USA - SOUTH CAROLINA Law and Practice Contributed by: Matt Norton and Christian Kolic, K&L Gates
Real Property Tax Real property tax matters are a significant part of the purchaser’s due diligence. In addition to veri - fying that all taxes due and payable have been paid, certain transactions may be deemed to be “assessable transfers of interest”; this designa - tion can trigger a reassessment of the property for tax purposes in the year following the trans - fer, and the resulting increase in value will result in an increase in real property taxes levied. If the property has been classified as agricultural property, a change to a non-agricultural use may result in a recapture (or “roll back”) of tax dis - counts given in the prior three years on account of the property’s agricultural classification. Under South Carolina law, the state can impose a tax lien on property in the hands of the pur - chaser for income and other general taxes not paid by the seller. South Carolina law further provides several safe harbours under which this liability can be avoided based on tax compliance affidavits of the seller and a compliance certifi - cate from the South Carolina taxing authorities. If a seller is an entity, the purchaser’s lawyer will verify the existence and good standing of the seller in South Carolina and, if different, its state of formation. The purchaser’s lawyer will also confirm that the transaction has been author - ised by all necessary resolutions and that any other necessary entity action has been adopted or taken by the seller’s governing body. 2.5 Typical Representations and Warranties There are no legally mandated representations and warranties or disclosures in commercial real estate transactions – the doctrine of caveat emptor prevails. Purchase and sale agreements typically contain customary representations
and warranties, although representations as to ownership and the status of title are less com - mon – title matters are left for due diligence by the buyer’s counsel, with the buyer’s risk further mitigated by title insurance. Sellers frequently indemnify the purchaser against breaches of representations and war - ranties; however, the liability of a seller for such breaches is frequently capped monetarily and subject to shortened periods in which claims may be asserted, but even where such indem - nities are capped, it may be the case that certain intentional, bad acts of the seller are carved out of the indemnity, such as fraud or willful miscon - duct. Note that the enforceability of provisions shortening general statutes of limitation may be unenforceable under South Carolina law, and South Carolina counsel should be consulted. It is also common for purchase and sale agreements to preclude recovery for indirect or consequen - tial damages. Most real estate transaction documents include waivers of jury trial and arbitration requirements. To ensure their enforceability, South Carolina counsel should be consulted during the drafting of such provisions. 2.6 Important Areas of Law for Investors General principles of contract and property law govern the transfer and ownership of real estate, but an investor would also want to understand the tax implications of investing in real estate. Specifically, real estate investment trusts (REITs) are a common investment vehicle that provide unique tax advantages to their investors. The South Carolina Local Government Develop - ment Agreement Act (S.C. Code Title 6, Chapter 31) is critical for developers in South Carolina. The Act authorises binding agreements between
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