ILN: BUYING AND SELLING REAL ESTATE - AN INTERNATIONAL GUIDE

Fall 20

I NTERNATIONAL L AWYERS N ETWORK

BUYING AND SELLING REAL ESTATE: AN INTERNATIONAL GUIDE

I L N R E A L E S T A T E G R OU P

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This guide offers an overview of legal aspects of buying and selling real estate in the requisite jurisdictions. It is meant as an introduction to these marketplaces and does not offer specific legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney- client relationship, or its equivalent in the requisite jurisdiction. Neither the International Lawyers Network or its employees, nor any of the contributing law firms or their partners or employees accepts any liability for anything contained in this guide or to any reader who relies on its content. Before concrete actions or decisions are taken, the reader should seek specific legal advice. The contributing member firms of the International Lawyers Network can advise in relation to questions regarding this guide in their respective jurisdictions and look forward to assisting. Please do not, however, share any confidential information with a member firm without first contacting that firm. This guide describes the law in force in the requisite jurisdictions at the dates of preparation. This may be some time ago and the reader should bear in mind that statutes, regulations, and rules are subject to change. No duty to update information is assumed by the ILN, its member firms, or the authors of this guide.

The information in this guide may be considered legal advertising.

Each contributing law firm is the owner of the copyright in its contribution. All rights reserved.

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Table of Contents

CHAPTER CONTRIBUTORS & FIRMS

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BUYING AND SELLING REAL ESTATE IN ARGENTINA

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BUYING AND SELLING REAL ESTATE IN AUSTRALIA

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BUYING AND SELLING REAL ESTATE IN AUSTRIA

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BUYING AND SELLING REAL ESTATE IN BRAZIL

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BUYING AND SELLING REAL ESTATE IN CANADA - QUÉBEC

48

BUYING AND SELLING REAL ESTATE IN CHILE

57

BUYING AND SELLING REAL ESTATE IN COLOMBIA

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BUYING AND SELLING REAL ESTATE IN COSTA RICA

70

BUYING AND SELLING REAL ESTATE IN CZECH REPUBLIC

77

BUYING AND SELLING REAL ESTATE IN ECUADOR

85

BUYING AND SELLING REAL ESTATE IN GREECE

89

BUYING AND SELLING REAL ESTATE IN HONG KONG

94

BUYING AND SELLING REAL ESTATE IN HUNGARY

101

BUYING AND SELLING REAL ESTATE IN INDIA

107

BUYING AND SELLING REAL ESTATE IN LATVIA

116

BUYING AND SELLING REAL ESTATE IN MEXICO

127

BUYING AND SELLING REAL ESTATE IN THE NETHERLANDS

136

BUYING AND SELLING REAL ESTATE IN NORWAY

144

BUYING AND SELLING REAL ESTATE IN PANAMA

147

BUYING AND SELLING REAL ESTATE IN PORTUGAL

151

BUYING AND SELLING REAL ESTATE IN ROMANIA

162

BUYING AND SELLING REAL ESTATE IN RUSSIA

169

BUYING AND SELLING REAL ESTATE IN SCOTLAND

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BUYING AND SELLING REAL ESTATE IN SINGAPORE

182

BUYING AND SELLING REAL ESTATE IN SLOVAKIA

188

BUYING AND SELLING REAL ESTATE IN TURKEY

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BUYING AND SELLING REAL ESTATE IN ENGLAND AND WALES

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BUYING AND SELLING REAL ESTATE IN THE UNITED STATES - FLORIDA

212

BUYING AND SELLING REAL ESTATE IN THE UNITED STATES - MASSACHUSETTS

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BUYING AND SELLING REAL ESTATE IN THE UNITED STATES - MICHIGAN

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CHAPTER CONTRIBUTORS & FIRMS

“Buying and Selling Real Estate in Argentina” Lawyers at Salaberren & López-Sansón Abogados – Buenos Aires

“Buying and Selling Real Estate in Czech Republic” Lawyers at PETERKA & PARTNERS – Prague

“Buying and Selling Real Estate in Ecuador” Lawyers at ConsorcioLegal – Guayaquil

“Buying and Selling Real Estate in Australia” Lawyers at Kalus Kenny Intelex – Melbourne

“Buying and Selling Real Estate in Greece” Lawyers at A&K Metaxopoulos and Partners – Athens

“Buying and Selling Real Estate in Brazil” Lawyers at KLA - Koury Lopes Advogados – São Paulo “Buyi ng and Selling Real Estate in Canada - Quebec” Lawyers at Robinson Sheppard Shapiro – Canada - Quebec

“Buying and Selling Real Estate in Hong Kong” Lawyers at Sit, Fung, Kwong & Shum – Hong Kong

“Buying and Selling Real Estate in Hungary” Lawyers at Jalsovszky Law Firm – Budapest

“Buying and Selling Real Estate in Chile” Lawyers at PAGBAM |Schwencke – Santiago

“Buying and Selling Real Estate in India” Lawyers at Ahlawat & Associates – New Delhi

“Buying and Selling Real Estate in Colombia” Lawyers at Gamboa, García & Cardona Abogados – Bogotá

“Buying and Selling Real Estate in Latvia” Lawyers at TGS Baltic – Riga

“Buying and Selling Real Estate in Costa Rica” Lawyers at Cordero & Cordero – San José

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“Buying and Selling Real Estate in Mexico” Lawyers at Martinez Algaba de Haro y Curiel and Martinez Berlanga Abogados – Mexico City “Buying and Selling Real Estate in the Netherlands” Lawyers at PlasBossinade Advocaten N.V. – Groningen

“Buying and Selling Real Estate in Scotland ” Lawyers at Miller Samuel Hill Brown – Glasgow

“Buying and Selling Real Estate in Singapore” Lawyers at Goodwins Law Corporation – Singapore

“Buying and Selling Real Estate in Norway” Lawyers at Økland & Co DA – Oslo

“Buying and Selling Real Estate in Slovakia” Lawyers at Slovakia – Bratislava

“Buying and Selling Real Estate in Panama” Lawyers at Quijano & Associates – Republic of Panama

“Buying and Selling Real Estate in Turkey” Lawyers at Özcan & Natan Attorney Partnership – Istanbul “Buying and Selling Real Estate in England, Wales & Northern Ireland” Lawyers at Fladgate LLP – London

“Buying and Selling Real Estate in Portugal” Lawyers at MGRA & Associados – Lisbon

“Buying and Selling Real Estate in Romania” Lawyers at PETERKA & PARTNERS – Bucharest

“Buying and Selling Real Estate in the United States – Florida” Lawyers at Shutts & Bowen - Miami, Florida, USA

“Buying and Selling Real Estate in Russia” Lawyers at Lidings Law Firm – Moscow

“Buying and Selling Real Estate in the United States - Massachusetts” Lawyers at Davis Malm & D’Agostine – Boston, Massachusetts, USA

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“Buying and Selling Real Estate in the United States - Michigan” Lawyers at Howard & Howard – Detroit, Michigan, USA

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Fall 20

I NTERNATIONAL L AWYERS N ETWORK

Buying and Selling Real Estate in Argentina SALABERREN Y LÓPEZ SANSON ABOGADOS

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KEY FACTS OF REAL ESTATE ACQUISITIONS UNDER ARGENTINIAN LAW I. INTRODUCTION.

expenses corresponding to his/her share, as well as of refunding other co-owners the expenses in which they may have exceedingly incurred in relation to their shares. Unless otherwise agreed, every co- owner may require the legal partition of the ownership and the division of the property. c) Condominiums. Condominium ( propiedad horizontal ) confers rights of use and disposal of an independent and undivided share of a building (called a functional unit) and the proportional part of said building’s common areas. The building’s different parts, as well as the rights arising from them, are interdependent. This type of property exercised over the functional unit , which may consist in a flat, a commercial property or other space with functional independence and direct or indirect access to a street. The condominium is governed by internal regulations which are incorporated to the title deed. d) Residential Developments. This category comprises country clubs, gated communities, industrial, commercial, or nautical parks or any other type of residential developments regardless of their destiny (temporal or permanent homestead or commercial), also including those with mixed uses, in accordance with local administrative regulations. The residential developments are considered a type of condominium. The main characteristics of this developments are enclosure of the development, existence of common and individual areas and the existence of an internal regulations. All of the common and exclusive parts and areas are

Below you will find a brief outline of the legal regulation of the acquisition of real estate property in Argentina, which is mainly governed by the Argentine Civil and Commercial Code (“ CCC ”). II. FORMS OF REAL ESTATE OWNERSHIP. Argentine law regulates different forms of real estate ownership. A brief summary is provided below: a) Sole Ownership. Sole Ownership confers all the powers to legally use and materially and legally dispose of a real estate property. All of the existing constructions belong to the owner, which are presumed to be built by said owner, except evidence to the contrary. This kind of ownership extends to the subsoil and airspace, with the exception of specific cases determined by law. The owner is also legally entitled to exclude third parties from said real estate property. b) Joint Ownership. Joint Ownership is the right over a real estate property that belongs to more than one person, where each person owns an undivided share of said property. Each co- owner can, solely or jointly, use the common property without altering its destiny, and also, they can agree either the use of the common property at alternate times or the exclusive use over determined parts of the property. Additionally, each co-owner can sell or encumber his or her undivided share without the assent of the other co- owners, while the sale of the whole property requires the consent of all the co-owners. Each co-owner is responsible for paying the

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interdependent, as well as the rights over them, conforming a non-divisible whole. Aspects in connection with authorized areas, dimensions, uses and other urbanistic elements of residential developments are governed by local administrative regulations of each jurisdiction. e) Surface rights. Surface right is a temporary right over a third party’s real e state property, which confers to its holder the power to use and dispose the legal right to plant, forest, or construct in said property (or a right over existing plantations, forestations, or constructions), comprehending property’s terrain, soil and/or subsoil, in accordance with the terms and conditions set forth in the deed title. The third party remains owner of the real estate property. The term of the surface right cannot exceed seventy years for constructions, or fifty years for plantations and forestations, both terms considered as from the date of acquisition of the surface right. The term can be renewed as long as it does not exceed said maximum terms. The owner of the property keeps his right to sell and dispose of the property as long as it does not interfere with the existing surface right. During the agreed term, the surface right holder may transfer and encumber the constructions without the prior consent of the owner. f) Usufruct. Usufruct confers the right to use a third party’s real estate property. This right can apply over a whole property or just a share of said property. This right can only be granted by the owner of the property.

Usufruct can be granted for life if the holder of the right is an individual or for a maximum of 50 years if the holder is a corporation. LEGAL FORMALITIES IN RELATION TO REAL ESTATE OWNERSHIP ACQUISITION. a) Preliminary Purchase Agreement. Under Argentine law, all transfers or creation of rights over real estate properties must be granted as a public deed before a notary. The notary must conduct due diligence to verify the soundness of the title of the seller over the relevant property, obtain certificates attesting the ownership and the inexistence of injunctions preventing the transfer. The notary also acts as a withholding agent of the taxes connected with the transfer. Although it is not mandatory, usually seller and buyer execute a preliminary purchase agreement ( boleto de compraventa ) of the real estate property, in order to agree on the terms of the transaction while all the required formalities for executing the transfer deed are complied with. In order to enter into the preliminary purchase agreement each of the parties must: (i) have general capacity in terms of the CCC as for the performance of legal acts; (ii) have an Argentine tax ID number; and (iii) in the case of individuals married under community property regimes, obtain their spouse’s assenttothesale. Preliminary purchase agreements usually include: (i) the identification of the parties; (ii) the price and payment terms; (iii) a detailed description of the property to be acquired; (iv) the current condition of the property to be acquired; (v) time of conveyance of the possession over the property; (vi) tax treatment of the

III.

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transaction; (vii) general obligations of the parties; (viii) appointment of a notary public for the granting of the transfer deed; and (ix) provisions in connection with parties’ failure to compliance with their respective obligations. b) Transfer Deed. Once the due diligence of the title has been completed and the certificates have been obtained, which usually takes about 30 days, the parties shall grant the transfer deed which has substantially the same content as the preliminary purchase agreement. Parties may directly sign the transfer deed and not sign a preliminary purchase agreement. The notary public is usually chosen by the buyer. The fees of the notary usually range from 1 % to 1.5 % of the purchase price. The fees and expenses relating to the due diligence over the title to the property are usually paid by the seller, while the remaining fees are paid by the seller. c) Registration with the Real Estate Registry. The final stage for acquiring property is the registration of the transfer deed with the Real Estate Registry of the jurisdiction where the property is located. Once registered, the buyer’s ownership over the property is enforceable before third parties. Such registration entails certain fees which are usually comprised in the notarial fees and are also assumed by the buyer. The times involved in the registration of the deed will depend on the relevant jurisdiction, but in average this should take between 1 and 2 months.

IV.

TAXES. Please find below an outline of the main taxes involved in the sale of real estate property according to the latest tax reform. a) Real Estate Transfer Tax. If the real estate property was acquired before January 1, 2018, individuals selling real estate property are taxed at 1.5 % tax rate over the price of the sale. This tax is withheld by the notary public. If the real estate property was acquired after that date, individuals are taxed at 15% rate over net income (sale price minus acquisition cost). According to the last tax reform, the transference of any rights over real estate property are also taxed at 15% tax rate (this includes the transfer of participations in real estate trusts). b) Corporate Income Tax. Companies selling real estate must pay corporate income tax over the sale of real estate property at 30% rate (in 2019 and 2020) and at 25% rate (from 2021 onwards), in both cases over net income. Also, corporations are taxed if they pay dividends at 7% rate (in 2019 and 2020) and at 13% rate (from 2021 onwards). Currently, some changes to the income tax law are being considered. c) Stamp Tax. This is a tax levied by each of the provinces in Argentina and the City of Buenos Aires which applies over the purchase price or the registered value of the property, whichever is higher. The tax rate varies in each jurisdiction. Usually, this tax is borne in equal parts by the seller and the buyer.

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V. AGENTS. Real Estate agents may be used by either buyer or seller of real estate property, but their participation in real estate transactions in not mandatory. The agent fees are not determined by law and may differ from one jurisdiction to another. Usual fees range from 3 % to 4 % of the purchase price. VI. SPECIAL CASES. a) Frontier Securities Zone Act (Decree 15,385/44 as Amended) (“FSZA”). The FSZA regulates the acquisition by foreign individuals or foreign companies of rural real estate assets and certain urban real estate assets located in frontier zones. It also regulates the acquisition of shares in companies which own said real estate assets, as well as corporate restructuring operations of said companies. The regulation of the FSZA considers the following to be foreign companies: (i) companies incorporated abroad from Argentina, (ii) companies incorporated in Argentina, in which foreign companies or individuals hold the majority stake or have sufficient votes to make decisions in shareholders’ meeting; and (iii) companies in which foreign shareholders own more than 25% of the corporate capital. Under the FSZA, all acquisitions of real estate assets located in frontier zones or shares of companies which own said assets require clearance from governmental authorities, with the exception of assets located in certain cities or urban assets which have a surface of less than 5,000 square meters, must be previously approved by the Internal Affairs Secretary. In order to obtain said approval, foreign companies must make a filing with the Internal Affairs Secretary, including certain

forms provided by said governmental entity, certain corporate information (e.g., corporate bylaws, appointment of board members, latest financial statements, identification of shareholders), certificates of criminal record of the board members and an investment project to be conducted in the real estate property to be acquired. The filing should be made by the investor. The authorization is granted by way of exception and depends on showing that the investor (or its shareholders and officers) has not been convicted of crimes affecting national security and proposing an investment project for the development of the acquired real estate asset. The investment project is analyzed in the light of the following criteria: (i) that the project is declared of national, provincial, or municipal interest by the competent authority; (ii) purports to the social and economic development of the region where it is located; (iii) it will be implemented in underdeveloped zones; and (iv) it mainly employs Argentine workers. b) Protection of Rural Lands Ownership Act (Act 26,737) (“PRLO”). The PRLO limits the ownership or possession of rural land by foreign individuals or companies (which are referred to as Foreign Owners). Rural Land is defined as any real estate asset located outside the limits of cities. It provides that all Foreign Owners cannot own or possess more than 15% of the total rural land of Argentina. Likewise, Foreign Owners cannot own or possess more than 15% of the total rural land in each Province or Administrative Department. Additionally, Foreign Owners of the same nationality cannot own or possess more than 30% of the rural land owned by Foreign Owners. Moreover, a single Foreign Owner cannot

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own more than 1,000 hectares in the core area or an equivalent surface in other locations to be determined by the governmental authority. Finally, Foreign Owners cannot hold an interest on rural land adjacent to bodies of water of certain importance. Moreover, any change in the composition of the corporate capital of local companies’ owners of rural land should be informed to the authorities to verify compliance with the PRLO. The PRLO considers the following to be Foreign Owners: a) Individuals of foreign nationality (although there are some exceptions for foreign nationals who have resided in Argentina for more than 10 years, or have Argentine children, or have been married to an Argentine national for more than 5 years); b) Companies, incorporated in Argentina or abroad, whose capital is owned in more than 51% (or a sufficient percentage to adopt decisions in shareholders’ meetings) by foreign individuals or companies. The regulations of the PRLO provide that in the case of usufruct and surface rights, it will only control the owner of the property and not the holders of said rights. The PRLO has created a National Registry of Rural Land which oversees compliance with the PRLO. The application of the PRLO is triggered when dealing with the acquisition of real estate assets or participation in companies which own of real estate assets which qualify as rural land. As noted before, the PRLO bans the acquisition of rural exceeding 1,000 hectares in the core area, or adjacent to bodies of water of certain importance, or in excess of the 15% maximum of the rural land allotted to

Foreign Owners at national, provincial, and municipal level. Before the granting of the deed of acquisition of the rural real estate asset the intervening notary must procure with the National Registry of Rural Land a certificate of clearance, confirming that the above limits are not breached by the intended transaction. If the certificate of clearance is not obtained the transaction cannot be implemented. c) “UVA” mortgage loans. UVA mortgage loans are a new form of mortgage loans aimed at the purchase, repair, or expansion of real estate property. They are granted by both public and private banks and represent a comparative advantage over other forms of mortgage loans, since they offer a more convenient interest rate. These loans are expressed in Purchasing Value Units (“UVAs”), which reflect the average construction cost of one square meter and are updated based on the Consumer Price Index. This is an exception to the general prohibition of adjusting based on inflation. They are expected to help individuals to acquire property, protecting them from currency swings.

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Fall 20

I NTERNATIONAL L AWYERS N ETWORK

BUYING AND SELLING REAL ESTATE IN AUSTRALIA KALUS KENNY INTELEX

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KEY FACTS OF REAL ESTATE ACQUISITIONS UNDER AUSTRALIAN LAW

INTRODUCTION The majority of land in Australia consists of freehold title. Registration of ownership of freehold title is recorded using the Torrens system. The Torrens system is a system of title by registration. This means that an interest will only be a legal interest if it is registered on title. Once the interest is registered, that interest is indefeasible and takes priority over all other interests. Both the vendor selling the land and the purchaser purchasing the land execute a legal document transferring ownership. Once settlement of the property has occurred, the transfer document is registered. Each State and Territory in Australia has its own register. The purchaser becomes the registered proprietor of the land, which is recorded on the Torrens title register. The registered proprietor is issued with a specific certificate of title for the property which typically contains a volume and folio number and a plan identifying the land, details of any restrictions (e.g., a covenant) affecting the land and details of any encumbrances (e.g., mortgage). Titles may comprise of land or spaces defined by a plan. In recent years, property settlements and registration of interests on the Torrens system have been effected electronically through the Property Exchange Australia platform (“ PEXA ”). One of the key benefits of using PEXA is that registration of interests is effected immediately. Certificates of title were previously issued only in paper, but now titles can be issued electronically. COMMON TYPES OF PROPERTY TRANSACTIONS Land In Australia you can acquire or sell a vacant block of land. Subject to zoning, the land maybe used to construct a residential and/or

commercial building on the land. Developers commonly subdivide large blocks of vacant land into smaller blocks, (subject to local zoning and planning restrictions) which are then on-sold to purchasers. It is often a condition of the land contract that purchasers must commence and complete the construction of a dwelling on the land within a certain timeframe. The type of dwelling may be controlled by restrictions imposed by the vendor, or the planning authority (e.g., local council) such as a covenant, building envelope and/or design guidelines. Residential Dwellings (Existing and Proposed) Existing Dwellings The purchase or sale of an existing residential dwelling is a common transaction. This involves the transfer of ownership of the land, including any fixed dwelling, improvements, and other permanent fixtures on the property. The property is usually sold to a purchaser in its current condition and subject to all defects. It is important for purchasers to undertake their own due diligence enquiries concerning the property and to be satisfied with its state and condition. These enquiries should be conducted before a contract is signed. As contracts are prepared by the vendor, they tend to be one-sided (except for certain statutory protections). Alternatively, the contract could be conditional on the purchaser being satisfied with certain enquiries and if not, then have a right to terminate the contract. Purchasers are entitled to attempt to negotiate contracts in order to make them more even handed. Proposed Dwellings Purchasing “off -the- plan” involves purchasing a dwelling that is yet to be built on a lot which is yet to be created. Settlement occurs once the subdivision has been registered (which creates

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a title for the lot), and construction of the dwelling has been completed. Off-the-plan contracts are complex, but commonplace. Both the land and what is being constructed on the land may be subject to changes by the vendor. It is important for purchasers to obtain legal advice before entering into such a contract. Depending on the State and Territory, there can be stamp duty savings when purchasing off-the- plan. It is important for vendors who are selling “off -the-pl an” to obtain legal advice before the contract is prepared. Settlement under an off- the-plan contract may take several years to settle, as the vendor has a specified timeframe in which to register the plan and construct the dwelling. These types of contracts are typically drafted on a vendor favourable basis, with the vendor having flexibility regarding construction and broad termination rights, especially if the development does not proceed. A purchaser’s right to terminate the contract is usually limited. Residential, commercial, and vacant land can be purchased and sold “off -the- plan”. Selling “off the plan”, is possible because of a legislative regime which allows this, so long as the parties may terminate the contract if the title is not created by an agreed date. Commercial Properties Commercial properties include retail, industrial and office spaces. The acquisition or sale of a commercial property may be with vacant possession or subject to a lease (i.e., tenanted). A property may comprise both commercial and residential spaces (e.g., commercial space at ground level, with adjoining residential space upstairs). If the property is leased and is sold to a purchaser subject to the terms of the lease, it is important for the purchaser to review the terms of the lease, especially if the purchaser is relying on the rent for income. The sale of commercial properties is usually a taxable supply and subject to the payment of a Federal Goods and Services Tax (“ GST ”). However, the

sale of leased property can be GST free if the parties agree that it is t he supply of a “going concern”. To satisfy the going concern exemption, certain requirements must be met. It is important that purchasers and vendors obtain legal advice in relation to the sale and purchase of commercial property and any GST consequences. Retail Properties When buying or selling a retail property in Australia, each state and territory has its own specific retail legislation, which governs retail premises, the lease provisions and disclosure documentation. If purchasing a leased property, it is important for a purchaser to review the lease documentation. A failure to do so could adversely affect the purchaser’s rights as the future landlord to enforce the terms of the lease. Some leases have termination rights, or rights under the retail lease legislation for longer terms, and certain rent review methodology. The applicable retail lease legislation has a big impact on leases, so leases are not always what they seem to be. DIFFERENT METHODS OF SALE Private Sale vs Auction Private Sale A property can be sold privately through a sales agent or by private sale directly between a vendor and a purchaser. In most cases, a vendor will engage a real estate agent to sell the property, as this can be more efficient, and the vendor has the benefit of the real estate agent’s brand, reputation, and database of potential purchasers. In these situations, contracts may be negotiated and re-drafted to suit both parties and may include agreed conditions.

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Auction A property can also be sold at a public auction. This involves the engagement of a real estate agent, who is also an auctioneer. An auction date is set by the vendor and interested buyers can attend the property and submit their offers by placing a public bid. Each State and Territory has its own legislation which governs auctions. Sales of property by auction are unconditional. The contract is signed, and the deposit is paid after the auction has concluded. Generally, the vendor controls the bidding by setting a reserve price, which is the minimum price a vendor will accept for the property. Sometimes, the bidding at a public auction does not reach the vendor’s reserve price. When this occurs, the property is “passed in” and the highest bidder has first right to negotiate with the vendor at the reserve price. Generally, at auctions it is more difficult for a purchaser to renegotiate the contract. Expression of Interest vs Tender There are methods of gauging interest in a property without a public auction or directly negotiating with a purchaser straight away. Such methods may involve an expression of

or reject any EOI in its absolute discretion without giving reasons and the vendor is not bound to accept the EOI with the highest price or any EOI received. EOIs can be complying or non-complying and a vendor is free to accept either. Once parties are close to agreement on commercial terms, a contract of sale must be entered into to effect a binding transaction. With an EOI, purchasers can be more casual with their proposal. Tender The vendor invites offers from tenderers for the purchase of the property. The tender document, which is usually prepared by the vendor’s solicitor, sets out the terms of the tender and attaches a copy of the contract of sale. The tenderer must deliver the tender to the tender box in a sealed envelope. The tender documents include the signed tender form, signed contract documentation, including guarantee and a cheque for the deposit. The key difference between a tender and an EOI is that each tenderer who lodges a tender is deemed to have made an irrevocable offer to purchase the property for the tender price and on the terms and conditions of the tender and the contract of sale. The offer made by the tenderer remains open for acceptance by the vendor for a certain period and it cannot be revoked before that time by the tenderer. Tenders can be complying, or non-complying and a vendor is free to accept either. The vendor is under no obligation to accept any tender, which is not lodged in accordance with the terms of the tender and is not bound to accept the highest tender. This method of selling is usually undertaken for large residential and commercial properties, like shopping centres, where the vendor prefers to keep the sale as private as possible. If a tender is accepted, there will be a binding contract between the parties.

interest or a tender. Expression of Interest

The vendor of the property invites potential purchasers to submit an expression of interest (“ EOI ”). The EOI form may be prepared by the rea l estate agent or by the vendor’s solicitor. It contains details of the purchaser, price, and terms such as the deposit, settlement period and special conditions. The terms of the EOI make it clear that the submission of an EOI does not create a contract for the sale of the property. It is not binding. Therefore, no legal rights or obligations except those contained in the EOI document are deemed to arise until a contract of sale is executed and exchanged and the full deposit is paid. The vendor may accept

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DOCUMENTATION Sale Documents to be in Writing

vendor is required to disclose certain information about the property in the form of a vendor’s statement or disclosure statement or by providing copies of certain prescribed documents (e.g., title search, plan, drainage diagrams, registered dealings on title and council certificates). In other parts of Australia, the disclosure regime does not exist or is very limited, with a requirement for the vendor to provide some statutory warranties about the property. It is important that a purchaser obtains legal advice and conducts its own due diligence enquiries and is satisfied in relation to all aspects of the property. Statutory disclosure obligations provide some protection to purchasers. Non-compliance by a vendor with statutory disclosure obligations may give a purchaser the right to terminate a contract. Negotiated Amendments If a purchaser or vendor has concerns or issues regarding the property, then the parties can negotiate any required amendments to the proposed contract before it is signed and exchanged. For example, does the contract need to be conditional on the purchaser undertaking due diligence enquiries or certain works or obtaining reports which must be satisfactory to the purchaser? Is there a particular issue concerning the property (e.g., contamination) which needs to be in a special condition? Is the vendor obliged to carry out works before settlement? Conditional Contracts It is not uncommon for the contract of sale to be subject to certain conditions. An off-the- plan contract is one example of a conditional contract, as it is subject to the registration of a plan of subdivision. A contract could also be conditional on finance, the purchaser’s d ue diligence enquiries (e.g., title and property searches, building and pest reports), either the

Each State and Territory has its own specific legislation, which requires that a contract for the sale or disposition of an interest in land must be in writing and signed by the person to be charged. Contract of Sale Each State and Territory has available its own standard contract of sale which is in a form approved by the relevant peak body for lawyers (e.g., applicable Law Society or Law Institute) or real estate agents (i.e., the Real Estate Institute for the State or Territory) or both. The contract of sale includes among other things the parties’ details, the property (and any inclusions) to be purchased, the price and the settlement date. It is important for purchasers to obtain legal advice before entering into a contract of sale and for vendors when having a contract prepared. It is becoming common for contracts to be signed electronically. However, whether or not banks and other financial institutions are prepared to accept electronically signed contracts is an evolving matter. Prescribed Conditions Generally, a contract of sale will contain standard or general conditions of sale, with the ability for the parties to include additional conditions as “special conditions” or to amend the standard or prescribed conditions. In terms of priority, the special conditions of a contract will usually prevail over any standard or general conditions. When preparing a contract of sale for an off-the-plan purchase, conditions imposed by statute must be included. The requirements for each State and Territory vary. Disclosure Requirements The vendor disclosure requirements vary for each State and Territory. In some States, a

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purchaser or the vendor procuring a permit for the property or the vendor agreeing to complete certain works before settlement. It is important that the condition is included in the contract and drafted carefully to ensure that the party relying on the condition can terminate the contract without penalty if the condition is not satisfied and is refunded any

Options Before a contract of sale is entered into, the parties could enter into an option agreement. Option agreements are commonly used by developers who wish to secure a right to purchase a future development site. Generally, the option agreement will require the payment of an option fee which may or may not form part of the deposit which is payable under the contract of sale. The option to acquire the property is exercisable within a specified time frame, which could be several months or years. The contract of sale for the purchase of the property should be attached to the option agreement. If the option is not exercised within the specified timeframe, it lapses. Any option fee paid is usually forfeited to the vendor. It is common for the grantee under an option to have the right to assign the benefit of the option to a third party. There are several types of option agreements. A call option is where the purchaser has the right to purchase the land, but no obligation to do so. A put option is where the vendor has the right to sell the land to the purchaser, but no obligation to do so. A put and call option is where the purchaser has the right to call for the option to be entered into by the purchaser (i.e., require the vendor to sell) or the vendor can put the contract to the purchaser (i.e., require the purchaser to buy). A put and call option agreement is normally used where the purchaser intends to proceed with the acquisition. Each State and Territory has its own stamp duty regime when dealing with options. Terms Contracts A terms contract is a special type of contract. Except for Victoria and Western Australia, these types of contracts are referred to as instalment contracts. What constitutes a terms contract or an instalment contract will vary depending on

deposit monies paid. Heads of Agreement

Before a contract of sale is entered into, the parties may execute a preliminary agreement. A heads of agreement (“ HOA ”) is one ex ample. A HOA is commonly used when the parties to a large transaction are seeking to secure an early commitment from the other party and wish to impose obligations of exclusivity and confidentiality. One of the advantages of having a HOA is that it sets the contractual framework for the parties at an early stage and helps identify the key terms. The HOA can create a timetable for certain events to happen. The parties can specify in the HOA if they intend to be immediately bound by its terms or if they are only bound upon the signing and exchanging of a formal contract of sale. If the HOA is meant to be binding, this needs to be expressed clearly in the HOA. Careful drafting is required. The disadvantages of using a HOA are that it can be time consuming to prepare and it could potentially restrict a party’s negotiating position in the future. Terms Sheet A terms sheet is another example of a preliminary agreement. A terms sheet can be binding or non-binding between the parties. Just like a heads of agreement, a terms sheet creates the framework for the sale or acquisition of the property between the parties. The same considerations which apply to a heads of agreement also apply to a terms sheet.

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the applicable legislation of the State or Territory. Terms contracts can be created inadvertently. Care must be taken. Generally, a terms contract can arise when a purchaser is obliged to make multiple instalments of the price under a contract or the purchaser is entitled to possession or occupation of the property before settlement. In some States, the title to the property may be transferred before the purchaser has paid the full price. While in other States the use of these types of contracts is either prohibited or their use is severely restricted. Where terms contracts or instalment contracts are permitted, the relevant statutory requirements must be strictly complied with to avoid creating a contract which is voidable by the purchaser. Terms contracts can impose restrictions on the vendor’s ability to mortgage the property once sold. Depending on the State or Territory, the consent of the purchaser is required to any mortgage of the property. Terms contracts are not common but were used for the sale and acquisition of rural properties (e.g., farms). Legal advice should be obtained when you are dealing with a terms contract or instalment contract. DIFFERENT TYPES OF OWNERSHIP In Australia there are several distinct ways that property can be owned. Sole Proprietor If a property is acquired by an individual or by a single corporate entity, that individual or single corporate entity will be recorded on the certificate of title as the sole registered proprietor. Co-ownership If two or more parties purchase property together in Australia, those owners are co- owners. The two types of co-ownership are joint tenancy and tenancy in common. Careful

consideration as to how property is owned is important as this can have implications for stamp duty, estate planning, finance, and tax implications. The co-ownership of a property can be registered as joint tenants or as tenants in common or a combination of both. Joint Tenancy A joint tenancy means that all co-owners own the property jointly and equally and each co- owner is entitled to the whole of the property. This means that upon the death of any of the joint tenants, the ownership share of the deceased person automatically passes to the surviving joint tenant/s equally. It is the right of survivorship, which is the principal difference between a joint tenancy and a tenancy in common. It is important that legal advice be obtained when determining whether a property should be owned as a joint tenancy or as tenants in common. A joint tenancy form of ownership is commonly used by spouses/domestic partners. In certain circumstances, a joint tenancy can be severed and converted into a tenancy in common. Tenants in Common A tenancy in common allows two or more parties to record and specify the percentage in which they will own a share in the property. This form of ownership is used when the contribution to acquire the property is unequal or where the ‘partners’ are not spouse s. For example, the transfer of land would refer to shares as proportions. This type of ownership allows each owner to separately deal with their respective share of the property as they require. This also includes transferring their share to a third party or bequeathing their share in the property under their will. This form of ownership is commonly used in business acquisitions.

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DUE DILIGENCE CONSIDERATIONS Vendor disclosure requirements

purchaser with evidence of the right to sell, such as the lodgement of a purchaser’s caveat. Restrictions /Encumbrances A search of the title and plan will reveal information which is relevant for a purchaser. Such information will show if a property is mortgaged or if there are restrictions, easements, or encumbrances (any registered interests or third-party agreements which affect or limit ownership or use of the land), which burden the property and potentially limit what a purchaser can do with the property. A title search will also reveal if any third parties have registered their interests, by a caveat or a mortgage. When a vendor sells and settles the property, the vendor must provide clear title at settlement to the purchaser. All mortgages and caveats must be removed by settlement. A vendor warranty to provide clear title is common in a contract. Planning Checks Purchasers should check the local planning scheme or planning restrictions for the property being purchased. This is important if a purchaser has a particular use for the property. In Australia, such controls are achieved through legislation and planning policies and instruments. Each State and Territory has its own regulatory framework. Responsibility for implementing those requirements is usually with the State Government and the local councils. Contracts of sale often contain conditions, which provide that a purchaser buys the property subject to all restrictions, including those under the relevant planning scheme. It is important that a purchaser is satisfied that they can use the property for the desired purpose. For example, is a permit required for the proposed use? In certain States, disclosure obligations will reveal the relevant zoning of a property, but full enquiries may be warranted.

A purchaser should be satisfied in relation to all aspects of the property being purchased as most contracts will be vendor-biased and once signed a purchaser will have little in the way of rights unless those rights are specifically negotiated. It is important that purchasers conduct their own due diligence as the disclosure requirements imposed on vendors in Australia varies from each State and Territory. It is important that legal advice is obtained as early as possible in the process. It is important that a vendor obtains legal advice to ensure they comply with any disclosure requirements which are imposed by the applicable State or Territory legislation. Otherwise, a failure to comply may give a purchaser rights to terminate a contract before settlement. Caveat Emptor The doctrine of caveat emptor o r “let the buyer beware” means that purchasers looking to buy property in Australia should undertake their own due diligence enquiries. Due diligence enquiries can be conducted before a contract is signed or the contract can be signed subject to the purchaser undertaking its due diligence enquiries and being satisfied with them within a specified timeframe. The extent of those enquiries will depend on the value of the property. Title Search Conducting a title search of the property is the first step. It is important to check that the vendor who is selling the property is actually the registered owner on title and to see a plan of the land being purchased. In Victoria, a person can sell land before that person has become the registered proprietor of the property. This can be achieved by providing a

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Property Inspections A physical inspection of the property by the purchaser is important. They may include expert building inspections and pest and termite inspections. A purchaser should check that the improvements on the property are sound and compliant with the applicable building legislation. A contract of sale will often include an acknowledgement that the purchaser accepts the condition of the property as at the day of sale. It is equally common that the vendor need only deliver the property at settlement in the condition it was in on the day of sale. A contract can be conditional on the purchaser obtaining a satisfactory pest/termite inspection and if not satisfactory, then the purchaser can terminate the contract. Survey Purchasers should check the title boundaries of the property. Are all fences and improvements erected within the title boundaries of the property? If not, there could be issues in the future if the owner of a neighbouring property seeks to enforce its rights. The principle of adverse possession means that a person may claim land by long usage. The requirements for adverse possession claims vary from State to State. However, adverse possession claims are not part of the land law in the Northern Territory or the Australian Capital Territory. Services As the vendor disclosure regimes vary from each State and Territory, it is important that a purchaser is satisfied with the level and quality of the services (i.e., water, sewerage, electricity, and gas) at the property. Do they exist? What is the state and condition of the services at the property? A failure to check for services could result in a purchaser incurring substantial cost if they need to be installed to the property and connected.

Environmental Checks Each State and Territory has its own regime for dealing with contaminated land. Generally, the person who causes the contamination is responsible. However, if that person no longer owns the land, or cannot be found, then the relevant authorities may require the owner of the land to deal with any contamination issues. It is important for purchasers to check the environmental condition of the property, especially if they have a particular use in mind or the property may be contaminated. Although this is less of an issue for existing residential land, it is a relevant consideration for industrial or commercial sites. If the land is contaminated, certain uses may be prohibited by the relevant planning regime, unless certain requirements are met (e.g., remediation of the land). If a purchaser is looking to use the property sensitively (e.g., residential or childcare), it is essential that the purchaser is satisfied with the environmental condition of the property. It is common in contracts of sale for a vendor to sell a property in its current condition and subject to any contamination. A vendor will seek a release and indemnity from a purchaser in respect of any claims, which may arise from contamination. If a vendor has a contamination report, the report will often be disclosed to the purchaser and the purchaser will be expected to purchase the property subject to that report. Finance If a purchaser requires finance to purchase the property, then the contract can be made conditional on finance being obtained. Land Tax When purchasing a property, it is important to understand what annual outgoings are payable such as council rates, water rates and land tax. Land tax is calculated as a percentage based on the value of land and is an annual charge. The

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