BELGIUM Law and Practice Contributed by: Pieter Puelinckx, Yves Moreau, Donald Krols and Astrid Laga, Linklaters
Buyers usually conduct a legal due diligence on real estate assets based on the data room and publicly available information, covering areas such as: • ownership title and encumbrances; • occupancy agreements; • construction agreements; • business, repair and maintenance agree - ments; • insurance coverage; • existing or potential legal disputes; and • property’s tax obligations and financial infor - mation. These legal analyses also often cover environ - mental and planning aspects such as: • planning status; • permits; • soil condition; • asbestos presence; and • energy efficiency compliance. When purchasing shares of a company that holds real estate assets, due diligence also includes examining the company’s financing agreements, corporate structure, employment agreements (if any) and accounting and tax obligations. Beyond the legal framework, purchasers gener - ally perform a technical evaluation of the prop - erties involved in the scope of the transaction to assess their physical condition and mainte - nance as often no warranty or representation is given with respect to the physical condition of the property. 2.5 Typical Representations and Warranties Seller’s representations and warranties (R&W) in real estate transactions generally relate to:
• the seller (eg, its rights to enter into the trans - action); • property ownership; • agreements with respect to the property; • absence of litigation; and • permits/environment. In a share deal structure, the seller’s R&W are usually broader and may also include corporate law, employment, accountancy, and tax matters. In the event of warranty breaches, the purchaser can seek compensation for damages suffered or the annulment/termination of the transaction in court (in case of material breach or defect in consent). Alternative remedies or limitation to the purchaser’s remedies may be agreed upon by the buyer and seller. Time limitations on liability for breaches of war - ranties by the sellers vary depending on the type of warranties. Fundamental warranties (typically concerning the ownership of the asset /shares of the target entity) usually remain in force for a longer period. Tax warranties typically endure until the expiration of the prescription period for claims by tax authorities. For other warranties, parties commonly agree to time limitations rang - ing from 12 to 36 months. A materiality threshold is often agreed upon for claims for damages by the purchaser due to breaches of warranties as well as a maximum limitation of liability for breaches is often stipu - lated, which is usually a percentage of the pur - chase price (eg, 10%). The implementation of a (purchaser or seller) warranty & indemnity (W&I) insurance covering damage resulting from breaches of warranties given by the seller is not unusual.
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