblages of real property for industrial uses, much of which is related to the burgeoning automotive manufacturing and aerospace indus - try in South Carolina. Construction, purchase, and sale activity related to multifamily projects continued to be robust, and there continues to be great interest in the acquisition of South Carolina real estate by out-of-state institutional investors. As a result of changing consumer habits, the office and retail sectors continue to be uncertain, and an increased number of restructurings and convey - ances are expected as lenders and landlords begin to actively pursue their remedies in dis - tressed settings. The recent rise in mortgage interest rates and the Federal Reserve’s attempt to corral rampant inflation have impacted real estate investors due to increased borrowing costs and reduced cash flow. Higher vacancy rates are seen in com - mercial buildings, both from the post-pandemic restructuring of the physical workplace and from increases in rent and operating costs. Many of the industrial sites being acquired are obtained from governmental or quasi-govern -
2. Sale and Purchase 2.1 Categories of Property Rights
Property rights generally fall into three catego - ries – fee interest, leasehold interest, and ease - ment interest. A fee interest generally describes ownership of the land and is often transferred by deed. A leasehold interest generally describes the right to use but not own the land, such as the interest acquired by a tenant when they enter into a lease with a landlord. An easement interest
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