Legal Guide To Real Estate 2024

Real Estate
2024
19th Edition
Contributing Editor:
Dan Wagerfield
Norton Rose Fulbright LLP
ISBN 978-1-83918-314-0
ISSN 1749-4745
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Table of Contents
Expert Analysis Chapter

Trends in Office Leasing
1 Dan Wagerfield, Norton Rose Fulbright LLP
Q&A Chapters
Canada Mexico
5 Stikeman Elliott LLP: Michael L. Dyck, 112 SMPS Legal: María Teresa Paillés,
Rachel V. Hutton, Patrick Morin & Mario Paura Andrés Pizarro Suárez, María Esther Rey &
Andrea Holtzman Cesarman
Chile
15 Puga y Ortiz Abogados: Alberto Alcalde Herrera & Nigeria
Pedro León Wielandt 122 Tunde & Adisa Legal Practitioners: Ayobami Tunde,
Gbemisola Mosuro & Opeyemi Adekanye
Cyprus
23 Andreas Demetriades & Co LLC: Demetris Demetriades Portugal
134 PLMJ: Teresa Madeira Afonso & Francisco Lino Dias
Dominican Republic
34 Prieto Cabrera & Asociados: Dr. Aimée Prieto Puerto Rico
150 Ferraiuoli, LLC: Eidalia González-Tosado &
England & Wales Eduardo Tamargo-Motroni
44 Norton Rose Fulbright LLP: Rowenna Butler
Slovenia
Germany 159 Law Firm Neffat and Partners: Domen Neffat &
56 Oppenhoff & Partner Rechtsanwälte Jakob Stanič Gruden
Steuerberater mbB: Dr. Stefanie Minzenmay &
Dr. Ann Margret Herzhoff Switzerland
170 MLL Meyerlustenberger Lachenal Froriep AG:
Greece Wolfgang Müller & Cosima Trabichet-Castan
67 Sardelas Petsa Law Firm: Alexandra Petsa,
Fay Vetouli & Nicolas Tarantilis Taiwan
180 Lee and Li, Attorneys-at-Law: Yi-Jiun Su & Lily Kuo
Ireland
77 McCann FitzGerald LLP: Shane Fahy & Denise Dockery Ukraine
190 Taras Burhan Law Office LLC: Taras Burhan,
Italy Zvenyslava Kit & Marian Tsap
90 Ontier Italy: Roberto De Simone & Laura Gentili
USA
Japan 202 Rosen Karol Salis, PLLC: Richard L. Rosen,
102 Anderson Mōri & Tomotsune: Kenichi Yamamoto & Leonard S. Salis, Dennison D. Marzocco &
Miho Ouchi Jeffrey S. Mailman
Welcome
Preface
Dear Reader,
At ‘EXPO Real’, an international real estate trade fair held in Munich, Germany in
October 2023, many of the delegates were using the expression ‘survive to 2025’.
With (at the time of writing) inflation still running higher than anyone would like and
reports that, for the UK, Q3 of 2023 was the second worst quarter on record for real
estate investment volumes, many in the real estate sector are looking to ride out the
slump (which may continue into much of 2024) in the hope that sustained economic
growth returns and markets normalise during 2024.
However, an interesting dichotomy is forming. Although certain aspects of the industry
are normalising and returning to pre-COVID patterns of behaviour, others appear to
have permanently changed as a result of the pandemic .
In this edition of the Guide, we are looking at one sector, the office leasing sector, and
investigating how the pandemic has altered how we use office space, and how office
leases are adapting as a result.
Dan Wagerfield
Partner & Co-Head of Real Estate (EMEA)
Welcome
Chapter 1 1
Trends in Office Leasing
Norton Rose Fulbright LLP Dan Wagerfield
factors (such as, for the UK, Brexit) make for a very uncertain
Introduction world and one where occupiers are finding it difficult to
The COVID-19 pandemic dramatically altered the way people determine what their office requirements will be.
went about their lives. Almost overnight, their daily routines How are these issues impacting the principal document
(who they saw, where they went and how they shopped) changed. that governs the landlord and tenant relationship, the lease
For many, perhaps the biggest change was how they worked. agreement? Let us begin by taking a look at two fundamentals:
The lockdowns that were imposed to help control the spread of the rent; and the duration of the lease.
the virus forced many to work from home. Whilst it is true that
in the years leading up to the pandemic, fully remote working Rent
or ‘hybrid working’ (where workers spend some of their time
working remotely and some of it in an office environment) was If remote or hybrid working means occupiers need less space, surely
on a gradual but slow upward trajectory (powered by advances rents will fall as a result of there being less demand. Interestingly,
in remote working technology and the need to offer options to at the moment, this does not seem to be the case for certain offices.
work remotely to help attract and maintain the best talent), for It is a complicated picture, but there is office space that is attracting
many, working away from the office was a luxury, the exception ever increasing rents, despite the current economic climate.
rather than the rule. There are a number of reasons for this, which are worth
Economists at Stanford University estimate that in 2019, investigating:
roughly 5% of full-time work was done from home (even less, if ■ First, yes, less space is probably needed per office worker,
you only look at the figures for those working in the financial or but what constitutes ‘the office’ is changing, as developers
professional services sectors). In April and May 2020, after the scramble to deliver what employers see as necessary to
community lockdown measures were implemented in the United promote productivity and well-being (and the amenities
States, it ballooned to 60%. and extras needed to encourage their staff back into the
For some, COVID-19 is still very much a lingering problem office). Taking employees out of cellular offices into open-
but with the public health emergency at an end and the plan areas (coupled with ‘hot desking’ arrangements)
lockdowns and curfews lifted, life feels very much like it did might look like a saving on space, but this comes with a
pre-pandemic. Many of the behavioural shifts triggered by the requirement for ‘break out’ areas, quiet contemplation
measures imposed to fight the spread of the virus have been zones and collaboration space, either within the premises
reversed. Others, however, look like they may be here to stay, themselves or within the common parts, where they are
with remote or hybrid working among office employees being shared with other occupiers.
one of them. Despite the well-publicised attempts by a number Because developers are having to provide more overall
of major companies (Apple amongst them) to force employees to gross floor area in order to accommodate all the extra
return to the office, or to abandon the hybrid office attendance facilities (such as bike hubs and parcel lockers), rents are
policies they adopted in the wake of COVID-19, McKinsey & tending to rise faster than inflation on a rate per square
Company predict that office attendance could stabilise at 30% foot basis. Because tenants are occupying less physical
down on pre-pandemic levels. space, they are tending to accept that rents quoted on a net
We will see. If COVID-19 accelerated the trend for remote basis should be higher to reflect the additional facilities
working, it has also revealed its limitations. Some take the view being provided within the common areas.
that hybrid working is damaging corporate DNA. They argue that ■ Second, in the past, much of the demand for office space
the office has an important role in providing informal learning has come from the financial services sector. The fortunes
opportunities for younger employees and that the networking, of this sector heavily influenced the demand for space in
connections, and serendipity offered by a collective, office- the main financial centres and, as a result, the rents that
based working environment all have an important part to play in office landlords could achieve. Now, however, a much
creativity – which, they say, lies at the heart of a successful business. wider range of occupiers are taking space (including tech,
Regardless, the pandemic has left an indelible mark on the media and medical organisations), some of whom are not as
way offices are used – when they are used, and how they are vulnerable to the wider macro-economic trends as financial
used. So too will the economic downturn that has followed services. Their presence in the office leasing market leaves
in the wake of the pandemic. Alongside the rise of remote or rents less exposed to shocks in the finance sector.
hybrid working, soaring energy prices, supply chain constraints ■ Third, the ‘headline’ rents being quoted probably exclude
and high inflation, along with other, more local, complicating incentive packages, which (in the UK) have been rising
sharply since the pandemic. These incentives include
Real Estate 2024

2 Trends in Office Leasing
rent-free periods, both at the beginning of the lease and Data from ‘Re-Leased’ (a commercial property software
during the term (if a tenant does not exercise a break right, platform) has average lease lengths in the UK, in the first quarter
for example). They also include landlord’s contributions to of 2019, as almost four-and-a-half years. In the first quarter of
the cost of the tenant’s fit out, or a tenant’s modifications this year, 2023, they had dropped to two years and 10 months, a
to any standard Category B specification that the landlord trend that is mirrored in Australia and New Zealand and other
will install. Often the ‘effective rent’ (i.e. the rent after common law jurisdictions.
factoring in the costs of these incentives) is much lower. The fall is in part due to occupiers exercising caution around
■ Finally, much of the post-pandemic rent data that exists major decisions as to their long-term occupational requirements.
tracks rental values secured on new lettings and here, as in Faced with a whole host of unknowns (not least whether hybrid
many cities across the world, new letting activity reveals a working is here to stay), many have chosen not to seek new space
‘flight to quality’. Increasingly, occupiers are seeking out but to renew or extend the leases of their current premises.
‘best-in-class’ space, for two main reasons: Pre-pandemic, renewals would typically account for 20–25%
■ First, with the built environment’s contribution to of leasing activity. There is evidence to suggest that in some
global carbon emissions increasingly in the spotlight, markets it now makes up more than half of all leasing activity.
many larger occupiers need modern, energy-efficient, Longer leases remain the favoured option for the larger floor
sustainable premises (with a high rating on a recognised plate users in the very best buildings, which remain in high
green building rating system, such as BREEAM,
demand. In the UK, terms of 10 to 15 years are not uncommon,
LEED, WELL or NABERS – see box) so they can meet
but look inside the lease agreement and you will probably find a
their own corporate social responsibility or net-zero
number of options that give the tenant flexibility of occupation.
targets (or those of their major stakeholders or most
Clifford Chance (a fellow international law firm) is reported
valued customers). And occupiers know the direction
to have taken a 20-year lease of its new 320,000 square foot.
of travel here. With regulations around energy
efficiency and sustainability only set to get tighter, London headquarters, but with a break at 15 years, options
occupiers are concerned with finding facilities that to hand back space and further break options over individual
outperform against current standards, so they carry floors during the term of the lease.
less transition risk going forward.
■ Second, occupiers trying to attract people back into Other Lease Terms
the office want new, amenity-rich, quality work places,
‘Green lease’ terms (or the additional provisions that impose
with coffee shops, gyms, electric vehicle charging
obligations on the landlord and tenant to report, manage and
points or good connections to public transport.
reduce the environmental impact of a building) will become
■ This sort of ‘Grade A’ stock does not come cheap and
for that reason can and does command the highest de rigueur but, at the time of writing, ensuring ‘flexibility’ of
rents (or the ‘green premium’ as it has been coined). occupation seems to be the key trend.
This is particularly the case when supply is constrained, With businesses operating in uncertain times, prospective
as it is in some areas with landlords and developers tenants are looking for increased flexibility in running their
hesitating to invest in new office buildings during business operations, so they can quickly respond to future
and immediately after the pandemic. In 2022, CBRE economic or other emergencies (or equally, a return to strong
looked at the impact an LEED certification had on growth and a rising head count).
rents in the United States. Across a sample of 190,000 For most occupiers, leases represent some of the longest
buildings, it found a 6% rent premium for certified contracts their business has and a large expense on the balance
over uncertified buildings of an equivalent type. sheet. Traditionally, leases have not given tenants much in the
Outside of these factors, it is probably worth challenging way of flexibility (particularly in landlord-friendly markets such
the initial premise that occupiers need less space as a result of as the City of London). Now, tenants are demanding terms that
hybrid working. Many employees want to work from home on give them the ability to easily adapt to new conditions and, keen
Mondays and Fridays and, faced with the ever-present challenge to secure lettings and avoid high vacancy rates, many landlords
of attracting and retaining talent, many employers have let them. are taking a more co-operative approach when it comes to
If the office is still needed three days a week, the shift to hybrid drafting the lease.
working does not afford much of an opportunity to reduce space This approach goes beyond the changes that were introduced
(unless it comes with other features to make space-saving work, in response to the government-mandated occupancy reductions
such as ‘hot desking’). and closures at the height of the pandemic. Those measures,
Of course, rents are not rising everywhere. With the focus which included rent abatement or deferment, are now largely a
on ‘prime’ offices (which were already sought-after before the thing of the past.
pandemic), ‘non-prime’ office rents and values are falling. We see increased flexibility in leases manifesting itself in a
Many commentators point to the fact that it is not unusual, number of ways. Of those, the top three are:
in recessionary times, to see an increased divergence in the ■ Break rights
performance of ‘prime’ over ‘non-prime’ assets, but unlike Generally speaking, where tenants agree longer term
previous downturns, when the gap closed as the economy picked leases, we are seeing more break rights (tenant only and
up, some point out that the ever more stringent regulations mutual) and the period of time between breaks is reducing.
around energy efficiency will permanently fix a ‘two tier’ market, It is true that office landlords are still looking for as long
stranding many non-prime assets. For these assets, the estimated a period of certainty of rental income as possible but there
rental value, after the upgrades needed, will not justify the cost, are signs that landlords are increasingly offering incentives
and re-purposing to other uses might be the only option.
(such as rent-free periods) if tenants do not exercise their
break rights.
Lease Duration Tenants are also looking for fewer conditions on their
Average lease lengths are becoming shorter. Again, the trend ability to break. Typically, landlords still require all the
towards shorter leases existed before the pandemic but COVID-19 rent up to the break date to be paid, but landlords are
accelerated it. relenting on other requirements.
Real Estate 2024

Norton Rose Fulbright LLP 3
■ Options to renew In our 2030 world, after a period of robust growth for the
As a by-product of shorter leases, landlords and tenants are business after 2024, head count has risen and the occupier has
agreeing more options to renew as a means of giving tenants taken slightly more space than it needs in a new, environmentally
the security of knowing they can stay in situ (should they efficient building (sub-letting part to a drone delivery start-up by
chose to) at the end of the contractual term. Again, unsure taking advantage of the relaxed restrictions around underletting
of what the future may hold, rather than agree a lease of say, of part in their new lease).
10 years, the tenant will take a lease for five years, with an The increase in head count (and the fact that some of the
option to renew for another three to five years. new, younger joiners live in shared accommodation, which is
■ Fewer restrictions on dealings not conducive to home working) means the office space is fully
The ability to assign or sub-let gives tenants the ability to utilised.
transfer the remaining lease obligations or offset the cost This looks very much like the leasing pattern of old but there
of unused space by allowing another occupier to share the is a key difference. Now, whether the employees come to the
premises on an underlease. office becomes a matter of personal choice.
Dealing with a lease in this way typically requires the Fixed with the idea that the networking opportunities and
landlord’s consent. We are seeing some relaxing of the creativity will suffer if the majority of the workforce is not in
conditions, principally an increased willingness to allow the office, the business leaders have chosen a variety of features
underletting of part. to attract employees into a new space. They are paying for
Pre-pandemic, it was often the case that occupiers would these handsomely, through the rent and service charge, but they
take more space than they needed, anticipating growth are convinced that the increased productivity that will result
and an increase in head count, and underlet any surplus from having the workforce together in an office with inviting
space to a third party. Now, with occupiers struggling to office furniture, lots of natural light, cutting-edge technology
determine their occupational needs, the trend is very much and ‘quiet contemplation’ pods and in a location that is rich in
to take only the space that is needed and negotiate options amenities (restaurants, bars, entertainment and cultural venues),
to take more space should it be needed in the future. will more than compensate for the increased cost.
There are signs too that landlords are being more And, just in case it does not, they have a break right at year three.
accommodating when it comes to the sharing of space.
Sharing (as distinct from underletting) has moved on from BREEAM
simply allowing a company in the same group to occupy. BREEAM is the ‘Building Research Establishment
In the tech sector, for example, sharing not only allows Environmental Assessment Method’. Created in 1990, it is the
business owners to reduce their overheads, it allows them oldest green building rating system. It measures nine elements:
to collaborate with like-minded organisations. management; health and well-being; transport; water; materials;
land use and ecology; and pollution. It is used in over 50
Serviced Office Providers countries around the world.
Perhaps the ultimate in flexibility is to not have a traditional lease
LEED
at all. Enter the ‘serviced’ office providers. A deep dive into
LEED stands for ‘Leadership in Energy and Environmental
these platforms is probably beyond the scope of this article, but
Design’, a green building certification used in the United
they all have a similar business model in that they provide fully
States and now worldwide. LEED has nine areas of focus,
equipped spaces ready for occupation, with furniture, heating and
including location and transportation, sustainable sites, water
air-conditioning, lighting, telecommunications infrastructure
efficiency, energy and atmosphere, material and resources,
(such as Wi-Fi), and basic office equipment (desks, chairs, etc.)
indoor environmental quality, innovation, regional priority,
Shorter leases mean tenants are less willing to invest in their
and integrative processes. As of 2019, 80,000 projects
own on-site amenities (e.g. kitchens, and showers) or corporate
were registered, with 32,500 projects having completed the
branding, to make the space feel like their own, as they would
certification process.
struggle to amortise the cost over the short term of the lease. In
a serviced office (where the occupier usually only has a licence,
WELL
or permission to occupy, not a lease), these facilities are all laid
WELL is managed by the ‘International WELL Building
on by the service provider, as part of a ‘plug and play’ approach
Institute’. WELL has 11 areas of focus: air; water; nourishment;
to real estate. In a ‘managed office’, which is a variant of the
light; movement; thermal comfort; sound; materials; mind;
serviced office model that allows the occupier the freedom to
community; and innovation.
tailor the space to its own requirements, this would extend to
corporate branding.
NABERS
Also administered by the Building Research Establishment,
Conclusion NABERS is the ‘National Australian Built Environment
Where are these trends taking offices and office leases? Rating System’. It assesses energy, water, waste and the indoor
Let’s fast forward to 2030 and (assuming there have not been environment to provide a rating of between one to six stars for
any more pandemics or major economic shocks along the way) building efficiency, to help owners and occupiers understand
look at it from the perspective of the corporate occupier. It their building’s performance in comparison to other buildings
will primarily be concerned with three things: (i) attracting and in the same sector.
retaining the best people; (ii) increasing productivity; and (iii)
meeting its shareholders’ requirements, in terms of sustainability
and carbon reduction targets.
Real Estate 2024

4 Trends in Office Leasing
Dan Wagerfield is a real estate lawyer based in London and is the Co-Head of Real Estate, EMEA at Norton Rose Fulbright LLP. With over
20 years of experience, Dan focuses his practice on real estate transactional work, including investment, development, secured lending, and
landlord and tenant matters, acting on behalf of private and public sector clients.
Dan regularly advises inward investors from Asia and Continental Europe on large-scale property development and investment transactions
and has extensive experience in the real estate elements of large-scale infrastructure and renewable energy projects.
Norton Rose Fulbright LLP Tel: +44 20 7444 2764

3 More London Riverside Email: dan.wagerfield@nortonrosefulbright.com
London, SE1 2AQ URL: www.nortonrosefulbright.com
United Kingdom
Norton Rose Fulbright is a global law firm. We provide the world’s Norton Rose Fulbright Verein, a Swiss verein, helps coordinate the
preeminent corporations and financial institutions with a full business activities of Norton Rose Fulbright members but does not itself provide
law service. We have more than 3,500 lawyers and other legal staff based legal services to clients. Norton Rose Fulbright has offices in more than
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Wherever we are, we operate in accordance with our global business
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that level of quality at every point of contact.
Real Estate 2024

Chapter 2 5
Canada
Canada
Michael L. Rachel V.
Dyck Hutton
Patrick Mario
Stikeman Elliott LLP Morin Paura
from holding “controlled land” outside of urban areas, with some

12 Real Estate Law exemptions. Some provinces require licensing or registration
for corporations to hold title to real property.
1.1 Please briefly describe the main laws that Federal laws necessitate notification or review by the
govern real estate in your jurisdiction. Laws relating
government in specific situations. On January 1, 2023, new
to leases of business premises should be listed in
response to question 10.1. Those relating to zoning and
federal legislation imposed a two-year restriction on certain
environmental should be listed in response to question non-Canadian individuals and entities buying residential
12.1. Those relating to tax should be listed in response to property in specified urban areas (including parts of Toronto
questions in Section 9. and Vancouver), subject to exemptions.
Real property is essentially a matter of provincial jurisdiction. 32 Real Estate Rights

Each province and territory of Canada has enacted statutes
that govern the acquisition, ownership, use, financing and 3.1 What are the types of rights over land recognised
development of real estate. The province whose law varies most in your jurisdiction? Are any of them purely contractual
from the others is Québec, where the law relating to real estate between the parties?
is based on civil law and is for the most part enshrined in the
Québec Civil Code (“CCQ”). There are various legal rights over land recognised in the common
law jurisdictions. An “estate” indicates an interest in real
1.2 What is the impact (if any) on real estate of local property of a particular type or duration and is either “freehold”
common law in your jurisdiction? (indefinite duration) or “leasehold” (fixed duration). Fee simple
is the most common form of freehold ownership, equivalent to
ownership. A “leasehold” estate is derived from a lease from
Jurisprudence is a major source of law in the common law
the freehold owner and does not constitute full ownership
provinces and many common law principles have been codified
rights. Other types of rights encountered in the common law
and incorporated into the statutes governing real estate.
jurisdictions include easements and covenants, which constitute
In Québec, although the CCQ and other statutes are the
rights in land, and licences, which are purely contractual.
primary source of law, analogies are drawn from case law as they
Québec law recognises absolute ownership as the right to use,
pertain to statutory provisions to fill lacunae.
enjoy and dispose of land freely. Co-ownership and superficies are
special modes of ownership. Usufruct, servitudes and emphyteusis
1.3 Are international laws relevant to real estate in your each result from the dismemberment from ownership of certain of
jurisdiction? Please ignore EU legislation enacted locally its associated rights. Ownership, its modes and dismemberments,
in EU countries. hypothecs (mortgages) and prior claims are considered rights in
property that run with the property in question when it changes
International laws do not directly affect real estate in Canada, hands. Other rights, including rights resulting from leases,
but international treaties are sometimes reflected in legislation are rights enforceable against a person, although leases do not
enacted within Canada, and orders of foreign courts are automatically terminate when land is transferred.
potentially enforceable.
3.2 Are there any scenarios where the right to land
22 Ownership diverges from the right to a building constructed
thereon?
2.1 Are there legal restrictions on ownership of real
estate by particular classes of persons (e.g. non-resident In common law jurisdictions, a building is considered part of the
persons)? land on which it is located. While parties to a lease can agree
that the building may belong to the tenant, this will not affect
Legal restrictions on ownership vary by province. In Québec, the treatment of the building as part of the realty against third
non-residents need provincial consent to acquire agricultural parties, such as mortgagees. However, land can be subdivided
land and face limits on owning classified cultural properties. In to separate legal ownership of the land (or airspace) in which a
Alberta, non-Canadian persons/entities are generally prohibited building is located from the land underneath or above it.
Real Estate 2024

6 Canada
In Québec, superficies allow ownership by one person of 4.5 Where there are both unregistered and registered
constructions on the land of another person and the transfer of the land or rights is there a probationary period following
right of accession can create a new lot that designates the airspace in first registration or are there perhaps different classes
which a building is located, and then transferring that lot to a third or qualities of title on first registration? Please give
party. Emphyteusis results in one person having the full enjoyment details. First registration means the occasion upon
of land for a term, provided that they make constructions, works which unregistered land or rights are first registered in
the registries.
and plantations that durably increase its value.
First registration of land usually occurs when the Crown

3.3 Is there a split between legal title and beneficial
makes the original grant to an owner, with no probationary
title in your jurisdiction and what are the registration
consequences of any split? Are there any proposals to period. However, for interests in land in land titles systems,
change this? most jurisdictions provide for a certification of the registration.
Until the certification process is complete, the registration can
be altered or rejected by registry officials if not compliant with
Common law allows land to be held in trust for a beneficial
registration requirements.
owner. Most provincial land registries are for legal title and not
beneficial ownership. However, new transparency laws now
mandate the disclosure of beneficial ownership (for example, 4.6 On a land sale, when is title (or ownership)
the Land Owner Transparency Registry in British Columbia). In transferred to the buyer?
some provinces, beneficial interests trigger property transfer tax
(such as Ontario and Québec), while in other provinces, transfer In common law jurisdictions, registered/legal title or ownership
tax is triggered only by a transfer of legal title. is transferred to the buyer upon registration of a deed or transfer
in the land registry office. In Québec, title is transferred as soon
42 System of Registration as there is a “meeting of the minds”, but the sale may not be
opposable against third parties until registration.
4.1 Is all land in your jurisdiction required to be
registered? What land (or rights) are unregistered? 4.7 Please briefly describe how some rights obtain
priority over other rights. Do earlier rights defeat later
All privately owned (as opposed to Crown-owned) real property rights?
in Canada is registered.
Each province uses some form of older registry and/or In the common law provinces, earlier rights have priority over
modern land titles system. later rights, although subject to a court applying equitable or
The registry system provides only for the public recording of “fairness” principles to alter the order of priority.
instruments affecting land. The land titles system, by contrast, Prior registered interests have priority over subsequent
is operated pursuant to legislation, and title to land within the registered interests and unregistered interests. There are
system is effectively guaranteed by the relevant province, with exceptions to this principle, such as when the party with the
certain exclusions/limitations. registered interest has notice of the prior unregistered interest.
In some jurisdictions (primarily where the registry system
applies), it is also possible to acquire ownership by way of
4.2 Is there a state guarantee of title? What does it
guarantee? prescription, and in most jurisdictions, some creditors (for
example, certain governmental entities and construction lien
holders) benefit from priority over prior registered mortgages.
Under the land titles system, the register or certificate of title may Bankruptcy legislation may modify the order of priority of
be relied upon as constituting the true and accurate status of title different creditors.
(subject typically to fraud and limited exceptions). In the rare cases
in which a person is wrongfully deprived of an interest in property
by virtue of an error on the register or certificate, access to a state- 52 The Registry / Registries
administered assurance fund for compensation is possible.
Registry systems do not guarantee title (such as in Québec, for 5.1 How many land registries operate in your
example). Quality of title is determined by the individual searching jurisdiction? If more than one please specify their
differing rules and requirements.
the file and is based on priority of the time of registration.
The registry system applies throughout Prince

4.3 What rights in land are compulsorily registrable?
Edward Island and Newfoundland and Labrador,
What (if any) is the consequence of non-registration?
and an analogous system applies throughout Québec.
The provinces of Manitoba, Ontario, Nova Scotia and New
Rights in land (immoveable property in Québec) are generally Brunswick employ both systems and are in various stages of
not compulsorily registrable, but need to be registered to render conversion from registry systems to land titles systems, with
them opposable to third parties, or establish or protect their Ontario and Manitoba being the farthest along.
priority, as third parties acting in good faith are entitled to rely The territories and western provinces of British Columbia,
upon the registry records. Alberta and Saskatchewan use only the land titles system.
The federal government maintains registry systems for certain
4.4 What rights in land are not required to be reserve lands, while some First Nations have set up their own
registered? reserve land registry systems or title systems.
See the answers to questions 4.1 and 4.3 above.
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Stikeman Elliott LLP 7
5.2 How do the owners of registered real estate prove b) Lawyers

their title? Lawyers play a role in virtually all real estate transactions.
The buyer’s lawyer will examine title to the subject property
and make other investigations regarding the legal status and
A copy of a registered transfer or deed of ownership of real
property can be obtained from the relevant registry office, often compliance of the land and improvements. Lawyers will also
electronically. While land registries can issue a certificate of prepare each party’s respective closing documents and will
title or parcel register, showing the name of the registered owner hold all deliveries and funds in escrow until the appropriate
and other property information, the physical document is not documents have been registered in the land registry office.
required by an owner to evidence his or her ownership. The buyer’s lawyer and the mortgage lender’s lawyer will also
arrange loan and mortgage documents, mortgage registration
and coordinate mortgage funding on closing.
5.3 Can any transaction relating to registered real
estate be completed electronically? What documents c) Notaries
need to be provided to the land registry for the
Notaries tend not to play a role in real estate transactions (with
registration of ownership right? Can information
on ownership of registered real estate be accessed the exception of residential transactions) other than in Québec,
electronically? where they can act for both parties to transactions, unless one
party is already represented by another notary or lawyer.
Transactions relating to registered real estate can be completed
d) Surveyors and other consultants
electronically and information on ownership can be accessed in
Surveyors are often retained to provide a survey of the
most provinces. A transfer of registered ownership is effected by
property to identify all structures on the property and to
the registration of a transfer or deed. In provinces where land is
determine building location compliance with zoning by-laws.
being converted to the land titles system from the registry system,
Environmental consultants, building inspectors and other
formal applications or other requirements must be made or
specialised consultants can also be involved.
satisfied to convert the relevant property to the land titles system.
e) Title insurers
5.4 Can compensation be claimed from the registry/ Title insurance is common in commercial real estate transactions
registries if it/they make a mistake? and is becoming increasingly common in residential transactions.
Typically, the title insurer will provide insurance in favour of an
In the common law jurisdictions, compensation may generally owner and/or lender on the basis of a title opinion provided
be claimed under the land titles system only. In those rare by an independent lawyer. This insurance can sometimes take
cases in which a person is wrongfully deprived of an interest in the place of certain off-title due diligence (for instance, zoning
property due to an error on the register or certificate, a state- compliance or survey matters), and can insure against the risk of
administered assurance fund for compensation may be accessed. an intervening registration between the time of closing and the
In Québec, an action in damages can be brought against the time of registration if applicable.
registrar for failure to maintain the register accurately.
6.2 How and on what basis are these persons
5.5 Are there restrictions on public access to the remunerated?
register? Can a buyer obtain all the information he
might reasonably need regarding encumbrances and Broker’s commissions are typically paid by the seller on closing.
other rights affecting real estate and is this achieved
by a search of the register? If not, what additional
Lawyers are typically paid on the basis of legal fees plus
information/process is required? disbursements.
Surveyors and other consultants are typically paid a flat rate
based on a quote.
There are no restrictions on public access to information in a Title insurers will be paid a rate per dollar of value of the
Canadian land register. A buyer can typically obtain information property insured and are paid when the transaction completes.
regarding registered encumbrances and other rights affecting
real estate. However, full due diligence including inquiries or
appropriate contractual representations and warranties from the 6.3 Is there any change in the sources or the
seller and inquiries to appropriate governmental authorities is availability of capital to finance real estate transactions
recommended to identify unregistered rights. in your jurisdiction, whether equity or debt? What are the
main sources of capital you see active in your market?
62 Real Estate Market

Market conditions continue to pose challenges as interest rates
and a possible recession are constraining the flow of capital,
6.1 Which parties (in addition to the buyer and seller
and the buyer’s finance provider) would normally be particularly to the office market but also to residential and
involved in a real estate transaction in your jurisdiction? industrial developments. While both equity and debt financing
Please briefly describe their roles and/or duties. is being impacted, the development community is by no means
retreating from the market but continues to look for funding
options, including more innovative options such as the creation
a) Brokers
Generally, real estate is listed for sale and marketed through a real of debt funds. In this climate, lenders are imposing tighter loan
estate broker (also called an agent or realtor). The buyers will often terms, a trend that is impacting newer and smaller developers and
prepare the offer and submit it to the listing/selling agent, while undoubtedly dampening enthusiasm for going ahead with certain
sophisticated buyers (particularly with respect to commercial real projects. However, more established players in the market are still
estate transactions) will typically negotiate the offer to purchase able to obtain bank financing on satisfactory terms. Private debt
directly with the seller, often with assistance from their lawyers. and equity capital is becoming more prevalent.
Real Estate 2024

8 Canada
6.4 What is the appetite for investors and/or duty on a seller to disclose material “latent” defects that cannot
developers to invest in your region compared to last year be identified by reasonable inspection and, across Canada, a
and what are the sectors/areas of most interest? Please seller will be liable for a latent defect where failure to disclose
give examples. amounts to fraudulent misrepresentation.
Developers’ appetites are still reasonably strong but there has 7.3 Can the seller be liable to the buyer for
been some weakening of investor interest due to uncertainty on misrepresentation?
several fronts, including a possible recession, the rising interest
rates and legacy projects that are over-levered in this interest rate In the common law jurisdictions of Canada, the seller can be
environment. Post-pandemic uncertainty about the future of the liable to a buyer for a misrepresentation, which may be innocent,
office market persists. Industrial developments have continued negligent or fraudulent. The liability of the seller and remedies
at an impressive pace, with some signs of a slowdown due to available to the buyer will vary depending upon the type of
onstreaming significant new supply. Activity in the residential misrepresentation.
condominium sector has also slowed, including cancellations The good faith requirement in Québec can lead to liability for
or the deferral of several high-profile projects, while rental misrepresentation if it pertains to a defect that the seller knew or
residential projects remain steady across Canada. Retail projects should have known about.
experienced a slight rebound in 2023, centring on grocery
store developments, possibly prompted by Canada’s continuing
population growth. 7.4 Do sellers usually give any form of title “guarantee”
or contractual warranties to the buyer? What would be
the scope of these? What is the function of any such
6.5 Have you observed any trends in particular market guarantee or warranties (e.g. to apportion risk, to give
sub sectors slowing down in your jurisdiction in terms of information)? Would any such guarantee or warranties
their attractiveness to investors/developers? Please give act as a substitute for the buyer carrying out his own
examples. diligence?
Residential condominium projects have been impacted by The land titles system of most common law jurisdictions is
restrictions on foreign buyers and rising mortgage rates, government-operated and effectively guarantees title, subject to
especially in the high-end residential subsector. Industrial certain limitations. However, title insurance is becoming more
property development, which has been very active over the common.
past few years, may be slowing down as capacity introduced Sellers often give warranties to the buyer in agreements for the
into the market is absorbed. Otherwise, the market has slowed purchase and sale of real property, the extent of which is dependent
moderately in the past year but can be described as in a holding on market forces and the relative bargaining power of the parties.
pattern while governments, investors, developers and tenants These can range from warranties regarding the corporate status
grapple with the extent and implications of recent interest rates, of the seller, to eligible uses of the property and environmental
immigration and economic changes and how best to proceed. matters. In commercial transactions, it is common for sellers to
sell on an “as is” basis, with very limited warranties.
72 Liabilities of Buyers and Sellers in Real Contractual warranties both apportion risk and give information
to the buyer. Whether warranties substitute for the buyer’s due
Estate Transactions diligence will depend upon the strength of the seller’s covenant,
although buyers seldom forgo diligence for essential factual
7.1 What (if any) are the minimum formalities for the matters (such as title to the property).
sale and purchase of real estate? In Québec, certain warranties are implied to the extent they are
not expressly excluded or limited in the deed of sale and depending
In the common law jurisdictions, agreements for the transfer of on whether the seller is a professional or non-professional seller.
the property must typically be in writing and the transfer of the
property registered in the land registry office. 7.5 Does the seller retain any liabilities in respect of
In some provinces, the deed must be accompanied by various the property post sale? Please give details.
confirmations from a lawyer or notary as to the identity and
capacity of the parties, their will and validity as to form.
Responsibility and liability for remediation of environmental
contamination generally rests with the seller or person that
7.2 Is the seller under a duty of disclosure? What caused the contamination, though subsequent owners, occupiers
matters must be disclosed? and those exercising control over real property can also be liable.
Across Canada, caveat emptor does not apply to fraud – see
In the common law jurisdictions, there is no general duty of question 7.3.
disclosure imposed on a seller and the principle of caveat emptor
(buyer beware) applies to buyers when purchasing real property. 7.6 What (if any) are the liabilities of the buyer (in
In Québec, warranties as to title, encumbrances, compliance addition to paying the sale price)?
with the law and the absence of latent defects apply to the extent
they are not excluded or limited under the deed of sale and all
In addition to liabilities under the purchase agreement and taxes
sellers are bound to act in good faith, and failure to disclose a
and registration and other fees relating to the purchase, the buyer
known defect would amount to fraud.
will be bound by obligations that “run with” the land of which it
There are exceptions to the caveat emptor principle, which will
has notice, such as leases, options to purchase, and some municipal
impose disclosure obligations on the seller. There are specific
agreements. Buyers may be responsible for environmental
statutory environmental disclosure obligations; a common law
liabilities even if not caused by them.
Real Estate 2024

send notices under federal bankruptcy legislation. The lender will

82 Finance and Banking then be free to have a receiver appointed (privately or by court
appointment). After that stage, the remedies vary significantly.
8.1 Please briefly describe any regulations concerning In some provinces, the lender will be free to sell the property
the lending of money to finance real estate. Are the rules
privately, by following a statutory process, while reserving the
different as between resident and non-resident persons
and/or between individual persons and corporate
right to sue the borrower for any deficiency in the sale proceeds.
entities? In other provinces, the lender can sue for foreclosure to seek
a court order transferring title to the property to the lender in
satisfaction of the debt. Most provinces permit a lender to apply
Generally, any domestic or foreign person/entity may lend to court for a judicial sale of the property, with the borrower
money and take a mortgage to secure real estate loans. remaining liable for any deficiency that may result.
However, the operations of financial institutions are regulated
under provincial and federal legislation, with special provisions
applying to foreign financial institutions. 8.6 Under what circumstances can security taken by a
lender be avoided or rendered unenforceable?
8.2 What are the main methods by which a real

estate lender seeks to protect itself from default by the If the security was not granted on a legitimate bona fide basis
borrower? and for valuable consideration, then the security may be voided
or rendered unenforceable under applicable insolvency laws
and/or fraudulent preference/conveyance laws. In certain
Generally, a real estate lender will register a mortgage (in
circumstances, claims under certain statutes, deemed trusts, or
Québec, a hypothec) against the particular property in the
charges granted by a court may take priority over the lender’s
applicable land registry office, establishing priority vis-à-vis third
security. Lenders must also act reasonably in making demands
parties and rendering the lender a secured lender or creditor.
for payment, giving the borrower reasonable time to pay, and
The lender will often take additional security such as an
follow statutory rules for seizing and selling secured assets.
assignment of rents and a charge over all the borrower’s personal
property (registered against the borrower under the personal
property security legislation of the applicable province). 8.7 What actions, if any, can a borrower take to
Lenders may also require an indemnifier or guarantor of frustrate enforcement action by a lender?
the mortgage, including from the individual principles or key
shareholders of the borrower. A borrower may attempt to obtain a stay of proceedings through
restructuring under federal bankruptcy and insolvency legislation.
8.3 What are the common proceedings for realisation
of mortgaged properties? Are there any options for a 8.8 What is the impact of an insolvency process or a
mortgagee to realise a mortgaged property without corporate rehabilitation process on the position of a real
involving court proceedings or the contribution of the estate lender?
mortgagor?
If security interests were granted by a borrower on a legitimate

In the Canadian common law provinces, the remedies for bona fide basis, for good consideration, the subsequent insolvency
mortgage lenders generally include foreclosure, enforcement of of the borrower generally does not affect the enforceability of
the covenant to pay, judicial sale, power of sale and the right the security interest. However, the secured party’s enforcement
to take possession. Power of sale allows the lender to sell the proceedings may be subject to court oversight and associated
property without court proceedings or supervision. All such delays. If security was granted for insufficient consideration, or
remedies may be exercised either concurrently or consecutively on any basis where the intent of the security was to prefer certain
but are subject to technical and procedural requirements and debts over others, federal legislation imposes “claw-back” rules
borrower protections imposed by statute. In Québec, analogous that could impair or invalidate the security.
remedies exist, although in different formats.
8.9 What is the process for enforcing security over

8.4 What minimum formalities are required for real shares? Does a lender have a right to appropriate shares
estate lending? in a borrower given as collateral? If so, can shares be
appropriated when a borrower is in administration or has
A mortgage (in Québec, deed of hypothec) between the parties entered another insolvency or reorganisation procedure?
must generally be in writing (often including a prescribed form),
duly executed (often in the presence of a lawyer or notary public) If a guarantor granted security to the lender over its shares in the
and registered against title to the property in order to protect the borrower, then, once demand is made, the lender can enforce
lender’s priority. In Québec, a notary must be involved for the its security over the guarantor’s shares in the borrower, in
purposes of the execution of the hypothec. accordance with applicable personal property security legislation.
8.5 How is a real estate lender protected from claims 92 Tax

against the borrower or the real estate asset by other
creditors? 9.1 Are transfers of real estate subject to a transfer
tax? How much? Who is liable?
Remedies vary widely from province to province. In all
jurisdictions, the lender must give “reasonable notice” before Transfers of real estate in most jurisdictions are subject to
making demand for payment and will generally be required to transfer tax imposed at both the provincial and, less frequently,
Real Estate 2024

10 Canada
municipal levels. The tax rate varies, from a high of 5% of the

purchase price or market value in Vancouver (where it exceeds a
102 Leases of Business Premises
minimum threshold), to no tax at all in Alberta, Newfoundland
and parts of Nova Scotia. In Ontario and Québec, unregistered 10.1 Please briefly describe the main laws that regulate
transfers of beneficial interests in real property are also taxed, leases of business premises.
subject to some exceptions. In most jurisdictions, the buyer
must pay the land transfer tax, although in Québec, the seller Commercial leasing is governed by provincial legislation and
may also be liable in certain circumstances. common law principles. For example, Ontario’s Commercial
Tenancies Act regulates most aspects of the landlord-tenant
9.2 When is the transfer tax paid? relationship in a commercial context, and the main body of law
referable to commercial leases in Québec is the CCQ. However,
some jurisdictions, such as Alberta, have no commercial
The transfer tax is generally paid at the time the transfer or deed tenancies legislation.
of sale is registered in the appropriate land registry office.
An abundance of common law has developed in this area,
which is relied upon by both landlords and tenants in the
9.3 Are transfers of real estate by individuals subject to common law jurisdictions when enforcing their respective rights
income tax? and/or remedies under commercial leases.
If real estate constituting capital property is sold, 50% of the 10.2 What types of business lease exist?
capital gain resulting from the sale should be included in the
vendor’s income. To the extent that the property was used in
carrying on a business, capital cost allowance was claimed on Different forms of leases specific to the use of the property
the property, and these capital costs are also recovered through (retail, industrial/warehousing or office property) have evolved.
the sale, the amount of the recovered capital cost allowance will Most commercial leases are “net leases” where the tenant pays
generally be fully taxable. Disposal of a real estate property a fixed rent in addition to its proportionate share of all expenses
included in the inventory of the seller is generally treated as relating to the ownership, insuring, operation and maintenance
business income, 100% of which should be subject to tax. of the property – such a lease is “net” (no cost) to the landlord
other than certain exclusions such as structural repairs or other
negotiated exclusions. “Gross leases” are less common and tend
9.4 Are transfers of real estate subject to VAT? How
to be used for short-term leases, whereby the tenant only pays a
much? Who is liable? Are there any exemptions?
fixed amount and no operating costs/additional rent.
The transfer of commercial and new residential buildings is

generally subject to the Goods and Services Tax (“GST”) or 10.3 What are the typical provisions for leases of
Harmonized Sales Tax (“HST”) and/or Québec Sales Tax business premises in your jurisdiction regarding: (a)
length of term; (b) rent increases; (c) tenant’s right to
(“QST”), depending on the jurisdiction. The seller is responsible
sell or sub-lease; (d) insurance; (e) (i) change of control
for collecting the applicable taxes from the buyer, other than of the tenant; and (ii) transfer of lease as a result of a
for buyers who are entitled to self-assess in accordance with tax corporate restructuring (e.g. merger); and (f) repairs?
legislation.
(a) Length of term
9.5 What other tax or taxes (if any) are payable by the Parties to a lease agreement are free to agree on whatever lease
seller on the disposal of a property? term they wish. A common lease term is five years with one or
more options to renew.
If the seller of a property is a non-resident of Canada, the buyer
must withhold a percentage of the sale proceeds on behalf of (b) Rent increases
the Canadian tax authorities unless the seller can produce a Rent increases are typically based on market conditions and
clearance certificate issued by the tax authorities. reflect supply and demand. Often, a lease will provide for a
rental increase upon an extension or renewal being exercised, or
9.6 Is taxation different if ownership of a company (or the fixed rent can be agreed to increase annually or otherwise.
other entity) owning real estate is transferred?
(c) Tenant’s right to assign or sub-lease/change of control/
corporate restructuring
Land transfer tax is generally not payable on a sale of shares
of a corporation with respect to real property owned by that An assignment of the lease, sub-lease and a change in control of
corporation, save for specific anti-avoidance provisions. Capital the tenant is typically subject to the landlord’s consent, which is
gains and/or income from a sale of shares are taxable. In not to be unreasonably withheld. Landlords may also have the
Ontario, subject to certain exemptions, the transfer of an interest right to terminate a lease upon receiving a request for consent,
in a partnership that owns real property attracts land transfer tax. which they can exercise in their sole discretion. Landlords can
also require additional security or otherwise condition their
consent for any transfer. Assignments, subleases, change of
9.7 Are there any tax issues that a buyer of real estate control or corporate restructuring involving an affiliate of the
should always take into consideration/conduct due
tenant does not usually require landlord consent.
diligence on?
(d) Insurance
Buyers should consider tax-efficient ownership structuring The tenant is typically responsible for maintaining its own
options, applicable transfer taxes and GST/HST/QST, as well liability insurance and property insurance on personal property
as foreign buyer considerations. and leasehold improvements. Commercial leases usually require
Real Estate 2024

the tenant to pay the costs of insurance maintained by the 10.8 Are there any trends in your market towards more
landlord relating to the leased premises. flexible space for occupiers, such as shared short-
term working spaces (co-working) or shared residential
(e) Repairs spaces with greater levels of facilities/activities for
Generally, the tenant is required to either perform maintenance residents (co-living)? If so, please provide examples/
details.
and repairs at its cost, or pay the landlord’s costs in doing so,
depending on the level of landlord management of the premises.
The demand for flexible office space has continued to grow
since the pandemic, following the rise of the hybrid work model
10.4 What taxes are payable on rent either by the and changing conventional work habits. There is increased
landlord or tenant of a business lease?
demand for spaces that offer shorter lease commitments and
flexible office layouts, to accommodate changing work patterns
GST, HST and/or QST, depending on the jurisdiction, is and remote work arrangements.
imposed upon rent payable by tenants under commercial leases.
If the tenant is registered for GST and/or QST purposes and 112 Leases of Residential Premises
exclusively engaged in commercial activities, the relevant tax is
usually recoverable by the tenant, but the landlord must collect 11.1 Please briefly describe the main laws that regulate
the tax. In some provinces, provincial sales tax may also apply. leases of residential premises.
Rent received by the landlord is generally subject to income tax.
Residential tenancies are regulated provincially by residential
10.5 In what circumstances are business leases tenancy laws, regulations and policies and, in Québec, by articles
usually terminated (e.g. at expiry, on default, by either 1892 and following of the CQQ. As urban housing costs have
party etc.)? Are there any special provisions allowing a soared in recent years, legislation and housing policies have
tenant to extend or renew the lease or for either party increasingly sought to protect residential tenant rights, control
to be compensated by the other for any reason on rent increases and limit landlord termination rights.
termination?
11.2 Do the laws differ if the premises are intended for

A commercial lease typically terminates upon expiry, on default,
multiple different residential occupiers?
when the landlord or tenant have negotiated specific termination
rights. If a tenant has an early termination right, they may be
required to reimburse the landlord for improvements the Residential tenancy laws in Canada apply regardless of whether
landlord paid for. Upon termination, a tenant may be required the premises are intended for single or multiple tenants, except
to restore the premises their original conditions, other than in respect of certain specific arrangements (e.g. an educational
normal wear and tear. institution operating housing rented to students, care homes and
mobile homes).
10.6 Does the landlord and/or the tenant of a business

lease cease to be liable for their respective obligations 11.3 What would typical provisions for a lease of
under the lease once they have sold their interest? Can residential premises be in your jurisdiction regarding:
they be responsible after the sale in respect of pre-sale (a) length of term; (b) rent increases/controls; (c) the
tenant’s rights to remain in the premises at the end of
non-compliance?
the term; and (d) the tenant’s contribution/obligation to
the property “costs”, e.g. insurance and repair?
Parties are not released from their obligations upon assignment
of their interest unless the lease provides otherwise. (a) The typical term length is one year although parties are
generally free to agree on a longer or shorter term. In
10.7 Green leases seek to impose obligations on some jurisdictions, when the lease term ends, the lease is
landlords and tenants designed to promote greater deemed to be a month-to-month lease, terminable by the
sustainable use of buildings and in the reduction of landlord only in limited circumstances.
the “environmental footprint” of a building. Please (b) In some jurisdictions, rent can only be increased once
briefly describe any “green obligations” commonly every 12 months, and the increase cannot exceed certain
found in leases stating whether these are clearly limits set each year by legislation.
defined, enforceable legal obligations or something not (c) In some jurisdictions, a lease is terminable only in the limited
amounting to enforceable legal obligations (for example
circumstances permitted under the legislation such that
aspirational objectives).
tenants have the right to remain in the premises at the end of
the term, regardless of whether the lease term has ended.
Green leases often contain general statements of environmental (d) In most jurisdictions, a tenant must maintain reasonable
objectives and can also contain targets to reduce energy and health, cleanliness and sanitary standards, and must
water consumption, enhance air quality, impose waste and repair damage to the rental it causes, but otherwise is not
recycling measures and stipulate materials used in construction responsible for property costs.
and cleaning. Whether “green obligations” are enforceable
depends on whether they have been agreed to in the lease
11.4 Would there be rights for a landlord to terminate
contract. While these obligations can appear onerous, landlords a residential lease and what steps would be needed to
rarely enforce these obligations strictly, and try to allow green achieve vacant possession if the circumstances existed
obligations to be economically feasible for tenants. Costs of for the right to be exercised?
energy-saving measures and improvements as well as savings
resulting from tax rebates can be also passed on to the tenant. Residential tenancies are increasingly terminable by a landlord
Real Estate 2024

12 Canada
only in limited circumstances including non-payment of rent, of contaminated real property can attract liability for such
breach of the lease or the relevant legislation, or if the landlord contamination, even if the owner or occupier did not cause the
or a purchaser intends to demolish, renovate or live in the unit. contamination.
To obtain vacant possession if the circumstances exist for
the termination right to be exercised, a landlord must provide
12.4 What main permits or licences are required for
prior written notice to the tenant in the approved form. If building works and/or the use of real estate?
the tenant does not vacate the unit on the effective date of the
notice, the landlord must make an application at the Residential
Tenancy Branch to obtain an order for possession, which can A permit is generally required for both the demolition and the
be converted into a writ of possession in court, enforceable by construction of structures. Other licences and permits will vary
private bailiffs. based on the use proposed.
122 Public Law Permits and Obligations 12.5 Are building/use permits and licences commonly
obtained in your jurisdiction? Can implied permission be
obtained in any way (e.g. by long use)?
12.1 What are the main laws which govern zoning/
permitting and related matters concerning the use,
development and occupation of land? Please briefly Building permits are required for the construction, additions
describe them and include environmental laws. or alterations to a building. A municipality’s zoning or land
use planning policies must be amended if they do not permit a
Each province has planning legislation governing the use and desired use.
occupation of buildings. Provincial Building Codes govern
structural and safety requirements, based on a National 12.6 What is the typical cost of building/use permits and
Building Code. There is no federal legislation on which the time involved in obtaining them?
provincial planning legislation is based. The provinces have
generally delegated responsibility for land use planning to local
Permit fees vary significantly. They are generally calculated based
municipalities where land use is primarily governed by Official
on the area and use of the proposed building (i.e. residential or
Plans and zoning by-laws.
non-residential). There is no set processing timeframe for building
permit applications, which may vary from a few days to months.
12.2 Can the state force land owners to sell land to it? If The timing to amend zoning or land use policies can take
so please briefly describe including price/compensation between three to 12 months depending on the complexity of
mechanism. the request.
The federal government has the statutory authority to expropriate 12.7 Are there any regulations on the protection of
land for public works or other public purpose, including any historic monuments in your jurisdiction? If any, when
right to, over or in respect of land, for a definite or indefinite and how are they likely to affect the transfer of rights in
period of time. Similarly, each province has expropriation real estate or development/change of use?
legislation, which grants expropriation powers to authorities
such as the provincial government, municipalities and utility Certain heritage monuments, such as railway stations and
companies. Expropriation legislation across Canada sets out lighthouses, are protected by federal legislation. Provinces have
specific procedural requirements that an expropriating authority legislation providing for the protection and preservation of
must follow. Compensation to a landowner is generally based heritage properties. All levels of government all have legislation
on the fair market value of the land being expropriated and may protecting archaeological sites on private and public land.
include reasonable costs and damages. Some local municipalities include heritage protection measures
in their land use planning policy documents and may have by-laws
12.3 Which bodies control land/building use and/ designating heritage properties to prevent their demolition/
or occupation and environmental regulation? How do alteration. Some municipalities may require owners of heritage
buyers obtain reliable information on these matters? properties to enter into covenants for the protection of such
properties, which may be registered on title to the property.
Control of land/building use and/or occupation is generally the
responsibility of local municipalities. Most municipalities will 12.8 How can, e.g. a potential buyer obtain reliable
provide letters confirming a property’s zoning, work orders and information on contamination and pollution of real
outstanding building permits on record (for a fee). Land use estate? Is there a public register of contaminated land in
planning policy documents, such as Official Plans, and zoning your jurisdiction?
by-laws are also usually available online.
The federal government and each province have compre- The only reliable method of accessing such information is to
hensive environmental protection legislation in place, the conduct independent environmental investigations at the subject
contents of which are similar to what is commonly found in property. Many provinces maintain publicly accessible registries of
the environmental legislation of most industrialised nations. properties with reported contamination issues. Those registries are
Generally speaking, the provinces have taken the lead in envi- hardly comprehensive and are often based solely on information
ronmental enforcement, but the federal government is active supplied by the property owner. Some provinces also maintain
in areas over which it has jurisdiction (for example, fisheries records of any environmental incidents at a given property, and
and shipping). those records are available through a search under provincial
Environmental liability, in certain provinces, does not rest freedom of information legislation or, in some cases, using a
solely on having caused contamination. An owner or occupier private search provider, Ecolog ERIS (https://www.eris.ca).
Real Estate 2024

12.9 In what circumstances (if any) is environmental Canada is a decentralised federation with substantial limi-
clean-up ever mandatory? tations on federal regulatory powers. The national carbon
pricing system has been determined to be constitutional. Some
of the currently proposed supplementary regulatory initiatives
Environmental enforcement in Canada is primarily at the
purporting to directly limit carbon emissions may be constrained
provincial level and the requirements to clean up differ.
by future litigation. However, Canada retains substantial lati-
Generally, clean-up of contamination is mandatory where
tude to create incentives to limit carbon emissions through its
contamination poses an immediate risk to the health and
spending and taxation powers.
safety of individuals or is likely to cause an adverse effect, but
other situations may trigger the issuance of an order for the
remediation of real property. Where clean-up occurs, it is likely 13.2 Are there any national greenhouse gas emissions
done voluntarily by an owner as a condition to obtaining permits reduction targets?
for development or in the course of a financing/sale.
Canada is a party to the Paris Accord. The Canadian Net-Zero
12.10 Please briefly outline any regulatory Emissions Accountability Act, which became law on June 29,
requirements for the assessment and management of 2021, enshrines Canada’s commitment to achieve net-zero
the energy performance of buildings in your jurisdiction. emissions by 2050. In 2022, Canada adopted the 2030 Emissions
Reduction Plan, which was intended to provide a roadmap to
There are currently no general regulatory requirements for show how Canada will meet its Paris Accord target to reduce
the assessment and management of the energy performance emissions by 40–45% below 2005 levels by 2030.
of existing buildings in Canada. The Government of Canada
provides owners, managers and operators with information and 13.3 Are there any other regulatory measures
resources to improve the energy performance of existing and new (not already mentioned) which aim to improve the
buildings. The National Energy Code of Canada for Buildings sustainability of both newly constructed and existing
2020 (“NECB”) establishes the minimum energy-efficiency buildings?
requirements for the design and construction of new buildings
in Canada and is published with a suite of National Model Codes. Buildings have generally been the third largest sector in terms
The new standards are comparable to those in countries that lead of carbon emissions, after energy and transportation. Buildings
the world in energy-efficient building construction, but only have account for roughly 190mt of carbon emissions, or 12% of
the force of law if adopted by a province. Provinces have adopted the national total. Accordingly, Canada’s 2030 Emissions
various editions of the National Model Codes, including the Reduction Plan contains a variety of steps to reduce carbon
NECB. Efforts to harmonise codes across Canada are underway emissions in the buildings sector – largely in cooperation with
to reduce variations and coordinate timelines for adoption. provinces and municipalities. The role of Canada is principally
to provide funds and incentives to provinces, municipalities
132 Climate Change and landowners to retrofit existing buildings and construct new
ones, to the highest zero-carbon standards.
13.1 Please briefly explain the nature and extent of
any regulatory measures for reducing carbon dioxide 142 COVID-19
emissions (including any mandatory emissions trading
scheme).
14.1 Please detail any laws that govern real estate in
your jurisdiction which were introduced in response to
Canada is a signatory to the Paris Accord, aiming to limit the effect of the Coronavirus (COVID-19) pandemic and
emissions and keep global temperature increases below 2oC which remain in place.
and preferably 1.5oC. Further, Canada has adopted the 2030
Emissions Reduction Plan and a national carbon pricing No material legislation affecting the real estate industry
system, as well as sector-specific regulations and incentives introduced in response to the Coronavirus (COVID-19)
to decarbonise the economy over time. The national carbon pandemic remains in place.
pricing system is a backstop programme designed to allow
provinces to develop their own systems. However, the national Acknowledgments
system effectively establishes a carbon pricing floor – currently
$60/t and increasing to $170/t by 2030. The firm would like to thank Krista Bauman, Salice Kale, Megan
Canada has also adopted a set of policy initiatives to either Coyle, Alan Stachowiak, Jean-Guillaume Shooner, Andrew
regulate or to provide incentives for decarbonisation steps in Elliott, Andrew S. Cunningham, Philippe Kattan, Jonathan
energy, transportation, construction and agriculture sectors. Drance, Jonathan S. Cheng and Igor Lazic for their contributions.
Real Estate 2024

14 Canada
Michael L. Dyck is a Partner in Stikeman Elliott’s Banking & Lending Group and Real Estate Group in Calgary whose practice focuses on
banking and real estate law. In his banking practice, Michael provides advice in all matters relating to banking transactions, including
Canadian aspects of cross-border financings. He has acted for lenders and borrowers in general corporate financings, acquisition financings
and subordinate financings, and for issuers and purchasers in connection with debt offerings. Michael provides advice to a broad range of
real estate, development and construction transactions in his commercial real estate practice. He has acted for purchasers and vendors
with respect to acquisitions and dispositions of multi-tenant office complexes, industrial properties and development sites, and lenders and
borrowers with commercial real estate financings. He also provides advice with respect to ownership arrangements, and advises owners in
connection with office tower and industrial developments, industrial leases, and construction projects.
Stikeman Elliott LLP Tel: +1 403 266 9030

4300 Bankers Hall West, 888 – 3 Street SW Fax: +1 403 266 9034
Calgary, AB Email: mdyck@stikeman.com
Canada URL: www.stikeman.com
Rachel V. Hutton is a Partner in the Vancouver office of Stikeman Elliott and practises real estate law, with a particular focus on energy projects,
capital projects and regulatory compliance. She has complementary expertise in environmental law, project finance and construction law
matters. Her practice includes a significant First Nations component, and she has negotiated agreements with First Nations and provided
risk analysis to private sector clients. In addition to energy and capital project mandate management, Rachel is frequently involved in joint
venture, M&A and other corporate transactions where management of real property assets is critical. She has acted for clients in the energy
and resource sector, pension funds and developers in the purchase and sale of major properties, on both a share and asset basis. Rachel is
also active in the real estate finance and project finance markets, acting for both lenders and borrowers.

Suite 1700, Park Place, 666 Burrard Street Fax: +1 604 681 1825
Vancouver, BC Email: rhutton@stikeman.com
Canada URL: www.stikeman.com
Patrick Morin is an Associate and member of the Corporate Group. His practice focuses mainly on real estate, corporate finance and banking law.

1155 René-Lévesque Blvd. West Email: pmorin@stikeman.com
Montréal QC URL: www.stikeman.com
Canada
Mario Paura is Head of the Toronto office’s Real Estate Group and Co-Head of the National Real Estate Group. He is an active member of the
Mergers & Acquisitions Group, co-leader of the Retail Group, and a member of the firm’s Management Committee. Mario has over 25 years
of experience focused primarily in the areas of commercial real estate, financing, M&A, and commercial leasing. Mario’s real estate practice
includes all aspects involving the purchase, sale, financing and development of asset classes including retail and commercial, industrial and
office, multi-residential, hospitality and entertainment properties, and REITs. In his banking practice, Mario has acted for both borrowers and
lenders in domestic and international, secured, and unsecured financings. In connection with his M&A practice, Mario regularly represents a
variety of clients with portfolios that span North America in all aspects of real estate investment.

5300 Commerce Court West Email: mpaura@stikeman.com
199 Bay Street, Toronto, ON URL: www.stikeman.com
Canada
Stikeman Elliott LLP is a global leader in Canadian business law, offering

creative solutions to clients across Canada and around the world. The
firm provides the highest quality counsel, decisive advice and workable
solutions through offices located in Montréal, Toronto, Ottawa, Calgary,
Vancouver, New York, London and Sydney. With an exceptional track record
on multijurisdictional matters in the U.S. and internationally, Stikeman Elliott
ranks as a top firm in its primary practice areas, including M&A, securities,
business litigation, banking and finance, competition and foreign investment,
tax, restructuring, energy, real estate, project development, employment and
labour, and pensions.
www.stikeman.com
Real Estate 2024

Chapter 3 15
Chile
Chile
Alberto Alcalde Herrera
Puga y Ortiz Abogados Pedro León Wielandt
12 Real Estate Law 1.3 Are international laws relevant to real estate in your
jurisdiction? Please ignore EU legislation enacted locally
in EU countries.
1.1 Please briefly describe the main laws that
to leases of business premises should be listed in International law is not relevant to the regulation of real estate.
response to question 10.1. Those relating to zoning and Real estate in Chile is regulated by local law.
environmental should be listed in response to question
12.1. Those relating to tax should be listed in response to
questions in Section 9.
22 Ownership

In Chile, real estate is governed by several laws and regulations, estate by particular classes of persons (e.g. non-resident
but it is mainly regulated by the Civil Code (“Código Civil ”), which persons)?
contains rules governing, among others, transfer of ownership,
definitions and use of land.
No. As a general rule, Chile guarantees the same property
Real estate rights are protected in the Constitution under the
property rights, including the expropriation of it and the right to rights to foreigners or non-resident persons as Chilean citizens;
be paid before the expropriation produces any effect. however, there are some exceptions, such as a rule that limits
Regarding the construction and use of land, the rules are as the acquisition of neighbouring lands to foreigners from those
follows: bordering countries.
■ General Urbanism and Construction Law, DFL 458
(“GUCL” or “Ley General de Urbanismo y Construcciones”). This 32 Real Estate Rights
is a general Act ruling the abstracts and general matters in
construction and use of land. 3.1 What are the types of rights over land recognised
■ General Ordinance of Urbanism and Construction, DS 47, in your jurisdiction? Are any of them purely contractual
(“GOUC” or “Ordenanza General de Urbanismo y Construcción”). between the parties?
This is a Supreme Decree containing more detailed
regulation with regard to construction and use of land. The types of rights that are recognised in Chilean law would be
■ Regulatory Plans and Ordinances, (“RP” or “Planos Reguladores the property right as a full ownership and other property rights
y Ordenanzas”). These are local government regulations such as usufruct or a lease based on use, among others. There is
contained in the county authority decree. In Chile, local also the right that the possessor may have over the land.
communities (counties) are organised as Municipalities and In general, in Chile, in order to acquire property rights to
the authority is the Mayor. RPs are issued by the Mayor, with land, an inscription in the public register “Conservador de Bienes
the previous approbation of the local Council. Raíces” is required; however, there are some rights over land that
■ Also relevant is the real estate co-ownership law (“Ley de are purely contractual, such as in the case of a lease that gives the
Copropiedad Inmobiliaria”), Law 21.442, which rules the rights lessee the right to use and enjoy the property.
and duties of the properties that are part of a condominium.
In other matters, constructions must comply with the
environmental rules contained in Law 19.300 and the DS (Decree) 3.2 Are there any scenarios where the right to land
40 of the Environmental Ministry. Not all constructions need diverges from the right to a building constructed
thereon?
to be approved by the environmental authorities; only those that
would have environmental consequences such as large buildings
or parking lots, etc. Isolated constructions (such as a house) do There is a scenario like the one described, which is regulated
not need to comply with these regulations. through the real estate co-ownership law, whereby a person can
become the owner of a unit of a building but is not owner of the
land on which the project was developed and instead acquires a
1.2 What is the impact (if any) on real estate of local
proportional right over this.
common law in your jurisdiction?
Local common law does not have an impact of on real estate in

Chile.
Real Estate 2024

16 Chile
3.3 Is there a split between legal title and beneficial 4.7 Please briefly describe how some rights obtain
title in your jurisdiction and what are the registration priority over other rights. Do earlier rights defeat later
consequences of any split? Are there any proposals to rights?
change this?
First-registered property rights obtain priority over other rights.
In Chile, there is not a split between the legal title and beneficial With regard to property rights that do not require registration,
title. There are no proposals to change this. the first signed agreement will take priority.
42 System of Registration 52 The Registry / Registries
4.1 Is all land in your jurisdiction required to be 5.1 How many land registries operate in your
registered? What land (or rights) are unregistered? jurisdiction? If more than one please specify their
In Chile, there is a registry system in relation to property rights.
The tradition (“tradicion”) is the method of acquiring ownership There is one land registry, the Conservador de Bienes Raíces;
in Chile, and in the case of real estate it is produced by the however, this has different areas of jurisdiction depending on
registration in the Conservador de Bienes Raíces. where the property is located.
However, there are some exceptions in the case of some rights,
excluding ownership, such as lease contracts, right of way and
5.2 How do the owners of registered real estate prove
other easements (“servidumbres”) that do not require registration. their title?
4.2 Is there a state guarantee of title? What does it There are some certificates issued by the Conservador de Bienes
guarantee? Raíces that guarantee the owner of a property. This title of
ownership presumes a property right in land.
There are some certificates issued by the Conservador de Bienes
Raíces that guarantee the owner of a property, who has some
property rights over it. estate be completed electronically? What documents
4.3 What rights in land are compulsorily registrable? registration of ownership right? Can information
What (if any) is the consequence of non-registration? on ownership of registered real estate be accessed
electronically?
The ownership of land and, in general, all other property rights

The sale agreement must be the register in a “notarium” and this
over land, except for some specific cases, require registration for
act cannot be completed electronically; however, it is possible to
their validity.
complete the registration of this agreement in the Conservador de
Without registration, the owner will not have property rights.
Bienes Raíces electronically. Almost all Conservadores in Chile have
a website or use email to carry out acts.
4.4 What rights in land are not required to be
registered?
5.4 Can compensation be claimed from the registry/
registries if it/they make a mistake?
The right to use some land, as in the case of a lease contract,
does not require registration.
Yes. It is possible to sue for compensation in trial if the register
This is also the case regarding certain easements.
official makes a mistake.
4.5 Where there are both unregistered and registered

land or rights is there a probationary period following 5.5 Are there restrictions on public access to the
first registration or are there perhaps different classes register? Can a buyer obtain all the information he
or qualities of title on first registration? Please give might reasonably need regarding encumbrances and
details. First registration means the occasion upon other rights affecting real estate and is this achieved
which unregistered land or rights are first registered in by a search of the register? If not, what additional
the registries. information/process is required?
There is not a probationary period for first registration. No, there are no restrictions on public access to the Conservador
de Bienes Raíces. Electronically, a buyer can obtain all the
information and documents he might need.
4.6 On a land sale, when is title (or ownership) Information can also be obtained in person at the office of
transferred to the buyer? the Conservador.
On a land sale, the buyer will be the owner of the property when
the agreement of sale is registered in the respective Conservador
de Bienes Raíces.
Real Estate 2024

Puga y Ortiz Abogados 17
62 Real Estate Market 72 Liabilities of Buyers and Sellers in Real

Estate Transactions
and the buyer’s finance provider) would normally be 7.1 What (if any) are the minimum formalities for the
involved in a real estate transaction in your jurisdiction? sale and purchase of real estate?
Please briefly describe their roles and/or duties.
The minimum formalities for the sale and purchase of real estate
In Chile, in addition to the buyer, the seller and the buyer’s
are certificated by the “notaria” and by the Conservador de Bienes
finance provider, there are land brokers (“corredor de bienes raíces”).
Raíces.
A land broker oversees the finding of the property and acts as an
The notary and the Conservador verify, among another things,
intermediary between the parties in all processes of negotiation
that the property is duly owned by the seller, that there is no
and acquisition. Real estate brokering is a non-regulated business.
prohibition over the land, such as mortgages, etc., that the
property does not have debt, as well as the formalities of the sale
6.2 How and on what basis are these persons agreement, such as the price, powers of attorney, description of
remunerated? the land, etc.
They have a fee between 2% and 5% (although this is always 7.2 Is the seller under a duty of disclosure? What
negotiable) of the sale price, or the price of the operation. The matters must be disclosed?
regular scheme is that every part pays 2% of the price in the case
of a sale, and 50% of a month’s rent in a lease.
Strictly, the seller does not have an obligation of disclosure;
however, for the formalities of the sale agreement, this is a
6.3 Is there any change in the sources or the public document in Chile (“escritura pública de compraventa”) as
availability of capital to finance real estate transactions well as the information of the inscription; this information can
in your jurisdiction, whether equity or debt? What are the be accessed by anyone.
7.3 Can the seller be liable to the buyer for

There is no change. The main sources are banks, insurance misrepresentation?
companies and investment funds. There are also some non-reg-
ulated agents in the market providing funds.
While it is not common, in Chile there is an action against the
seller, “acción redhibitoria”, that permits the sale agreement to be
6.4 What is the appetite for investors and/or terminated/cancelled when the land has defects that were not
developers to invest in your region compared to last year known.
and what are the sectors/areas of most interest? Please
give examples.
7.4 Do sellers usually give any form of title “guarantee”
There has been a great decrease in activity in the last two years
due to political issues, inflation, and the collateral effects of guarantee or warranties (e.g. to apportion risk, to give
the COVID-19 pandemic. Many construction enterprises information)? Would any such guarantee or warranties
have failed under bankruptcy due to the effect of COVID-19 act as a substitute for the buyer carrying out his own
pandemic and supplies and shipping prices. Also, inflation has diligence?
affected interest rates levels, which are at very high rate.
The main appetite for investors today focuses on multi-family Generally, no. However, the Civil Code makes the seller
projects, in which investments are still rising. responsible to the buyer for the title’s validity. It is local practice
that the seller would provide all titles to the buyer for 10 years
6.5 Have you observed any trends in particular market that the seller had used to carry out his own due diligence.
sub sectors slowing down in your jurisdiction in terms of
their attractiveness to investors/developers? Please give
examples. 7.5 Does the seller retain any liabilities in respect of
the property post sale? Please give details.
Yes. Housing activity, as well as building, is currently limited

The seller retains some liabilities post-sale such as the acción
due the increase of financial rates, costs and restrictions in the
redhibiditoria for hidden defects.
financing for housing projects. Besides, due to authorities’
In the case of new buildings or constructions, the first seller
delays granting licences and permits, it has become very complex
will be responsible for the construction quality. This guarantee
to start or develop new projects; new bureaucratic requirements
will be for three years with regard to details, five years for
are putting great limitations on such activities.
general quality and 10 years for structural defects.
7.6 What (if any) are the liabilities of the buyer (in
addition to paying the sale price)?
There are no liabilities of the buyer.
Real Estate 2024

18 Chile
82 Finance and Banking 8.7 What actions, if any, can a borrower take to
frustrate enforcement action by a lender?
8.1 Please briefly describe any regulations concerning

the lending of money to finance real estate. Are the rules If the lender has a mortgage or there is a lease contract, it is
different as between resident and non-resident persons not guaranteed that the borrower would frustrate enforcement
and/or between individual persons and corporate action.
entities?
8.8 What is the impact of an insolvency process or a

Real estate financing is regulated by banking law. However, corporate rehabilitation process on the position of a real
this regulation is related to banking requirements. There is no estate lender?
regulation with regard to contracts that is ruled by the Civil Code.
The Financial Consumer Protection Law (Law 19.496) must
also be complied with. This is a dangerous situation for the lender if the loan is a
Other regulations are contained in Law 18.010 that contain warrantied mortgage. Some persons can have better rights to
some regulations related to credit operations. For example, the collect than the mortgage lender. Salaries, wages, pension debts
maximum interest permitted is 1.5% of the average market rate. and some taxes will be paid before the mortgage creditor.
If the financing uses a lease contract, there will not be an
insolvency process for the lender; he owns the real estate.
estate lender seeks to protect itself from default by the
borrower? 8.9 What is the process for enforcing security over
shares? Does a lender have a right to appropriate shares
in a borrower given as collateral? If so, can shares be
The main structures for borrowing money are mortgages for
individuals and leases for companies. Leases are preferred by entered another insolvency or reorganisation procedure?
companies for the tax benefits.
Therefore, the protection provided by a mortgage is in the
possibility to collect in court and execute the property rights. In It is prohibited in Chile to appropriate the warranties, no
the case of a lease, the lender continues to be the owner of the matter their nature. The lender must sue the debtor. There is,
real estate. however, one exception. If the warranty was granted to a bank
over securities, the lender can ask the stock exchange to sell the
shares in the public offer and receive the price; however, it is not
common to appropriate the shares.
of mortgaged properties? Are there any options for a
mortgagee to realise a mortgaged property without
involving court proceedings or the contribution of the 92 Tax
mortgagor?
9.1 Are transfers of real estate subject to a transfer
The realisation of a mortgage must be carried out in court. There tax? How much? Who is liable?
is a special procedure to collect the debt in court (executive
procedure), but a trial is still needed. No, transfers of real estate are not subject to a transfer tax.
8.4 What minimum formalities are required for real 9.2 When is the transfer tax paid?
estate lending?
Please see question 9.1 above.

Due to the common lending associated with a mortgage, the
contract must be carried out in a public deed. Moreover, in
Chile, public deeds have a special recognition, to be enforced in 9.3 Are transfers of real estate by individuals subject to
court in an executive trial. income tax?
8.5 How is a real estate lender protected from claims Yes, transfers of real estate by individuals are subject to income
against the borrower or the real estate asset by other tax when the difference between the buying and selling price is
creditors? over approximately USD 240,000. An individual can use this
benefit in aggregate for all the sales in his life.
The lender is protected – depending on the contract – by the
mortgage if it is the contract. He has a real right to enforce 9.4 Are transfers of real estate subject to VAT? How
the execution of the debt. Moreover, the lender/owner of a much? Who is liable? Are there any exemptions?
mortgage has a privileged right to collect his credit over a regular
creditor. In leasing contracts, the lender remains the owner and
can recover his position of the property in trial. Whether transfers of real estate are subject to VAT depends;
however, the general rule is that they are not.
The transfer of real estate it is not subject to VAT for individuals.
8.6 Under what circumstances can security taken by a Building companies and other companies must pay VAT
lender be avoided or rendered unenforceable? when they sell a new construction and when the business of the
company is to buy and sell properties.
It is very difficult to avoid or render unenforceable security The VAT rate is 19%.
taken by a lender. A mortgage, pledge or promissory note must
be annulled in trial to avoid the payment.
Real Estate 2024

9.5 What other tax or taxes (if any) are payable by the 10.5 In what circumstances are business leases
seller on the disposal of a property? usually terminated (e.g. at expiry, on default, by either
party etc.)? Are there any special provisions allowing a
tenant to extend or renew the lease or for either party
There are no other taxes payable by the seller on the disposal of to be compensated by the other for any reason on
a property. termination?
9.6 Is taxation different if ownership of a company (or Business leases can terminate by term, agreement or as a result
other entity) owning real estate is transferred? of a breach of either party’s obligation. This is also the case if
the property is no longer useful. If the lease is terminated due
Yes, it is different. Companies do not have the benefit mentioned to a breach of the leaser’s part, he will be responsible for paying
in question 9.3 above. the rent for the entire term agreed.
Companies will pay income tax over the profit, the rate of
which is 27%. 10.6 Does the landlord and/or the tenant of a business
lease cease to be liable for their respective obligations
9.7 Are there any tax issues that a buyer of real estate under the lease once they have sold their interest? Can
should always take into consideration/conduct due they be responsible after the sale in respect of pre-sale
diligence on? non-compliance?
Borrowing in Chile is subject to a special and flat tax called Usually, the landlord and/or the tenant of a business lease cease
Stamp Tax. to be liable for their respective obligations under the lease once
Stamp Tax is a progressive rate tax until the term of the first they have sold their interest. They would be responsible after
year. Therefore, there is a flat tax rate for real estate businesses. the sale in respect of pre-sale non-compliance where this has
The maximum tax rate is approximately 0.7% over the amount been expressly agreed.
borrowed.
10.7 Green leases seek to impose obligations on
102 Leases of Business Premises landlords and tenants designed to promote greater
sustainable use of buildings and in the reduction of
the “environmental footprint” of a building. Please
10.1 Please briefly describe the main laws that regulate briefly describe any “green obligations” commonly
leases of business premises.
found in leases stating whether these are clearly
defined, enforceable legal obligations or something not
See question 11.1 below. amounting to enforceable legal obligations (for example
10.2 What types of business lease exist?

There are no “green obligations” commonly found in leases.
See question 11.1 below.

10.8 Are there any trends in your market towards more
flexible space for occupiers, such as shared short-
10.3 What are the typical provisions for leases of term working spaces (co-working) or shared residential
business premises in your jurisdiction regarding: (a) spaces with greater levels of facilities/activities for
length of term; (b) rent increases; (c) tenant’s right to residents (co-living)? If so, please provide examples/
sell or sub-lease; (d) insurance; (e) (i) change of control details.
of the tenant; and (ii) transfer of lease as a result of a
corporate restructuring (e.g. merger); and (f) repairs?
Yes, but there is an excipient market. Some co-working places
have been successful and shared residential spaces for elderly
(a) There are no rules regarding the length of term. people are increasing.
(b) It is usually agreed that the rent increase will be equivalent to
the rise in living costs.
(c) Normally, the tenant is not permitted to sub-lease. 112 Leases of Residential Premises
(d) Usually, the tenant is obligated to insure the property.
(e) A change of control of the tenant does not affect the lease 11.1 Please briefly describe the main laws that regulate
contract, nor does restructuring. The cost of repairs would leases of residential premises.
be payable by the owner if the repairs are necessary due to
natural use of the property. If not, the other party would pay. The law does not differ between business, commercial or
residential lease.
10.4 What taxes are payable on rent either by the
The lease contract is mainly described and ruled (in general –
landlord or tenant of a business lease? abstract) in the Civil Code.
A special law regulates the lease of real estate in the city, and
another law regulates the lease of real estate outside cities.
Regular taxes are due for a business lease. Companies must pay
Law 18.101 regulates urban leases, with specific premises and
profit tax (27% over gains) and individuals must pay personal
judicial procedures added to the Civil Code rules.
taxes between 0% and 42%.
Real Estate 2024

20 Chile
11.2 Do the laws differ if the premises are intended for There are some minor works that require a simpler proceeding
multiple different residential occupiers? permit.
A regular permit is granted by the Construction Director of
No; the law does not differ if the premises are intended for the Municipality and assumes or requires authorisation from
multiple different residential occupiers. other bodies, e.g. environmental, traffic, pollution, etc.
11.3 What would typical provisions for a lease of 12.5 Are building/use permits and licences commonly
residential premises be in your jurisdiction regarding: obtained in your jurisdiction? Can implied permission be
(a) length of term; (b) rent increases/controls; (c) the obtained in any way (e.g. by long use)?
the term; and (d) the tenant’s contribution/obligation to There are different permits and licences to build and use a building.
To build, a permit will be needed. The permit shall be
granted by the DOM depending on how the project complies
There are no typical provisions; the contract is agreed on a case- with the construction and occupation regulations (architecture,
by-case basis. calculation, engineering, as well as the use of the construction
(residential, business, school, market, etc.)) and are in line with
11.4 Would there be rights for a landlord to terminate the local planning regulations. Permission shall be granted if
a residential lease and what steps would be needed to the project complies with the rules and use.
achieve vacant possession if the circumstances existed However, this differs with regard to the authorisation
for the right to be exercised? needed in order to use the building for another activity other
than residential (licence). A licence is needed in order to use
The landlord can always terminate a residential lease in case of a a building for a specific activity. The licence office (oficina de
breach of contract obligations. Nevertheless, the declaration of patentes) of the county will grant the licence if the activity is
termination must be resolved at trial. permitted in the building zone and the taxes associated are paid.
122 Public Law Permits and Obligations 12.6 What is the typical cost of building/use permits and
the time involved in obtaining them?
The typical cost of building use/permits is 1.5% of the total cost.
development and occupation of land? Please briefly
describe them and include environmental laws.
12.7 Are there any regulations on the protection of
The GUCL and GOUC mainly and generally regulate the use, historic monuments in your jurisdiction? If any, when
development and occupation of the land. Local communities’ and how are they likely to affect the transfer of rights in
real estate or development/change of use?
rules must also be considered.
Yes, the protection of historic monuments, as well as topical

12.2 Can the state force land owners to sell land to it? If
so please briefly describe including price/compensation
places, public monuments and nature sanctuaries is regulated
mechanism. by Law 17.288.
The law does not affect the transfer of rights.
Nevertheless, the law can severely affect the development or
Yes. The state can force landowners to sell land to it.
use of real estate that is registered as a historic monument.
Compensation must be paid up front, in cash, and the price must
be equivalent to the commercial value of the land, construction
and all the installations. A special commission shall issue an 12.8 How can, e.g. a potential buyer obtain reliable
appraisal. The landlord can always claim the appraisal in court. information on contamination and pollution of real
estate? Is there a public register of contaminated land in
your jurisdiction?
12.3 Which bodies control land/building use and/
or occupation and environmental regulation? How do
buyers obtain reliable information on these matters? The Environmental Ministry is the body that regulates
contamination and pollution in Chile.
It is an obligation in Chile for some class of industries (chemicals,
The County Construction Director (“DOM” or “Director de
Obras Municipales”) controls the land use and ensures building oil, and gas, etc.) to issue an annual sworn declaration regarding
regulations are complied with. pollution emission and contaminant transferal (D.S. 1 2013).
Environmental regulation will be controlled by the DOM,
requiring the respective evaluation if it is necessary considering 12.9 In what circumstances (if any) is environmental
the extent of the construction, parking number, and other clean-up ever mandatory?
considerations. However, the evaluation of the environmental
matters will be evaluated by another state body.
Mitigation measures will be a requirement to approve the
environmental declaration or study at the Environmental Ministry.
12.4 What main permits or licences are required for Clean-up will be mandatory whenever the environmental authority
building works and/or the use of real estate? declares it.
A construction permit is required for any construction or

building works.
Real Estate 2024

12.10 Please briefly outline any regulatory 13.3 Are there any other regulatory measures
requirements for the assessment and management of (not already mentioned) which aim to improve the
the energy performance of buildings in your jurisdiction. sustainability of both newly constructed and existing
buildings?
There are no regulatory requirements for the assessment and
management of the energy performance of buildings. Yes; however, these only concern new buildings. There
are several rules regarding power emissions, noise control,
132 Climate Change incentives for solar power installations, etc.
13.1 Please briefly explain the nature and extent of 142 COVID-19
any regulatory measures for reducing carbon dioxide
emissions (including any mandatory emissions trading 14.1 Please detail any laws that govern real estate in
scheme). your jurisdiction which were introduced in response to
the effect of the Coronavirus (COVID-19) pandemic and
which remain in place.
Carbon- and wood-burning are not permitted.
No laws governing real estate were introduced in response to the

13.2 Are there any national greenhouse gas emissions
effect of the COVID-19 pandemic.
reduction targets?
Yes, the Environmental Ministry is the authority that oversees

this issue, among other duties. The target is to reduce gas
emissions to a maximum of 95 million tons for 2025.
Real Estate 2024

22 Chile
Alberto Alcalde Herrera became a partner at Puga y Ortiz Abogados (PUGA ORTIZ) in 2001. Prior to that, he was a partner at Carey & Allende
and an attorney for subsidiaries of Banco Santiago (now Banco Santander Chile) from 1997 to 2000 in matters of investment funds and
financial consulting.
Alberto earned his law degree at Gabriela Mistral University and was admitted to the local Bar in 1993. He holds a Master’s degree in
Entrepreneurial Law, LL.M., from the Pontifical Catholic University of Chile (Santiago, 1998) and has taken courses and programmes in
economics and finance at the School of Economics of the University of Chile in 1993, as well as a course in Community Law held by the
Academy of European Law in Trier in February 2004.
Alberto has been a professor of Civil Law, Competition Law and Economic Law at Gabriela Mistral University.
Puga y Ortiz Abogados Tel: +56 2 2337 7000

Presidente Riesco 5561 8th Floor Email: aa@pugaortiz.cl
Comuna de Las Condes URL: www.pugaortiz.cl
Región Metropolitana
Santiago, 7500000
Chile
Pedro León Wielandt was born in Santiago, Chile, in 1995.

He earned his law degree from the University of Chile and was admitted to the local Bar in 2021.
His professional practice concentrates on corporate and property matters. He counsels clients in contractual issues, restructurings, the
formation of new companies and real estate developments, among other transactions.
In 2021, Pedro was an attorney assistant at Guerrero Olivo, where he assisted with corporate and antitrust matters.
He joined PUGA ORTIZ in 2021, becoming a member of partner Alberto Alcalde’s team. Pedro speaks both Spanish and English.
Puga y Ortiz Abogados Tel: +56 2 2337 7000

Presidente Riesco 5561 8th Floor Email: pedro.leon@pugaortiz.cl
Comuna de Las Condes URL: www.pugaortiz.cl
Región Metropolitana
Santiago, 7500000
Chile
Founded in 1925, Puga y Ortiz Abogados is a highly specialised leading

law firm, widely perceived as one of the most important Chilean law firms.
Puga Ortiz performs in relevant cases related to civil law, product liability,
intellectual property, bankruptcy and litigation as well as in complex
negotiating and resolving conflicts. Labour, real estate, construction,
environmental, infrastructure, water and energy law are also areas covered
by experienced lawyers.
The firm specialises in starting up and developing major real estate projects
as well as handling bids for concessions and public and private projects.
The firm is structured so that each case, matter or situation is handled
personally by at least one of the partners, supported by a highly specialised
team. Clients receive personalised and full-time assistance that ensures
efficiency, delivering specialised services by incorporating new partners
who have made important contributions to each practice area.
www.pugaortiz.cl
Real Estate 2024

Chapter 4 23
Cyprus
Cyprus
Andreas Demetriades & Co LLC Demetris Demetriades
■ The Rent Control Law, No. 23/83 safeguards tenants’

12 Real Estate Law rights in specified geographical areas (usually urban)
provided such premises were completed and rented for
1.1 Please briefly describe the main laws that the first time prior to a specified date. It is not applicable
govern real estate in your jurisdiction. Laws relating to non-Cypriots renting properties in Cyprus. Leases
exceeding 15 years may be registered with the Department
of Lands and Surveys and registration should be affected
12.1. Those relating to tax should be listed in response to within three months of the signing of the lease.
questions in Section 9. ■ The Sale of Immovable Property (Specific Performance)
Law of 2011 sets out the remedy of specific performance for
Purchasers depositing a duly stamped copy of the Contract
■ The Immovable Property (Tenure, Registration &
of Sale at the Department of Lands and Surveys within six
Valuation) Law, Cap. 224 deals with all matters relating months from the date of its execution. Registration of the
to the tenure, registration, disposition and valuation of Contract of Sale prevents the Vendor from transferring
immovable property within the framework of the Cyprus the property elsewhere or encumbering it for as long as the
land registration system. Contract is valid and legally effective. Should the Vendor fail
■ The Acquisition of Immovable Property (Aliens) to transfer the property pursuant to the Contract of Sale, the
Law, Cap. 109 imposes restrictions on the acquisition of Purchaser may obtain from the Court a specific performance
immovable property in Cyprus by non-Cypriots. These order enforcing the transfer of the property in his name.
restrictions have been removed altogether for EU citizens ■ The Compulsory Acquisition of Property Law, No.
and are little more than a formality for others (see question 15/1962 sets out the circumstances and the conditions upon
2.1 below). which national or local government bodies may acquire
■ The Immovable Property (Transfer and Mortgage) property, in the public interest and by showing just cause,
Law, No. 9/65 regulates mortgages of immovable on the proviso that the owner receives compensation equal
property and sales of mortgaged property. It requires to its market value. The same law includes a provision that
mortgages to be registered at the Department of Lands properties compulsorily acquired should be returned to
and Surveys. It provides for transfer fees payable on the their owners if the purpose for which they were acquired
transfer of immovable property. is not realised within three years of the date of acquisition.
■ Under the Immovable Property Tax Law, Cap. 322
and the Immovable Property (Towns) Tax Law, No.
89/62, immovable property tax is payable each year by
all owners of immovable property in Cyprus, assessed on
the taxpayer’s total holding of immovable property on 1
January of each calendar year. Cyprus is a common law jurisdiction and has adopted the Anglo-
■ The Capital Gains Tax Law, No. 52/80 provides for Saxon system as a result of having served as a British Colony.
capital gains tax (“CGT”) at the rate of 20% on inflation- Although the area of Real Estate Law has been substantially
adjusted gains realised from the disposal of immovable codified in statutes, the common law principle of stare decisis
property in Cyprus, including gains from the disposal of is still applicable. Consequently, Cyprus courts are bound to
shares in private companies that own such property. In follow decisions of courts at a higher level and in the absence
accordance with recent amendments, a full exemption of local precedents, English case law is persuasive and, in some
from CGT was granted for the sale to an independent circumstances, binding.
party of immovable property consisting of land, or land
with a building or buildings, which will be acquired from 1.3 Are international laws relevant to real estate in your
an independent party at market value from 16 July 2016 jurisdiction? Please ignore EU legislation enacted locally
until 31 December 2016. That is, regardless of when the in EU countries.
property will be sold, in essence that it has been bought
up before 31 December 2016, and therefore no CGT will There is no international law directly affecting real estate in
be payable. The exemption does not apply to immovable Cyprus. On a peripheral level, Cyprus has commitments under
property that was acquired not by purchase or by purchase its double taxation agreements that relate only to the taxation of
agreement but by a donation/gift or by way of an exchange. income and gains from property.
Real Estate 2024

24 Cyprus
22 Ownership 3.3 Is there a split between legal title and beneficial

consequences of any split? Are there any proposals to
2.1 Are there legal restrictions on ownership of real change this?
estate by particular classes of persons (e.g. non-resident
persons)?
Primarily, there can be no split between the two. However, it
can be said that in cases where the legal title is registered in the
Non-EEA nationals or companies wishing to acquire immovable
name of a Trust, the ultimate beneficial owner of the Title Deed
property must obtain the permission of the Council of Ministers
is the beneficiary himself, although much would depend on the
(“CoM”). Such permit is granted to bona fide applicants to acquire
terms and nature of the Trust as such can be discretionary.
a flat, house or a piece of land not exceeding three donums
Another scenario where there is a divergence between the legal
(approximately 4,014m 2 ) for the erection of only one house for
and beneficial title is in cases where the Title Deed to a real estate
use as a residence only by the buyer and his family. As of May
is transferred to another party; however, the original owner retains
2013, the Ministry of Interior has permitted ownership of up to
two properties, which can be two residences or one residence the right to use and exploit the property during his lifetime.
and commercial premises with a floor area of up to 100m 2 .
The buyers are entitled to occupy the property during the 42 System of Registration
examination period of their application, which may take as little
as 14 days. 4.1 Is all land in your jurisdiction required to be
Members of the family of an original buyer may also purchase registered? What land (or rights) are unregistered?
their own property, provided that they are both financially and
residentially independent of the buyer. Permission is granted for All land is registered in the Republic of Cyprus.
personal use, and not for letting or commercial use. This rule
is relaxed for international companies, which are permitted to
acquire business premises as well as houses or flats as residences 4.2 Is there a state guarantee of title? What does it
for their members or directors. guarantee?
Once the permit has been issued and the property has been
registered in the buyer’s name, there is no further restriction and There is no state guarantee of title. The registered owner of the
the property may be sold or disposed of freely. Furthermore, the land is the undisputed owner subject to the right of the power of
legal heir may have the property registered in his name without the Director of the Department of Lands and Surveys to rectify
any additional permit. errors and or omissions.
It should be noted that a non-EEA national incorporating a
company in Cyprus would allow him to purchase an indefinite
number and type of properties in the same manner as an EEA 4.3 What rights in land are compulsorily registrable?
national.
32 Real Estate Rights It is not compulsory to register rights acquired in land (for
example, by a Contract of Purchase or mortgage), but these
rights have no value or only have a diminished legal status unless
3.1 What are the types of rights over land recognised
in your jurisdiction? Are any of them purely contractual they are registered.
between the parties?
Land may be held as freehold (estate in fee simple) or leasehold. registered?
Unlike other jurisdictions, joint ownership of property is not
recognised in Cyprus and the applicable mode of owning property A licence to use land and an Option to Purchase Agreement are
collectively is tenancy in common, whereby each owner owns an rights in land that are not required to be registered.
undivided share of the property.
Part IIA of the Immovable Property Law provides a framework
for the ownership, possession and enjoyment of the various units 4.5 Where there are both unregistered and registered
in a building of joint ownership by their respective owners, as well land or rights is there a probationary period following
first registration or are there perhaps different classes
as the relations between them and their rights and obligations.
or qualities of title on first registration? Please give
The following legal interests over land may be created: details. First registration means the occasion upon
■ legal mortgage; which unregistered land or rights are first registered in
■ easement; and the registries.
■ rent charge.
Contractual rights affecting land can also be created, such as
There is no issue with regard to unregistered land as such does
leases, licences to occupy and options and pre-emption rights.
not exist. However, a registrable right in land that is filed first
at the Land Registry would rank prior to others filed later, such
3.2 Are there any scenarios where the right to land as a mortgage.
diverges from the right to a building constructed
thereon?
4.6 On a land sale, when is title (or ownership)
transferred to the buyer?
The answer to this question is negative. The land and any
buildings erected are inseparable for title purposes and there
is no concept of dual ownership. The owner of the land owns Title is transferred in the name of the buyer on conclusion of a
anything erected on it. simple procedure that takes place at the regional Land Registry
Real Estate 2024

Andreas Demetriades & Co LLC 25
in the presence of the seller and the buyer or their authorised form; however, an individual may file an action for damages for
representatives. Subject to the buyer agreeing to the description negligence in Court.
of the land transferred to him and the seller confirming that the
selling price has been paid, the title transfer is completed. If
5.5 Are there restrictions on public access to the
there is a Contract signed between the parties, it will provide the
framework and the timescale within which the title transfer will might reasonably need regarding encumbrances and
take place. The buyer may only judicially enforce his legal right other rights affecting real estate and is this achieved
to transfer of the title, provided the duly executed and stamped by a search of the register? If not, what additional
Contract is deposited with the Department of Lands and information/process is required?
Surveys for Specific Performance. It is not necessary, however,
for a Contract of Sale to be signed between the parties in order The names of the registered owners of property as well as any
for a transfer of Title Deed to take place.
encumbrances filed on real estate are considered confidential
data, and therefore access to this information is only permitted
4.7 Please briefly describe how some rights obtain to the owners themselves and any authorised representatives.
priority over other rights. Do earlier rights defeat later Access to the records of a particular individual can be granted
rights? in the context of a legal action filed in Court or to a Judgment
Creditor.
The priority of rights is generally determined by the date of
creation. For example, registration of a judgment made under the 62 Real Estate Market
Civil Procedure Law (known as “memorandum” or “memo”) will
take precedence of the same or a mortgage filed at a later date.
and the buyer’s finance provider) would normally be
52 The Registry / Registries involved in a real estate transaction in your jurisdiction?
5.1 How many land registries operate in your
jurisdiction? If more than one please specify their The principal professional advisers in a real estate transaction
differing rules and requirements. are the following:
■ Lawyers: The commercial terms are usually negotiated
The initial and main responsibility of the Department of Lands between the parties or their property agents, whereas
and Surveys is the registration of immovable property on the the lawyers involved will put them in a legal context in
island. It has regional offices in the six major cities of Cyprus the form of a Contract of Sale. The lawyer of the buyer
and the same rules and requirements apply to all. will usually verify the ownership of the real estate by the
seller as well as carry out an official search to confirm the
registration of any encumbrances over the property as well
their title? as the availability of all necessary permits with reference to
buildings erected thereon.
■ Real estate agents: Sometimes a real estate agent is involved
Each registered owner is issued a two-page document on
in making the initial introduction of the real estate to the
completion of the registration of a real estate in the name of the
prospective buyer.
owner. It is essentially a true copy of the official Land Registry
■ Engineer/Surveyor: The buyer may also employ qualified
Records and contains information regarding the real estate such
engineers to carry out structural or other surveys or
as its registered owner, its size, its location and the Land Registry
surveyors to verify the market value of the real estate.
Office reference.

remunerated?
estate be completed electronically? What documents
registration of ownership right? Can information The remuneration of these persons is usually connected with
on ownership of registered real estate be accessed the value of the transaction as well as the time spent on the
electronically?
transaction, although in most instances a fixed fee is agreed
between the parties.
Transactions relating to real estate cannot be completed
electronically at this stage; online navigation to a registered plot of
6.3 Is there any change in the sources or the
land with imaging is available, in addition to further online services
availability of capital to finance real estate transactions
regarding the Department of Land and Surveys (“DLS”) at the in your jurisdiction, whether equity or debt? What are the
Government Gateway Portal https://portal.dls.moi.gov.cy/en-us/ main sources of capital you see active in your market?
homepage/pages/default.aspx . As a result of recent COVID-19
restrictions, many applications can actually now be completed
online; however, actual transfers of immovable property can only There is a noticeable increase in the availability of capital to
be completed in person at the Land Registry Office. finance real estate transactions, which are mainly funded
from abroad, either by individual or institutional investors.
Immigration Programmes offered by the Government and
5.4 Can compensation be claimed from the registry/ connected to investment in real estate also have contributed to
registries if it/they make a mistake? such to a great extent. Although the market is mainly driven by
cash buyers, financial institutions have recently started offering
There is no codified scheme of compensation set up in statutory more competitively priced loan products.
Real Estate 2024

26 Cyprus
6.4 What is the appetite for investors and/or 7.3 Can the seller be liable to the buyer for
developers to invest in your region compared to last year misrepresentation?
give examples.
Yes, he can be liable if his actions fall within Section 19 of the
Contract Law, Cap. 149, which provides that when consent to an
According to the Cyprus Land Registry, as of the end of agreement is caused by coercion, fraud or misrepresentation, the
September 2023, the total number of registered contracts of sales Contract is voidable at the option of the party whose consent
since the beginning of the year reached 11,519, showing a 20% was so caused. This remedy is not available if the party to whom
increase year-on-year. In Q3 2023, the number of registered the misrepresentation was made had the means of discovering
contracts of sales reached a total of 3,830, up 14.4% year-on-year. the truth with ordinary diligence, or if it did not cause the party
The share of overseas sales comprised 45.9% of total property concerned to consent to the agreement.
sales contracts for the last nine months. Since the beginning of
the year, foreign property sales totalled 5,289, demonstrating an
increase by 27.9% year-on-year driven by demand from non-EU or contractual warranties to the buyer? What would be
citizens. In Q3 2023, the overseas sales increased by 13.7% to the scope of these? What is the function of any such
1,712 comparing with Q3 2022. The increase in immigration guarantee or warranties (e.g. to apportion risk, to give
and relocation of businesses in Cyprus due to the conflict in information)? Would any such guarantee or warranties
the Ukraine continues, whereas a new trend that has arisen is act as a substitute for the buyer carrying out his own
from Israeli investors and individuals making Cyprus a Plan B diligence?
destination. Private and institutional investors are still looking
at generating income via investment in real estate. Warranties given by sellers usually cover matters such as the
legal ownership of the property, any encumbrances filed on the
title, availability of planning and building permits, the ability
6.5 Have you observed any trends in particular market
to deliver clean Title Deeds and the timely completion of the
their attractiveness to investors/developers? Please give property, if under construction.
examples. The buyer, however, should always carry out his own due
diligence.
Demand for high-end residential properties has slowed down
following the closure of the Cyprus Investment Programme 7.5 Does the seller retain any liabilities in respect of
leading to Citizenship. Rising interest rates have also made the property post sale? Please give details.
investors more selective in income producing assets.
Yes, provided there are clauses to this effect; however, in general,
72 Liabilities of Buyers and Sellers in Real all liabilities are satisfied with the completion of the transfer of
Estate Transactions the title at the Land Registry.
7.1 What (if any) are the minimum formalities for the 7.6 What (if any) are the liabilities of the buyer (in
sale and purchase of real estate? addition to paying the sale price)?
Normally, a Contract of Sale is executed between the parties The buyer is liable to pay the stamp duty on the Contract of Sale
so that they are legally bound to complete the transaction. and the transfer fees (where the purchase price is not subject to
However, it is not obligatory to have a written Contract of Sale VAT). A buyer is also obliged to provide documents that justify his
in order for a real estate transaction to take place. Stamping the “Source of Funds” under the anti-money laundering regulations so
Contract in accordance with the provisions of the Stamp Law that the bank of the seller can accept the funds in Cyprus.
and depositing it at the Department of Lands and Surveys under
the Sale of Immovable Property (Specific Performance) Law of 82 Finance and Banking
2011 avails the buyer with the additional protection of a specific
performance order. The Contract of Sale must be filed at the 8.1 Please briefly describe any regulations concerning
Land Registry within six months of signing. the lending of money to finance real estate. Are the rules
The Contract of Sale sets out the description of the property, different as between resident and non-resident persons
the amount of the purchase price and the mode of payment, as and/or between individual persons and corporate
entities?
well as the completion date. There is no official requirement for
certification or witnessing of the signatures of the parties on a
Contract of Sale. There are no regulations specifically concerning the lending of
money to finance purchases of real estate, although the Immovable
Property (Transfer and Mortgage) Law includes provisions for the
7.2 Is the seller under a duty of disclosure? What mortgaging of real estate as security for loans. Each financial
matters must be disclosed?
institution may impose their own criteria while also following the
requirements imposed by the Central Bank of Cyprus.
There is no duty of disclosure on the seller. The buyer should
incorporate warranties and conditions in the Contract of Sale so
as to protect his interests.
borrower?
The most common security that is imposed to obtain a loan is the
Real Estate 2024

mortgaging of the immovable property at the Land Registry. A borrower, there are certain provisions within the law that
mortgage does not constitute an estate in land but a contractual prevent the borrower from selling it.
right for the benefit of the lender and a charge on the immovable It is important to make reference to the mortgage-relief
property. scheme for struggling homeowners, ESTIA, which was officially
If the borrower is a company, creating a charge over any of its launched on 12 July 2019 with the opening of applications for
property must be registered with the Registrar of Companies as the scheme, which were initially accepted until the end of 2019;
well. The real estate lender can also file a floating charge and an extension was later given.
secure a personal guarantee by physical persons, which in most The stated purpose of ESTIA is to assist, support and protect
cases would be given by the directors of the company. vulnerable households that have mortgaged their houses that
are their primary residence for their loans and at the same time
8.3 What are the common proceedings for realisation reduce the high number of bad debts.
of mortgaged properties? Are there any options for a This applies to loans (mortgages) that were deemed
mortgagee to realise a mortgaged property without non-performing on or until 30 September 2017 and of which
involving court proceedings or the contribution of the the primary residence that is mortgaged must have a maximum
mortgagor? market value of up to €350,000. The Mortgage to Rent (“MtR”)
scheme enactment has been approved by the CoM on 12 July
As from 17 April 2015, the 2014 amendment to the Immovable 2023. According to the MtR scheme:
Property (Transfer and Mortgage) Law, No. 9/65 has been put ■ credit institutions and credit acquiring companies can
into effect to allow lenders to proceed with the forced sale agree for qualifying debtors to transfer the ownership
of mortgaged property. The procedure for liquidation of a of their primary residence to the entity in charge of
mortgage may commence provided the debt has become due implementing the said scheme, namely KEDIPES;
and there is a delay of payment for a period of more than 120 ■ KEDIPES will pay the credit institution/credit acquiring
days (see: Article 44B of the above-mentioned Law). A series company a price in exchange for the ownership of the
of procedural steps must be undertaken by the lender within primary residence;
a fixed-time framework, which significantly improves the ■ the qualifying debtor will continue residing in the
timescale within which a forced sale can be achieved. This is previously owned residence as tenant; and
a vast improvement of the previous procedures that allowed a ■ the state will be paying the rent for the qualifying debtor’s
debtor to delay the sale of the mortgaged asset for as long as 10 use of the residence as tenant.
years or more. Since then, there had been several amendments In addition to the above, the CoM’s decision clarifies further
of the above Law; however, the main purpose has remained the conditions relating to the MtR scheme, such as the criteria on
same: a quicker forced sale of the mortgaged property. the basis of which debtors and primary residences fall under the
“qualifying” status, the debt write-off from credit institutions/
8.4 What minimum formalities are required for real credit acquiring companies and the debtors’ ability to buy back
estate lending? the residence.
Banks place great emphasis on the repayment ability of the 8.8 What is the impact of an insolvency process or a
borrower as well as on being able to provide a significant corporate rehabilitation process on the position of a real
personal contribution of funds, which normally is equal to estate lender?
at least 30% of the selling price or of the market value of the
property (the minimum out of these two). In such case, the real estate lender should notify the Receiver so
as to register his claim in terms of priority.
8.5 How is a real estate lender protected from claims
against the borrower or the real estate asset by other 8.9 What is the process for enforcing security over
creditors?
A real estate lender is protected by filing a mortgage on the appropriated when a borrower is in administration or has
real estate asset, which is registered at the Land Registry, and entered another insolvency or reorganisation procedure?
ensuring that the borrower received independent legal advice at
the time of entering into the Loan Agreement. In cases where a pledge applies to the shares, the lender is entitled
to acquire them. The practice is that he would have registered a
8.6 Under what circumstances can security taken by a floating charge at the Company Registrar that would allow him
lender be avoided or rendered unenforceable? to appoint an administrator and thus take any necessary steps to
protect his interests.
Security taken by a lender can be avoided or rendered
unenforceable in circumstances where the lender fails to register 92 Tax
his security with the Land Registry and where other charges
have been previously registered on the property (and which have 9.1 Are transfers of real estate subject to a transfer
priority according to the Law) or in the case where the borrower tax? How much? Who is liable?
disposes the asset in any way.
Transfer fees are payable by the buyer to the Department of
8.7 What actions, if any, can a borrower take to Lands and Surveys on the date of transfer of the Title Deed in
frustrate enforcement action by a lender? his name. Although the fee is usually calculated on the purchase
price, DLS may impose higher transfer fees if the valuation
If the mortgaged property is the primary residence of the department decides that the market value of the property at the
Real Estate 2024

28 Cyprus
time of purchase exceeds the purchase price. The applicable 9.6 Is taxation different if ownership of a company (or
rates are 3% on the first €85,000, 5% on the next €85,000 and other entity) owning real estate is transferred?
8% on any excess above €170,000.
As a result of special measures introduced by the Government
Gains on disposal of shares in unlisted companies are subject to
to further revive the property market: (a) if VAT was paid on
CGT if (and only to the extent that) they derive from immovable
the property, no Property Transfer Fees are payable (transfer
property in Cyprus. CGT also applies on the sale of shares
fees still applicable on any excess amount between the selling
of companies that indirectly hold Cyprus-situated immovable
price and the market price); and (b) if VAT was not paid on the
property at least 50% of whose value derives from the market
property, the Property Transfer Fees are reduced by 50%.
value of immovable property situated in Cyprus.
9.2 When is the transfer tax paid?

9.7 Are there any tax issues that a buyer of real estate
Transfer tax is paid at the time of transfer of the Title Deed to diligence on?
the property in the name of the buyer.
It is important to give some thought to the buyer’s future
9.3 Are transfers of real estate by individuals subject to purchasing activity as well as the use of the real estate purchased.
income tax? It may be prudent to purchase the real estate in the name of
a company as that could reduce the buyer’s tax liability when
selling the real estate or renting it out.
Transfers of real estate are not subject to income tax unless the
individual selling has made multiple transactions in real estate
and thus is considered as “trading in land”. 102 Leases of Business Premises
10.1 Please briefly describe the main laws that regulate

9.4 Are transfers of real estate subject to VAT? How leases of business premises.
Leases are governed by the Contract Law, subject to restrictions

VAT is chargeable at the standard applicable rate on the first
introduced by the Rent Control Law, which protects tenants
sale of new buildings or parts of buildings and the land on
against eviction, controls the adjustment of rents and regulates
which they stand if the application for a planning permit was
relations between landlords and tenants. Individuals who are not
submitted after 1 May 2004. No VAT is charged on subsequent
citizens of Cyprus and legal entities controlled by non-residents
sales, or on the sale of undeveloped land or the leasing or letting
are not covered by the rent control provisions.
of immovable property.
Leases exceeding 15 years may be registered with the
A reduced rate of 5% applies for the first 200m 2 of residences
Department of Lands and Surveys, and registration should be
to Contracts concluded from 1 October 2011 onwards for the
effected within three months of signing the lease, provided this
acquisition or construction of residences to be used as the
is permitted by the lease agreement. Registered leases afford the
acquirer’s primary and permanent place of residence for the next
tenant certain advantages, including the right to trade the lease.
10 years. A grant is available to provide for an effective rate of
Under the Acquisition of Immovable Property (Aliens) Law,
5% for Contracts concluded prior to that date.
third-country nationals and Cyprus companies controlled by
From 2 January 2018, the sale of non-developed land is
them require permission from the CoM before entering into a
subject to VAT at the standard rate when supplied in the course
lease of immovable property for a period exceeding 33 years.
of business. Non-developed building land is defined as any land
intended for the construction of one or more structures in the
course of carrying out a business activity. 10.2 What types of business lease exist?
9.5 What other tax or taxes (if any) are payable by the There are no specific types of business leases. The parties to the
seller on the disposal of a property? lease agree the terms of such bases on what they have specifically
agreed between them.
CGT is levied at the rate of 20% on gains realised from the
disposal of immovable property in Cyprus. 10.3 What are the typical provisions for leases of
Gains can be subject to income tax if the buyer is considered business premises in your jurisdiction regarding: (a)
to be carrying out multiple transactions and therefore considered length of term; (b) rent increases; (c) tenant’s right to
as “trading in land”. sell or sub-lease; (d) insurance; (e) (i) change of control
The Central Agency for Equal Distribution of Burdens of the tenant; and (ii) transfer of lease as a result of a
(Creation, Objects, Responsibilities, and Other Related Matters)
Law of 1989, has been amended by introducing a 0.4% levy on
the sale proceeds from all disposals of immovable property, Such provisions are a matter for agreement between the parties.
which is within the current control of the Republic of Cyprus (a) The duration of the lease can range from months to years.
(i.e. both trading-nature and capital-nature disposals). This also (b) There is similar variability in the length of the initial rental
applies to the disposal of shares of a company that is the direct term and the provisions relating to review.
owner of such immovable property, to the extent that the buyer (c) Assignment of the lease, or subletting of the whole or
of the shares assumes the control of such company. The relevant part, are typically permitted subject to the landlord’s prior
value of the shares for the purposes of calculating the amount of consent, subject to certain conditions being met.
the levy equals the latest valuation of the immovable property by (d) There are no legal obligations on either party with regard
the Department of Lands and Surveys (“DLS”). The obligation to insuring the leased premises and the matter is freely
for payment of the levy lies with the seller of the property. negotiable between a landlord and tenant.
Real Estate 2024

(e)(i) In the same way, provisions regarding the change of 10.7 Green leases seek to impose obligations on
control of the tenant and the transfer of the lease as a result landlords and tenants designed to promote greater
of a corporate restructuring are negotiable. sustainable use of buildings and in the reduction of
(e)(ii) Where the lease is for a whole building, repair and decoration the “environmental footprint” of a building. Please
are usually the tenant’s responsibility. If the lease is for part briefly describe any “green obligations” commonly
of a building, the tenants are usually liable for internal repair found in leases stating whether these are clearly
and decoration of the parts they occupy. defined, enforceable legal obligations or something not
(f) Landlords are usually liable for external and structural amounting to enforceable legal obligations (for example
repairs of the whole building and repair and decoration of
the common parts, with provision for recovery of the costs
via a service charge. Green leases are extremely rare in Cyprus and there is not
enough data to provide examples.
landlord or tenant of a business lease? 10.8 Are there any trends in your market towards more
VAT of 19% is applicable on rental income arising from the
spaces with greater levels of facilities/activities for
rental of an immovable property to a taxable person who will residents (co-living)? If so, please provide examples/
carry out taxable activities from the property. The total rental details.
income should surpass the VAT registration threshold, which is
currently €15,600 over 12 months. Residential properties where
the tenant will not use them to carry out taxable activities are Usually, businesses occupy their own distinct workspaces,
exempt from VAT. although recently there has been a trend in the market for shared
The Special Defence Contribution (“SDC”) is applicable at the short-term working spaces with communal business facilities,
rate of 3% on the 75% of the rental income of Cyprus domiciled such as a reception and conference rooms. Co-living is mostly
individuals. A Legal Entity should withhold the SDC at source found in student accommodation.
and pay it to the Inland Revenue Department on a monthly basis.
Personal or corporate income tax as well as SDC tax is 112 Leases of Residential Premises
applicable on rental income.
Income tax is payable at the individual’s marginal rate or the 11.1 Please briefly describe the main laws that regulate
standard corporate tax rate (12.5%) on the gross income less a leases of residential premises.
deduction of 20%.
General Healthcare System (“GHS”) contribution of 2.65% is
payable on the gross amount of rental income. ■ The Rent Control Law of 1983: This law provides
protection to “statutory tenants” from eviction except
under predetermined circumstances. The Rent Control
10.5 In what circumstances are business leases Court has jurisdiction over matters concerning the
usually terminated (e.g. at expiry, on default, by either
recovery of possession of controlled rented property and
tenant to extend or renew the lease or for either party the determination of rent increase issues under this law. If a
to be compensated by the other for any reason on property falls under the Rent Control Law, any stipulations
termination? about rent increases within the lease agreement are subject
to the law’s provisions, irrespective of the lease’s status
Business leases are usually terminated by agreement, on expiry ■ The Immovable Property (Tenure, Registration &
of the contractual term of duration. Valuation) Law, Cap. 224: This law deals with matters
In certain instances, the Rent Control Law will be applicable, relating to the tenure, registration, disposition, and
which allows a business tenant to remain in possession of the valuation of immovable property within the Cyprus land
premises after the tenancy agreement has expired and to receive registration system
compensation in certain cases of eviction should the Rent
Control Tribunal decide so. 11.2 Do the laws differ if the premises are intended for
In such an instance, he would become a “statutory tenant” and multiple different residential occupiers?
can only be evicted from the premise provided specific statutory
provisions apply. Rent increases are defined by an order issued
by the CoM and are currently set to “6%”. The Rent Control There are no different laws for multiple residential occupiers.
Act is not applicable to non-Cypriots or tenants of premises However, there are some specific provisions that only apply
situated outside certain “controlled” areas (mainly geographical to commonly owned buildings that require the formation of
areas within municipal boundaries or premises that have been a building committee so as to take several decisions for the
completed and rented for the first time after 31 December 1999). maintenance of the building and the responsibilities of the
owners as to the commonly owned areas.

lease cease to be liable for their respective obligations 11.3 What would typical provisions for a lease of
under the lease once they have sold their interest? Can residential premises be in your jurisdiction regarding:
they be responsible after the sale in respect of pre-sale (a) length of term; (b) rent increases/controls; (c) the
non-compliance? tenant’s rights to remain in the premises at the end of
This depends on the relevant contractual provision agreed by
the parties. They are responsible, however, in respect of pre-sale
non-compliance. See question 10.3 above.
Real Estate 2024

30 Cyprus
11.4 Would there be rights for a landlord to terminate ■ Department of Planning and Housing – https://www.moi.
a residential lease and what steps would be needed to gov.cy/moi/tph/tph.nsf/contactinfo_en/contactinfo_
achieve vacant possession if the circumstances existed en?opendocument .
for the right to be exercised? ■ Department of Land and Surveys – https://portal.dls.moi.
gov.cy/en/epikoinonia/grafeia-tmimatos-ktimatologiou-
If there is a lease agreement in place that has not yet expired, kai-chorometrias/.
the expiration will occur according to the provisions of the lease ■ Department of Environment – https://www.moa.gov.
agreement. If the tenant remains in possession of the premises cy/moa/environment/environmentnew.nsf/contact_en/
after the lease agreement has expired, he will become a “statutory contact_en?OpenDocument .
tenant” and can only be evicted according to the provisions
of the Rent Control Law as described above in question 10.5. 12.4 What main permits or licences are required for
This applies only for premises situated in certain “controlled” building works and/or the use of real estate?
areas. If there is no lease agreement in place, the tenancy is
from month to month. Once again, it depends on whether the
All buildings require planning permission and a building permit.
premises are situated in certain “controlled” areas, which would
At first instance, planning permission must be obtained from
mean that the Rent Control Law would apply. It is considered
the Planning Authority.
rather complicated to achieve vacant possession in Cyprus.
Subsequently, a building permit must be obtained from the
local municipality or district administration office.
122 Public Law Permits and Obligations Once a building is completed, a Certificate of Final Approval
is issued certifying adherence to the terms imposed by the
12.1 What are the main laws which govern zoning/ building permit.
permitting and related matters concerning the use, A division permit must also be acquired if more than one unit
development and occupation of land? Please briefly is erected on a single or more plots of land, defining how the
describe them and include environmental laws. Title Deed(s) are divided into separate Title Deeds for each unit.
Once the Certificate of Final Approval of the Division Permit
The Town and Country Planning Law of 1972 and subsequent is issued, these documents are filed with the District Land
amendments provides for the zoning and planning of land in Registry, which will then carry out its internal processes to issue
Cyprus. It provides, among other things, for the preparation of a separate Title Deed for each unit.
Development Plans, control of development and designation of
areas of historic, architectural and environmental interest.
12.5 Are building/use permits and licences commonly
The Streets and Buildings Law is the main law that regulates obtained in your jurisdiction? Can implied permission be
the construction of all building and civil engineering works. obtained in any way (e.g. by long use)?
These two laws, together, define the development and
building control system of Cyprus.
Cyprus has enacted a number of statutes that harmonise Building and use permits and licences are necessary for any
local legislation with European Directives in order to protect building development and there is no concept of implied permis-
the environment. Such areas include water quality, atmospheric sion being obtained in any way.
pollution and climate change, noise, nuclear radiation, waste
disposal, packaging, conservation of flora and fauna and 12.6 What is the typical cost of building/use permits and
assessment of the environmental impact of proposed projects in the time involved in obtaining them?
the process of issuing the necessary permits.
Furthermore, the Civil Wrongs Law Cap. 148 provides Applications for planning permission may be submitted by the
remedies against the torts of nuisance, trespass, and negligence. owner or authorised representative, to the competent Planning
Authority. The Planning Authority must come to a decision with
12.2 Can the state force land owners to sell land to it? If respect to an application within a period of three months from
so please briefly describe including price/compensation its submission, although sometimes examination may take longer
mechanism. depending on the complexity of the case. The fee payable depends
on a range of factors, including the scale and nature of the project.
Article 23 of the Constitution of the Republic of Cyprus protects The department has developed a web-based tool for fee calculations
the right of ownership and the peaceful enjoyment of property that can be accessed at http://feecalc.tph.moi.gov.cy/home61.
by both Cypriot and non-Cypriot nationals. Thus, compulsory html . The application for a building permit can be submitted to
acquisition or imposition of restrictions on immovable the appropriate local authority depending on the location of the
property is strictly regulated by the Compulsory Acquisition immovable property, and the review of the application and issue of
Law, No. 15/62. National or local government bodies may all permits takes from six months to a year.
acquire property, in the public interest and by showing just
cause, but only on payment of immediate compensation to the 12.7 Are there any regulations on the protection of
owner, which is calculated at the market value at the time of historic monuments in your jurisdiction? If any, when
publication of the acquisition notification. and how are they likely to affect the transfer of rights in

or occupation and environmental regulation? How do The Antiquities Law, Cap. 31 provides for the protection
buyers obtain reliable information on these matters? of historic monuments and antiquities. Part II provides that
the CoM may, on the recommendation of the Director of the
Contact details for the relevant authorities are as follows: Department of Antiquities, designate any building, site or object
Real Estate 2024

as an ancient monument. Any site so designated may not be

altered without official consent, and it is a criminal offence to
132 Climate Change
damage, deface or litter a historic monument. In addition, the
surrounding area may be designated as protected, in which event 13.1 Please briefly explain the nature and extent of
any proposed construction, demolition, felling of trees or similar
activity may not be undertaken without the appropriate permit.
scheme).
Alternatively, it may be compulsorily acquired (see question 1.1).
Compensation is provided to owners of private property that is
designated as a historic monument, and grants are also available Since 1997, Cyprus has been a signatory to the United Nations
for maintenance and restoration. Framework Convention on Climate Change (“UNFCCC”)
and, since 1990, the Kyoto Protocol, both of which have been
ratified by the Cypriot Parliament under ratification Law No.
12.8 How can, e.g. a potential buyer obtain reliable 12(III)/2003. Although it was not included in Annex 1 of the
information on contamination and pollution of real
UNFCCC or Annex B of the Kyoto Protocol, as an EU Member
your jurisdiction?
State, Cyprus must limit emissions of greenhouse gases under
the Effort Sharing Decision, which is Decision No. 443/2009/
EC of the European Parliament and the Council, and which
There is no public register of contaminated land. Should a entered into force on 25 June 2009.
potential buyer wish to obtain such information, he may do so Regulatory measures implemented within national legislation
by private investigation. However, Cyprus legislation is in line include the licensing of industrial plants and the granting of the
with Directive 2003/4/EC on public access to environmental relevant Air Emission Permits that have been brought into effect
information. The provisions of the said law require the public through the provisions of the Air Pollution Control Law (Law
authorities to make available any environmental information 187(I)/2002), as amended by Law No. 180(I)/2013. The Permits
held by such authorities to any natural or legal person requesting granted include operating conditions such as the obligation to
such environmental information. install air pollution abatement techniques and not to exceed the
set air emission standards. According to the aforementioned Law
12.9 In what circumstances (if any) is environmental (Law No. 187(I)/2002), before the granting of an Air Emission
clean-up ever mandatory? Permit, there are technical requirements to be satisfied for any
machine or equipment used by the industrial plants. Furthermore,
The Waste Law No. 185 (I)/2011, the Packaging and Packaging any material (including fuels) used by such machines or equipment
should meet the standard requirements of quality.
Waste Law 2002–2006, the Management of Waste From Extractive
Industries Law No. 82(I)/2009 and the relevant regulations and
decrees issued under the abovementioned laws provide a strict 13.2 Are there any national greenhouse gas emissions
framework for the avoidance of environmental pollution. Failure reduction targets?
to comply with the provisions of the law corresponds to three
years’ imprisonment and/or financial fines of €500,000, and/or The CoM approved the new National Governance System for
an extrajudicial fine of €4,000. In the case of severe danger to the European Green Deal, and the implementation of National
human health or the environment, administrative sanctions of Energy and Climate Plan was introduced under the Regulation
a maximum of €4 million are imposed. Further remedies for on the governance of the energy union climate action, which
an aggrieved claimant would be available in civil law under the will be enforced for the years 2021–2030.
common law tort of nuisance, whereby he could apply to the Emissions in the non-Emission Trading Scheme (“ETS”)
Court for an injunction requiring the party responsible for the sector are aimed to be reduced by 20.9% and the emissions in
environmental pollution to remedy the nuisance. the ETS sectors are aimed to be reduced by 24.9% compared
with 2005 emission levels (non-ETS is understood as a part of
the domestic greenhouse gas emissions that are not covered by
12.10 Please briefly outline any regulatory
the European Union Emission Trading Scheme (“EU ETS”)).
requirements for the assessment and management of
the energy performance of buildings in your jurisdiction. It also includes targets for reducing national emissions of
specific air pollutants and reducing emissions from land use,
land use change or forestry.
The Law Regulating the Energy Performance of Buildings Under the NECP of Cyprus, greenhouse gas emissions are
(Law No. 142(I) of 2006) and the relevant regulations regulate set to be reduced with key policies including the promotion of
the assessment and management of the energy performance of natural gas and renewable energy sources, an increase in carbon
buildings in Cyprus. It provides a methodology for calculating sink, improvements of energy efficiency in buildings, industry
the integrated energy performance of buildings, sets minimum and infrastructure, and the reduction of emissions in the
standards for the energy performance of new buildings transport, agricultural and waste sector. In 2023, a specialised
and existing buildings undergoing substantial renovation, law has granted the transport minister the power to implement
establishes procedures for the energy certification of new ultra-low emissions zones (“ULEZ”) in Cyprus.
and existing buildings (and, for public buildings, prominent
display of this certification and other relevant information), and
establishes standards for periodic inspection and maintenance 13.3 Are there any other regulatory measures
of energy-converting equipment such as boilers and heating and (not already mentioned) which aim to improve the
sustainability of both newly constructed and existing
air-conditioning systems.
buildings?
No, there are no other measures.
Real Estate 2024

32 Cyprus
142 COVID-19

There are none specifically in response to COVID-19.
Real Estate 2024

Demetris Demetriades is the managing partner and Head of the Immigration and Real Estate Department of Andreas Demetriades & Co LLC
in Cyprus. He has been with the Law Firm since 1994, representing high-net-worth and ultra-high-net-worth individuals, entrepreneurs and
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Demetris earned his Bachelor of Laws (LL.B.) degree from the University of East Anglia in England. He then qualified as a Barrister at Law
of the Honourable Society of Gray’s Inn, one of the four Inns of Court in London, and is a member of the Cyprus Bar Association (First Rank
achievement). He is fluent in Greek and English.
Andreas Demetriades & Co LLC Tel: +357 2681 1668

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www.demetriadeslaw.com
Real Estate 2024

34 Chapter 5
Dominican Republic
Dominican Republic
Prieto Cabrera & Asociados Dr. Aimée Prieto
the Dominican Tax Administration and fulfil all relevant tax

12 Real Estate Law obligations, which are the same to those required of nationals.

32 Real Estate Rights
response to question 10.1. Those relating to zoning and 3.1 What are the types of rights over land recognised
environmental should be listed in response to question in your jurisdiction? Are any of them purely contractual
12.1. Those relating to tax should be listed in response to between the parties?
The Dominican Republic Constitution provides that all persons

The main laws governing real estate (property rights and title have the right of enjoyment, use, and disposal of their properties.
to land) in the Dominican Republic are the Constitution, the Real property rights are divided into main real property rights
Property Registry Law No. 108-05, as amended, (the “Property and accessory real property rights. Main real property rights
Registry Law”), along with its implementing regulations, and the are the right of ownership and its derivations (disposal, use,
Condominium Law No. 5038 of 1958, as amended. habitation, easements, and long-term lease (enfranchisement/
The Property Registry Law is supplemented by regulations and enfiteusis)) for which real property rights are recognised.
rules as follows: (i) the Dominican Civil Code; (ii) the Dominican Mortgages, pledges, liens, and encumbrances – also real property
Civil Procedure Code; (iii) resolutions issued by the Supreme security rights – are recognised as accessory real property rights.
Court of Justice and the Judiciary Council; and (iv) supplemental ■ Easements can be established either by law, due to the
laws including No. 1024-1928 on the Establishment of the Family situation of the properties, or by agreement between the
Property, Conditional Sale of Real Estate Law No. 596-1941, parties.
Expropriation Law No. 344-1943, National Cadastral Law No. ■ Usufruct (disposal) can be used as collateral or transferred
317-1968, Mortgage Market and Trust Law No. 189-11, Money and may be established by law or through an agreement
Laundering Law No. 155-17, Environment Protection Law No. between parties.
64-00, Green Protected Areas No. 202-04, Public Notary Law No. ■ Use and occupancy rights, as their name suggests, are limited
140-15, and Private International Law No. 544-14, among others. and non-transferable. They are strictly contractual rights.
■ Comodato (loan for use) is a contract in which one party
1.2 What is the impact (if any) on real estate of local provides another with something for use, with the
common law in your jurisdiction? obligation to return it after use.
■ Enfiteusis, a type of real estate leasing originating in France,
The Dominican Republic is a civil law jurisdiction. Common is a primarily personal right, with durations ranging from
law has no impact on real estate in this jurisdiction. 18 to 99 years. It becomes valid only when recorded in the
Title Registry, at which point it can be used as collateral
and transferred.
1.3 Are international laws relevant to real estate in your ■ Guarantees in real estate transactions can take various
forms, including mortgages, privileges, bonds, pledges,
in EU countries.
anticresis, conditional sales of real estate, and leasing of real
estate. Articles 9095, 2011, 2071–2072, 2073–2084, 2085–
Real estate law in the Dominican Republic is territorial. Therefore, 2091, Dominican Civil Code.
international laws are not applicable to real estate matters. ■ The Civil Code encompasses three types of mortgages:
legal (Article 2121–2122); judicial (Article 2123); and
22 Ownership conventional (Article 2124–2133). Among the legal
mortgages, which grant de facto rights without the need
2.1 Are there legal restrictions on ownership of real for an agreement or judicial intervention, are: (i) the
estate by particular classes of persons (e.g. non-resident mortgage of a wife over the assets of her husband; (ii)
persons)? the mortgage of minors over the assets of their tutors;
and (iii) the mortgage of the state, municipalities,
Foreigners have the same rights as nationals and can freely and other public establishments over the assets of
acquire land. However, to do so, foreigners must register with collectors and administrators.
Real Estate 2024

Prieto Cabrera & Asociados 35
■ Improvements are constructions made on land for the Consequently, according to the Property Registry Law, when
benefit of the title holder or third parties. registering new real estate properties or conveyances of real
Moreover, Principle V of Property Registry Law states that estate rights, the interested party must make a contribution to
the law takes precedence over any private agreements. the Guarantee Fund. However, it is crucial to highlight that, to
date, this fund has not been enforced.
diverges from the right to a building constructed 4.3 What rights in land are compulsorily registrable?
thereon? What (if any) is the consequence of non-registration?
Dominican law follows the principle of “superficies solo cedit”, where All conveyances of real property, liens, encumbrances, and other
the owner of land also owns the buildings and constructions interests (e.g., easements) in real property must be registered in
built on it by a third party. In principle, if the owner does not the Title Registry to be enforceable against third parties. The
want the improvement constructed on their land, they may Property Registry Law establishes that registration is constitutive
request its demolition, at the expense of the builder. However, if and legally binding for liens and encumbrances, ensuring their
they decide to keep the building, they must pay for the materials enforceability against third parties.
used and the cost of labour. According to the Property Registry Law, the following rights
Nevertheless, the owner can, through an agreement, in land are compulsory registrable:
acknowledge the right of improvement with the possibility of ■ Those that establish, transfer, declare, modify, or extinguish
revocation in favour of a third party on a registered property. real property rights.
This is done to provide and establish this real property right as ■ Those that impose encumbrances, liens, and provisional
enforceable against third parties. measures on the land.
■ Those with administrative and legal limitations of a
particular nature, such as easements, declarations of
3.3 Is there a split between legal title and beneficial cultural heritage, and others that, in any way, restrict the
title in your jurisdiction and what are the registration freedom of disposition of the property.
consequences of any split? Are there any proposals to ■ The rights of condominiums over their exclusive units, as
change this? well as their proportional share in the common areas.
Under Dominican law there is no split between legal title and

beneficial title – there is only one title deed for the owner. registered?
Yet, the doctrine and case law have incorporated the French
concept of enfiteusis into the local legal system. Enfiteusis is a real
Most rights in land, such as mortgages, encumbrances, and
property right (in rem) that involves transferring the beneficial
easements, are required for registration. While the registration
domain of a property for an extended period in exchange for a
of leases is not mandated by law, it remains an option.
fee. This transfer includes the responsibilities and operational
risks of the leased property. As a result, the property owner
retains the legal title, while the enfiteuta holds the beneficial title, 4.5 Where there are both unregistered and registered
allowing them to exercise various rights (such as modifying land or rights is there a probationary period following
the property, making improvements, granting and acquiring first registration or are there perhaps different classes
easements, transferring the right, using it as collateral, among details. First registration means the occasion upon
others) throughout the agreement’s duration. which unregistered land or rights are first registered in
the registries.
42 System of Registration
There is no probationary period following the initial registration.
4.1 Is all land in your jurisdiction required to be In the Dominican Republic, there are two valid registration
registered? What land (or rights) are unregistered? systems:
■ For registered real properties, the Property Registry Law
According to the law, the Dominican State is the original ranks the property rights according to the maxim “prior in
proprietor of all lands within the national territory. Any land tempore, potior in iure” – “first in time, first in right”.
without proven ownership must be registered in the name of ■ For unregistered real properties, the Registration and
the State. Consequently, all land must be registered in the Preservation of Mortgages Law No. 2914 of 1890, known
as the Ministerial System, of French origin, is a system that
appropriate Title Registry. Any documents or agreements that
records declared rights, but does not assess whether the
establish or modify property rights must undergo registration to
recorded rights comply with legal requirements.
be enforceable against third parties.

4.2 Is there a state guarantee of title? What does it transferred to the buyer?
guarantee?
Ownership is transferred when the parties agree on the property

Dominican law provides that any right registered in accordance and the sale price. However, it becomes enforceable against
with its provisions is irrevocable and enjoys the protection and third parties only after the transfer taxes are paid, and the title is
absolute guarantee of the State. transferred in the Title Registry.
In this context, the Property Registry Law has established a The transfer of title is generally formalised through a purchase
Guarantee Fund to ensure indemnification for any owner who and sale contract between the parties, which must be notarised.
suffers prejudice without fault due to the application of the law. If the transaction is executed outside the Dominican Republic,
Real Estate 2024

36 Dominican Republic
the contract shall be apostilled, and if it is in a language other 5.5 Are there restrictions on public access to the
than Spanish, it must be translated. After executing and register? Can a buyer obtain all the information he
legalising the contract, the purchaser is responsible for paying might reasonably need regarding encumbrances and
transfer taxes and registering the title in their name with the other rights affecting real estate and is this achieved
Title Registry to protect their rights against third parties. by a search of the register? If not, what additional
information/process is required?
In cases where a right of first refusal exists through an option-
to-purchase agreement, the beneficiary has the option to register
this right in the Title Registry before executing the sale. This The information recorded in the Title Registry is publicly
registration safeguards their right to acquire the property and accessible to anyone interested in the legal status of a property.
prevents it from being sold to other potential purchasers. This information can be accessed electronically or in consultation
rooms at the Title Registry.
It is highly advisable for buyers of properties in the Dominican
4.7 Please briefly describe how some rights obtain
Republic to engage an attorney for due diligence, prior to
rights? purchasing a property.
Priority is determined by the order of registration. In the case

of mortgages, multiple ranks can be registered to correspond
to different mortgage creditors. The lender in the first rank 6.1 Which parties (in addition to the buyer and seller
will have priority over others. Privileges granted by law, such
involved in a real estate transaction in your jurisdiction?
as child support or employee salaries, also take precedence over Please briefly describe their roles and/or duties.
private creditors and should be registered.
■ Attorneys: Attorneys represent both the buyer and seller,
52 The Registry / Registries review contracts, conduct due diligence, ensure legal
compliance, and provide legal advice throughout the
5.1 How many land registries operate in your transaction. It is recommended that each party has an
jurisdiction? If more than one please specify their attorney in Dominican Republic’s real estate transactions.
■ Real estate agents/brokers: Real estate agents or brokers
facilitate the transaction by connecting buyers with sellers.
The National Title Registry Directorate oversees and regulates the ■ Notary public: To legalise the parties’ signatures and the
Title Registry Offices located throughout the country. Each office authenticity of the parties.
has limited jurisdiction over its land district, as assigned by the ■ Land surveyors: To determine that the property’s
National Title Registry Directorate. As of November 2023, there boundaries align with the legal description, and to confirm
are currently 24 Title Registry Offices in the Dominican Republic, the technical status of the land.
and a services office in Punta Cana, La Altagracia province. ■ Escrow company: An escrow agent may be used to hold
The Land Jurisdiction is part of the Judiciary of the Dominican funds and documents until the conditions of the sale are met.
Republic. ■ Fiduciary: In transactions involving trust agreements
pursuant to Law No. 189-11, a fiduciary may be engaged
to facilitate the registration of trust agreements and
oversee the fiduciary aspects of the transaction for proper
their title?
execution of trust-related obligations.
A title deed is issued to the owner of a registered real property

by the Title Registry. 6.2 How and on what basis are these persons
remunerated?

Remuneration for these individuals is typically negotiated freely
need to be provided to the land registry for the with service providers and may be based on a percentage of
registration of ownership right? Can information the purchase price or a fixed fee. Each party is responsible for
on ownership of registered real estate be accessed covering the costs associated with their own advisors.
electronically?
At present, only title searches can be obtained electronically. availability of capital to finance real estate transactions
However, the electronic processing of title transfers and the in your jurisdiction, whether equity or debt? What are the
recording of liens and encumbrances is expected to become main sources of capital you see active in your market?
available soon.
The ownership of registered real estate can be accessed The primary sources for real estate financing are financial
electronically by legal description or cadastral information. institutions, private lenders, and private funds or investors.
According to the Export and Investment Center of the
Dominican Republic, in their Investment Guide Dominican
registries if it/they make a mistake? Republic 2023, “Real Estate is one of the main drivers of dynamism and
economic growth, representing 17% of the total foreign investment received
between 2013 to 2022.”
The Property Registry Law establishes a Guarantee Fund to In the January–March quarter of 2023, the mortgage interest
ensure the payment of an indemnity to any owner who is adversely rate closed at an average of 12.76% and remained between
affected without fault due to the application of the law. However, 10.41% and 13.20%, according to official numbers from the
as we mentioned, this fund has not been enforced to date. Dominican Central Bank.
Real Estate 2024

The government, in coordination with the monetary authority, a. The purchase and sale contract must be duly legalised by a
has made efforts to facilitate access to mortgage loans with low notary public, or a public deed of purchase must be issued
interest rates by releasing the legal reserve and promoting more by a notary public.
affordable housing projects. Also, with the Mortgage Market b. An original title deed certificate for the property.
and Trust Law No. 189-11 – created to improve the Dominican c. A receipt confirming the payment of the real estate
mortgage market and to cover more sectors of the population property transfer tax.
– the government has promoted policies and tax exemptions to d. An original certification from the Tax Administration
facilitate the development of low-cost housing. indicating that the property is up to date with all applicable
Through Law No. 158-01, the Tourism Promotion Council taxes, or proof of a tax exemption or waiver.
(CONFOTUR) has benefit tourism projects with tax incentives. e. A copy of the identity card or passport of the parties and
At the end of April 2023, the financing portfolio for the their representatives, and a tax ID certification issued by
acquisition and renovations of homes was DOP 307,844 the Tax Administration.
million, representing an increase of 14.2%, equivalent to DOP f. For legal entities: a valid Mercantile Registry certificate; a
38,426 million, more than April 2022. This is evidenced by corporate authorisation to purchase or sell the property; the
the statistics of the Superintendency of Banks, detailing that appointment of a legal representative for the transaction; and
the real estate credit segment of the financial system went from an accurate description of the real property, duly certified
DOP 269,418 million in April 2022 to DOP 307,844 million and registered at the corresponding Mercantile Registry.
in April 2023. This last amount benefitted a total of 128,052 g. Proof of payment of the price for transactions over
clients, some 10,353 more loans than in April of the previous DOP 1 million), due to the Anti-Money Laundering Law.
year. These data represent 18.3% of the total loans granted by h. Any other taxes and stamps as may be applicable.
the economic sector of the local financial system.
7.2 Is the seller under a duty of disclosure? What
6.4 What is the appetite for investors and/or matters must be disclosed?
developers to invest in your region compared to last year
The seller must act in good faith without concealing any
give examples.
information that, if known by the purchaser, would prevent the
purchaser from completing the transaction. The Dominican
Capital in credit portfolios has been allocated to a variety Civil Code provides that “good faith” is presumable, and the
of projects, including the construction of new structures, case law sustains that the acquisition of a property that is
renovation of existing ones, and land acquisition for new tourism supported by a deed free and clear of any liens and encumbrances
development initiatives. According to information from the is presumed as good faith. 
Bank Superintendence as of August 2023, the mortgage loan
portfolio stood at DOP 326.935 billion, benefitting more than
132,000 individuals. 7.3 Can the seller be liable to the buyer for
misrepresentation?
Furthermore, the Dominican Central Bank has recently been
authorised to implement a mechanism to facilitate the financing
of large-scale affordable housing construction projects through Under the Dominican Republic Civil Code, the owner of the
financial intermediaries. This support extends to both public- property must guarantee the purchaser or tenant against hidden
private trusts for low-cost housing projects created under the defects (vicios ocultos) and against eviction.
provisions of the Mortgage Market and Trust Law No. 189-11 The seller may be liable for losses and damages arising in
and other initiatives aimed at constructing such housing projects. connection with a misrepresentation if the misrepresentation
involves material information, which would have changed the
purchaser’s consent if known prior to the transaction.
Also, contractual warranties are normally binding on the
their attractiveness to investors/developers? Please give seller as essential conditions upon which the purchaser has
examples. relied upon to consent to the agreement and, as a result, if any of
them are proven to be false this would effectively provide cause
for the purchaser to unilaterally terminate the agreement.
Following the 2008–2009 economic crisis, the real estate market
has been on an upward trajectory, experiencing dynamic growth
in recent years. Government incentives in the tourism sector, 7.4 Do sellers usually give any form of title “guarantee”
policies supporting housing development, and a consistent or contractual warranties to the buyer? What would be
increase in tourism and investor interest have diversified the scope of these? What is the function of any such
guarantee or warranties (e.g. to apportion risk, to give
investment opportunities in the market.
information)? Would any such guarantee or warranties
The farmland, beach properties and second homes in tourist act as a substitute for the buyer carrying out his own
projects have had more demand after the COVID-19 pandemic. diligence?
72 Liabilities of Buyers and Sellers in Real The parties may agree on any provision within the contract
Estate Transactions without prejudice to any public order matters. However, the
sale agreement must necessarily include the price and the form
7.1 What (if any) are the minimum formalities for the of payment, a description of the property and of the parties.
sale and purchase of real estate? There are other customary provisions, such as: representations
and warranties, including those against hidden defects on
The minimum formalities for the sale and purchase of real estate the property; delivery of the property; and a privilege known
are as follows: as “privilegio del vendedor no pagado”, which is a lien against the
Real Estate 2024

purchaser if the price was not paid in full to the seller but the Additionally, the Anti-Money Laundering Law includes
title deed was effectively delivered to the purchaser at closing. obligations regarding source of funds.
Other representations and warranties clauses are: (i) the seller
has all legal rights with respect to the property and good title,
and the property is free of any liens and encumbrances; (ii) the estate lender seeks to protect itself from default by the
property has not been leased, given as put-option, nor is it in use borrower?
or occupied, whether legally or not, by any third party, unless as
agreed by both parties; (iii) the seller is up to date in any and all
The customary real estate security instrument is the mortgage,
payments of tax and for utility services in connection with the
which must be registered with the corresponding Title Registry
property; (iv) right of peaceful ownership, which stipulates that
to become enforceable against third parties. Equity loans are
there are no claims of ownership by third parties regarding the
typically preferred, as the real property to be acquired serves
real estate property; and (v) there are no claims or litigation in
as collateral. In the case of financial intermediation entities,
progress that may affect the property.
a three-party agreement (involving the seller, purchaser, and
Warranties are not a substitute for buyers conducting their own
lender) is executed, consolidating the sale and loan agreement
due diligence because any actions against a misrepresentation or
provisions into a single document.
warranty would need to be filed before a judge to obtain relief.
The buyer would then have to await a favourable judgment and
initiate the execution process to enforce the judgment. 8.3 What are the common proceedings for realisation
7.5 Does the seller retain any liabilities in respect of involving court proceedings or the contribution of the
the property post sale? Please give details. mortgagor?
Once a property is sold and the sale is complete, the seller Regarding conventional mortgages, there is an option for the
typically does not retain any liabilities related to the property. mortgagee to realise a mortgaged property through direct
The seller is required to disclose any known defects on the attribution of such property without the need for court
property or the property’s title before the sale. proceedings. Two conditions must be met for this to occur: (i)
The sales contract may include representations and warranties the attribution must be specified in the mortgage deed; and (ii)
made by the seller about the condition of the property. These in the event of attribution, an expert will assess the value of the
representations and warranties may provide the buyer with property before the competent court (judicial expert).
certain rights if the property does not meet the stated conditions. The common procedures for both legal and conventional
However, the seller’s liability for breaches of these representations mortgages involve either (i) an amicable sale of the property
and warranties may be limited in duration and scope. if the mortgagor agrees to the purchase price (subject to court
Sellers generally offer buyers a period for due diligence and validation of the purchase price), or (ii) a sale by auction (subject
property inspection. to court initiation and oversight of the auction process).
7.6 What (if any) are the liabilities of the buyer (in 8.4 What minimum formalities are required for real
addition to paying the sale price)? estate lending?
The purchaser is responsible for the payment of the purchase There are no specific legal formalities or requirements for real
price and the transfer taxes and must also proceed with the estate lending by private parties.
formalisation of the transfer of the property under their name in However, financial institutions typically require certain
the corresponding Title Registry. documents before authorising a loan and executing the
corresponding loan agreements. These documents may include:
82 Finance and Banking ■ Identity document of the debtor, and if married, the
spouse’s identity document and marriage certification.
8.1 Please briefly describe any regulations concerning ■ Income documents, such as letters of employment,
the lending of money to finance real estate. Are the rules financial statements, and bank account statements.
different as between resident and non-resident persons ■ Property appraisal by an authorised appraiser.
and/or between individual persons and corporate ■ Credit report.
entities? ■ Having a savings account with the lending bank.
■ Title deed, which must be surveyed.
There are no governmental permissions, approvals or licences ■ Title search issued by the Title Registry
required for foreign or domestic persons or entities to make ■ Certification from the Tax Administration indicating that
real estate loans secured by real property. For financial the property is up to date with applicable taxes or that it
intermediation institutions, restrictions may apply as provided qualifies for a tax waiver or exemption.
by the Financial and Monetary Law No. 183-02, and its ■ Receipt of payment for the real estate property transfer tax.
amendments. The Superintendence of Banks is the supervisory ■ For legal entities, copies of the bylaws and other
body of all banks and finance intermediation entities in the incorporation documents, a current Mercantile Registry
Dominican Republic, in charge of the policies and the issuance certificate, tax ID certification, and corporate authorisation
of regulations, including financing in real estate. The Asset for the sale and purchase of the property duly registered.
Evaluation Regulation is one of the main policies regarding real ■ Life insurance policy, if applicable, for personal loans.
estate that establishes the evaluation of assets, including real
properties and provisions by financial intermediation entities.
Real Estate 2024

8.5 How is a real estate lender protected from claims initiated with the notice to the company and the debtor of the
against the borrower or the real estate asset by other default and its intention to enforce the security interest in the
creditors? company’s shares. The process is expedited when a lender has
the right to appropriate shares given as collateral and it has been
Mortgages provide a priority privilege to the registered creditor duly registered at the corresponding entities. However, when
over unsecured creditors. the insolvency procedure starts, the legal actions are suspended.
92 Tax
8.6 Under what circumstances can security taken by a
If the security is not recorded before the corresponding Title
Registry, it may not be enforceable against third parties with
privileges, and as a result, the creditor would have to compete with Transfer tax is 3% of the sale price or the appraised value of the
all other creditors in case of the execution of the real property. real estate property as determined by the Tax Administration,
whichever amount is higher. The responsibility for paying
transfer taxes falls on the purchaser, although the parties have
8.7 What actions, if any, can a borrower take to the flexibility to agree otherwise in the purchase agreement.

The debtor may pursue various legal actions, including filing
incidental claims (with or without merit). Typically, these claims
are aimed at prolonging the process and delaying the public The 3% transfer tax must be paid within six months of executing
auction sale. Some examples of these incidental claims include the sales contract; otherwise, penalties will apply.
challenging the validity of the notice of payment served by the
bailiff and seeking adjustments to the property sale specifications 9.3 Are transfers of real estate by individuals subject to
filed in court, among others. If these claims are found to be income tax?
unfounded, the court should dismiss them and proceed with the
public auction sale. In certain locations, the judge may handle
Other than the transfer tax, no additional taxes are paid in
the incidental lawsuits separately from the sale of the property.
connection with the transfer of real estate property. However,
When a judge issues a judgment but does not conduct the
individuals may be liable to pay capital gains tax on the sale of
sale on the same day, the debtor may appeal those judgments.
real estate property.
During the sale hearing, the debtor could request a dismissal
because the incidental lawsuits were appealed. While some
judges suspend the sale until all incidental matters are resolved, 9.4 Are transfers of real estate subject to VAT? How
this is not standard practice. In practice, these incidental claims much? Who is liable? Are there any exemptions?
are often accumulated and decided on the day of the public
auction. On the day of the sale, the final judgment is read, and Transfers of real estate are not subject to Value Added Tax (VAT).
the auction takes place. This approach can make it challenging
for the debtor to file further appeals or appeal to higher courts.
While incidental claims should not be appealed, in practice, it is 9.5 What other tax or taxes (if any) are payable by the
seller on the disposal of a property?
sometimes used as a time-consuming tactic.
Capital gains arising from the sale or transfer of property are

subject to a rate of 27%. The taxable gain is generally calculated
corporate rehabilitation process on the position of a real
estate lender?
by subtracting the acquisition cost, adjusted for inflation, from
either the gross selling price or the market value.
The impact of an insolvency process or a corporate restructuring

process on the position of a real estate lender can vary depending 9.6 Is taxation different if ownership of a company (or
on several factors. In most liquidation and corporate restructuring other entity) owning real estate is transferred?
processes, creditors are typically ranked in order of priority for
repayment. Secured creditors, such as real estate lenders with Capital gains realised from the sale of shares are generally subject
mortgages or liens on the property, often have a higher priority to a 1% withholding tax, although this can vary depending on the
than unsecured creditors. This means that real estate lenders specific case. Under a recent reform, if the shares being transferred
may have a better chance of recovering their debt from the sale represent ownership of a company that holds real property assets
or liquidation of the property compared to unsecured creditors. related to a business activity (e.g. leasing), the transfer is exempt
However, when the insolvency process starts, the legal actions from VAT and transfer tax. However, this exemption may be
are suspended, including foreclosure and repossession. challenged by the Tax Administration if it can demonstrate that
the sale was structured as a share deal to avoid transfer tax.
shares? Does a lender have a right to appropriate shares 9.7 Are there any tax issues that a buyer of real estate
in a borrower given as collateral? If so, can shares be should always take into consideration/conduct due
appropriated when a borrower is in administration or has diligence on?
entered another insolvency or reorganisation procedure?
In their due diligence, buyers must verify that the real property
Enforcing security over shares in the Dominican Republic is tax, which amounts to 1% of the property’s value, is up to date
Real Estate 2024

and settled by the seller at the time of purchase. Failure to do 10.4 What taxes are payable on rent either by the
so may result in the Tax Administration transferring the tax landlord or tenant of a business lease?
obligation, along with associated charges and interest, to the
buyer when they pay the transfer tax for the property. Buyers
Tax on rental income. Rental income is subject to a 27%
can request this information from the Tax Administration
income tax for legal entities and a 10% withholding tax for
with the seller’s consent or by providing a copy of the executed individuals. Landlords are responsible for withholding and
purchase agreement. submitting the tax to the Tax Administration.
VAT. Leases are subject to VAT of 18%, which the landlord
102 Leases of Business Premises must withhold and submit to the Tax Administration.
Other taxes due by individual owners. Owners and trusts
10.1 Please briefly describe the main laws that regulate are subject to a 1% annual property tax on their taxable real
leases of business premises. estate holdings exceedingly approximately US$150,000.
The main legal instruments governing leases, whether for 10.5 In what circumstances are business leases
business or residential premises, include the Dominican Civil usually terminated (e.g. at expiry, on default, by either
Code, Decree No. 4807 on Rental and Control of Eviction dated party etc.)? Are there any special provisions allowing a
May 16, 1959, and Law No. 4314 dated October 22, 1955, which tenant to extend or renew the lease or for either party
regulates the provision and application of securities in tenancy to be compensated by the other for any reason on
termination?
and was modified by Law No. 17-88 dated February 5, 1988.
Currently, the Congress is considering a new bill to regulate
housing rentals and evictions, with the aim of streamlining the Leases are typically terminated under the following circumstances:
eviction process for non-paying tenants and reducing the time ■ The term of the lease expires without renewal.
for such evictions. ■ Default or failure to comply with payment obligations and
other breaches of the contract expressly provided for.
■ Mutual consent of both parties.
10.2 What types of business lease exist? ■ Destruction of the leased property.
■ Unauthorised use of the property, especially if it negatively
There are no specific provisions in Dominican law regarding affects the landowner.
business leases. ■ Subleasing the property in whole or part, if expressly
prohibited.
■ The tenant performing modifications to the property
10.3 What are the typical provisions for leases of
business premises in your jurisdiction regarding: (a)
without the landowner’s consent.
sell or sub-lease; (d) insurance; (e) (i) change of control 10.6 Does the landlord and/or the tenant of a business
of the tenant; and (ii) transfer of lease as a result of a lease cease to be liable for their respective obligations
corporate restructuring (e.g. merger); and (f) repairs? under the lease once they have sold their interest? Can
they be responsible after the sale in respect of pre-sale
a. There are no legal restrictions on a minimum or maximum non-compliance?
lease term; however, a lease term must be included and
agreed upon by the parties. Unless specified otherwise, landlords and tenants are typically
b. Lease agreements often include a yearly rent increase, either no longer liable for their obligations once they have transferred
in the form of a fixed percentage or with reference to the their interests.
national annual inflation rate established by the Dominican
Central Bank.
c. Under the Civil Code, tenants have the right to assign the landlords and tenants designed to promote greater
lease agreement or sublease the property, unless such actions sustainable use of buildings and in the reduction of
are explicitly prohibited in the agreement. the “environmental footprint” of a building. Please
d. Insurance for leases is not mandatory under the law, but briefly describe any “green obligations” commonly
parties can choose to include it in their contract if they agree found in leases stating whether these are clearly
to do so. defined, enforceable legal obligations or something not
e. Change of control provisions can be included in commercial
leases, but a change in the control of the tenant’s shares does
not automatically terminate the lease unless such a provision
is specifically outlined in the lease agreement. The Dominican Republic’s legislation does not include specific
If the lease agreement does not include the sale of the green lease obligations.
property as a cause for termination, the purchaser is typically
bound by the lease. However, the purchaser must serve 10.8 Are there any trends in your market towards more
notice to the tenant for the transfer to be executed in their flexible space for occupiers, such as shared short-
favour and be enforceable against third parties. term working spaces (co-working) or shared residential
f. Upon the termination of the lease agreement, the tenant is spaces with greater levels of facilities/activities for
obligated to return the property in the same condition as it residents (co-living)? If so, please provide examples/
was originally received. Therefore, the tenant must cover details.
the costs of any necessary repairs to achieve this condition.
Security deposit provisions are common in lease agreements, There is a growing demand for co-working spaces, as the
and it is typical to include clauses specifying the tenant’s COVID-19 pandemic generated the adoption of a hybrid work
responsibility for covering damages. model.
Real Estate 2024

112 Leases of Residential Premises 122 Public Law Permits and Obligations
11.1 Please briefly describe the main laws that regulate 12.1 What are the main laws which govern zoning/
leases of residential premises. permitting and related matters concerning the use,
The main legal instruments governing leases, whether for
business or residential premises, include the Dominican Civil
Code, Decree No. 4807 on Rental and Control of Eviction dated ■ Law No. 975-44, which sets forth the main legal provisions
May 16, 1959, and Law No. 4314 dated October 22, 1955, which pertaining to zoning and the use of land.
regulates the provision and application of securities in tenancy ■ Law No. 176-07 of the National District and the
and was modified by Law No. 17-88 dated February 5, 1988. Municipalities, which regulates the Dominican municipal
Currently, the Congress is considering a new bill to regulate (city council) system.
housing rentals and evictions, with the aim of streamlining the ■ Law No. 675 on Urbanization, Public Ornament and
eviction process for non-paying tenants and reducing the time Constructions.
for such evictions. In addition, Laws No. 64-00, and No. 202-04 (environmental
laws) set forth provisions regarding zoning in specific regions of
the national territory and include a series of limitations with regard
11.2 Do the laws differ if the premises are intended for to the use of lands declared as national parks or protected areas.
The laws do not differ if the premises are intended for multiple
residential occupiers. mechanism.
11.3 What would typical provisions for a lease of The Dominican Constitution grants eminent domain powers to
residential premises be in your jurisdiction regarding: the Dominican government. Compensation for expropriated
(a) length of term; (b) rent increases/controls; (c) the
property is determined either through an agreement between
the term; and (d) the tenant’s contribution/obligation to the government and the landowner or by a ruling issued by the
the property “costs”, e.g. insurance and repair? competent court.
According to the Property Registry Law, in cases of
government expropriation of real estate, the Title Registry will
Typical provisions for a lease of residential premises are:
not register any transfer of rights related to the property until
a. A one-year term that automatically renews unless either
proof of compensation is provided.
party provides a 60-day termination notice.
b. An estimated annual increase of 5–10% in monthly
payments. 12.3 Which bodies control land/building use and/
c. Tenant obligations continue until the property is effectively or occupation and environmental regulation? How do
returned to the owner with verification through a written buyers obtain reliable information on these matters?
receipt.
d. The tenant typically pays for utilities and private services, The construction must comply with building codes provided by
including electricity, water, garbage, cable, telephone, and the Ministry of Public Works, the Environment Ministry, the
Internet. Municipality, and, in tourist areas, by the Ministry of Tourism.
Land use and zoning permits are issued by the municipalities,
the Ministry of Environment and the Ministry of Tourism (if
a residential lease and what steps would be needed to the property is located in a tourist zone).
achieve vacant possession if the circumstances existed
for the right to be exercised? 12.4 What main permits or licences are required for
building works and/or the use of real estate?
A landlord can terminate a residential lease and vacate the
property as provided in the lease contract and under the The main permits and licences for building works and the use of
following circumstances: real estate are as follows:
■ Failure to pay rent when due. ■ Certification of non-objection of the use of land issued by
■ Use of the rented property for purposes different from the municipality.
what was agreed upon, if it affects the owner, public order, ■ Construction permit duly issued by the Ministry of Public
or good manners. Works.
■ Total or partial sublease of the property if prohibited in ■ Certification of non-objection of the use of land issued
the agreement. by the Ministry of Environment and Natural Resource, if
■ Modification of the leased property. required.
■ If the property requires repairs, remodelling, or new ■ Certification of non-objection of the use of land issued by
construction. the Ministry of Tourism, if required.
■ If the property will be occupied by the owner, their spouse, ■ Certification of approval by the National Bureau of
or relatives. Architectural Heritage, if required.
■ Approved waterworks plans by the Santo Domingo Water
and Aqueduct Corporation or the National Institute of
Potable Water and Sewers, as applicable, for residential
Real Estate 2024

developments of more than 10 housing units or more than technologies. Depending on the specific technology used in
10,000 square metres (107,639.1 square feet). each project, owners or tenants of family dwellings, commercial,
■ If construction is performed within 60 metres of the or industrial buildings that change or expand to incorporate
shoreline, a presidential authorisation is required. renewable energy systems for their private energy consumption
can receive incentives of up to 75% of the equipment costs in
the form of a single income tax credit. These projects must be
obtained in your jurisdiction? Can implied permission be approved by the competent government agencies.
132 Climate Change
Construction permits are commonly obtained in the Dominican
Republic. Implied permission cannot be obtained in any way. 13.1 Please briefly explain the nature and extent of
12.6 What is the typical cost of building/use permits and scheme).
The Dominican National Development Strategy 2030, enacted

The time and cost of obtaining building and use permits vary into law in January 2012, places a central emphasis on national
based on the number of permits required and the complexity of adaptation to climate change. Law No. 1-12, as part of this
the project. strategy, commits to a binding reduction of greenhouse gas
(GHG) emissions by 25% by 2030 compared to 2010 levels. It
12.7 Are there any regulations on the protection of also mandates a periodic review of emission reduction targets
historic monuments in your jurisdiction? If any, when every five years until 2030. Additionally, the law sets a goal of
and how are they likely to affect the transfer of rights in achieving a 140% increase in GDP from 2010 to 2030.
real estate or development/change of use? The National Council on Climate Change and Clean
Development Mechanism (NCCCDM), chaired by the
The Dominican Republic Constitution stipulates that the President of the Dominican Republic, plays a crucial role in
cultural heritage of the Nation, both material and immaterial, formulating policies to prevent and mitigate GHG emissions.
is under the protection of the State. The State is responsible for It also promotes the development of programmes, projects,
ensuring its protection, enrichment, conservation, restoration, and strategies for climate action. Furthermore, the NCCCDM
and value. Additionally, assets of the cultural heritage of the ensures compliance with climate change commitments made
Nation, whether owned or acquired by the State, are inalienable, with the United Nations.
unencumbered, and their ownership is imprescriptible.
Law No. 318-1978 for the Cultural Heritage of the Nation 13.2 Are there any national greenhouse gas emissions
empowers the State to regulate all matters related to the reduction targets?
protection, conservation, enrichment, and utilisation of the
cultural heritage of the Nation. The Dominican National Development Strategy 2030
Furthermore, Law No. 492-1969 designates the Colonial establishes a target to reduce emissions by 2.8 tons per capita
Zone of Santo Domingo as protected cultural heritage. by 2030.
According to the Executive Vice-President of the NCCCDM,
12.8 How can, e.g. a potential buyer obtain reliable in 2021, the Dominican Republic emitted 2.47 tons of CO2
information on contamination and pollution of real per capita. This data is based on the National Inventory of
estate? Is there a public register of contaminated land in Greenhouse Gases conducted as part of the Third National
your jurisdiction? Communication on Climate Change. It positions the Dominican
Republic among the countries with the lowest GHG emissions
Private studies can assess contamination or pollution levels in Latin America.
of a property. We are not aware of any public records of
contaminated land in the country.
13.3 Are there any other regulatory measures
(not already mentioned) which aim to improve the
12.9 In what circumstances (if any) is environmental sustainability of both newly constructed and existing
clean-up ever mandatory? buildings?
Dominican Environmental Law No. 64-00 requires that any We are not aware of any additional regulatory measures to
person that causes damage to the environment or natural resources enhance the sustainability of both newly constructed and
is held liable and must repair such damage at their own cost. existing buildings.

142 COVID-19
the energy performance of buildings in your jurisdiction. 14.1 Please detail any laws that govern real estate in
In our jurisdiction, there are currently no regulatory requirements which remain in place.
for assessing and managing the energy performance of
buildings. However, Law No. 57-07 on Incentives for Renewable
Energy offers incentives for the adoption of renewable energy This is not applicable.
Real Estate 2024

Dr. Aimée Prieto is a partner at Prieto Cabrera & Asociados, a leading firm in the Dominican Republic. Aimée is an attorney with more than
20 years of experience and a practice specialising in real estate, asset recovery, and litigation. Aimée has advised over 150 real estate
transactions in the Dominican Republic.
Aimée holds certifications as a Certified Fraud Examiner (CFE 2014) and a Certified Mediator (NCPM 2023).
Aimée’s prior experience in business law and government work gives her a competitive advantage over many other lawyers. Before founding Prieto
Cabrera & Asociados, Aimée was an advisor to the Dominican Republic’s Presidential Office of Information and Communication Technologies.
She also was an associate attorney in the Business, Corporate and Intellectual Property Departments of a prominent full-service law firm.
Since 2015, Aimée has been the exclusive member of ICC FraudNet for the Dominican Republic and has served on its board of directors
from 2018 to present day. FraudNet is the world’s leading asset recovery legal network, known for its an ample cross-border collaboration
among its members.
Aimée is a founding member for IWIRC Latin America (IWIRC is the International Women’s Insolvency and Restructuring Confederation). She
served as its Co-Chair from 2019 to 2022 and currently holds the position of Latin America Regional Coordinator.
Prieto Cabrera & Asociados Tel: +1 809 541 1444

Haim Lopez Penha No. 19, Paraiso Email: aprieto@prietocabrera.com
Santo Domingo, National District URL: www.prietocabrera.com
Dominican Republic
Prieto Cabrera & Asociados is a leading firm in real estate transactions and
asset recovery in the Dominican Republic.
Prieto Cabrera & Asociados has ample experience providing legal services
on: (i) real estate transactions (including acquisitions, sales, leases,
condominiums, fractional ownerships, liens, mortgages, loans, foreclosures,
negotiations, closings, etc.); (ii) foreign investment in the Dominican Republic;
(iii) asset recovery and investigation in the Dominican Republic and abroad;
(iv) litigation; (v) business organisation and corporate transactions; (vi)
insolvency; (vii) intellectual property; (viii) contractual document review,
drafting and advice; and (ix) technology, privacy and data protection.
Prieto Cabrera & Asociados is the Dominican Republic’s only member of
FraudNet, the fraud prevention network of the International Chamber of
Commerce (ICC) Commercial Crime Services. FraudNet has been recognised
by Chambers Global as the world’s leading asset recovery legal network.
www.prietocabrera.com
Real Estate 2024

44 Chapter 6
England & Wales

England & Wales
Norton Rose Fulbright LLP Rowenna Butler
impact of international law on these related areas will have

12 Real Estate Law repercussions for real estate transactions.

22 Ownership
response to question 10.1. Those relating to zoning and 2.1 Are there legal restrictions on ownership of real
environmental should be listed in response to question estate by particular classes of persons (e.g. non-resident
12.1. Those relating to tax should be listed in response to persons)?
Any person over the age of 18, of whatever nationality, may buy
Real estate in England and Wales is underpinned by two main and sell freehold land without restriction. Until recently, it was
pieces of legislation: the Law of Property Act 1925; and the Land also the case that any corporate entity, wherever established,
Registration Act 2002. may hold and dispose of freehold land, provided that it has the
The 1925 Act introduced major reforms to pre-existing real corporate power to do so (subject to any applicable UK, EU or
estate law in order to consolidate and modernise it. It is wide- UN sanctions in force at any time). The position has now changed
ranging and establishes general principles, such as the estates for overseas entities as a result of Part 1 of the Economic Crime
and interests in land that can exist at law. (Transparency and Enforcement) Act 2022 (Part 1 ECA 2022).
Ownership of land and many of the rights and burdens that Part 1 ECA 2022 came into force on 1 August 2022 and
affect it must be registered at the Land Registry, a government establishes a compulsory registration regime for overseas entities
agency. The land registration regime is set out in the Land who already own, or wish to own, land in the UK.
Registration Act 2002 and accompanying regulations. In broad terms:
However, these two Acts are not all-inclusive and other ■ Any overseas entity that owns, or wishes to own, land in
legislation governs various aspects of real estate law and practice, the UK is required to be registered in a new register of
such as the execution formalities for contracts and deeds. overseas entities (ROE) maintained by Companies House.
■ Registration involves the overseas entity providing
prescribed information (which must be verified
1.2 What is the impact (if any) on real estate of local independently) and statements about itself and its
common law in your jurisdiction? registrable beneficial owners or, if it has none, its managing
officers. Additional information must be disclosed where
The law in England and Wales comprises legislation, common law a registrable beneficial owner is a trustee. There is also an
and equity. Common law – generally the body of law built up by annual updating requirement.
the precedent of the courts – is therefore an important element ■ Overseas entities that acquired UK land on or after 1 January
in modern real estate law. It is continually developing and plays 1999 but before 1 August 2022 had until 31 January 2023 to
a critical part in the application and interpretation of legislation. apply for registration in the ROE.
■ A failure to register or to comply with the requirement to
update the register annually means that an overseas entity:
1.3 Are international laws relevant to real estate in your
■ cannot be registered at the Land Registry as the legal
in EU countries.
owner of land; and
■ where already registered as legal owner, cannot sell,
charge or grant a lease of the land for a term of more
Real estate is governed by the law of domestic jurisdictions. As a than seven years as any buyer, chargee or lessee will not
result, legal formalities and requirements relating to it are largely be able to register the disposition at the Land Registry.
untouched by international laws. In fact, increasing legislative ■ Compliance is enforced through restrictions on the title
devolution within the UK is having more of an impact in some registers of land owned by overseas entities. There are also
of these areas than international law. criminal sanctions for non-compliance and for delivering
However, real estate transactions are not ring-fenced and misleading, false or deceptive information.
many other areas of law that impact on real estate have an In addition, non-UK resident trusts that have acquired UK
international element. For example, environmental principles, land after 6 October 2020 are required to register with the Trust
laws and policies in the UK often derive from a web of Registration Service, regardless of whether they are liable to pay
international agreements, EU legislation and UK law. Any any UK tax.
Real Estate 2024

caused by mistakes in the register (or in search results) relating

32 Real Estate Rights to a registered title, even if the mistake is the result of forged
documents. The Land Registry has the right to recover payments
3.1 What are the types of rights over land recognised from third parties wholly or partly responsible for the mistake.
in your jurisdiction? Are any of them purely contractual
Several categories of rights over land are recognised in England
and Wales:
a) Ownership rights. There are three types of ownership The Land Registration Act 2002 specifies the dispositions that
interest: freehold; leasehold; and commonhold. Of these, must be substantively registered in the land register. These
commonhold is not widely used. include: the transfer of freehold land or a lease with more than
b) Legal rights over land that must be created by deed, such as seven years to run; the grant of a lease of over seven years; and
legal charges. the grant of a legal charge.
c) Equitable rights. Many are created by contract, such as The consequences of non-registration will depend on whether
agreements for sale, options and agreements for lease. or not it is a first registration:
d) Rights that can arise without any documentation, such as a) if it is, the legal interest reverts to the disponor after a
“prescriptive” rights arising as a result of a long period of specified period; and
use without challenge. b) in the case of registered land, legal title does not pass until
a disposition is registered.
The disposition would also lose priority to any other registered
diverges from the right to a building constructed ahead of it.
thereon?
Divergence arises where freehold land is subject to a lease of a registered?
building or part of a building on the land. The freehold and
leasehold interests would co-exist for the period of the lease but There are two main categories of rights that are not required to
the divergence would end on the termination of the lease. be registered in the land register:
a) “overriding interests” that include most leases of seven
3.3 Is there a split between legal title and beneficial years or less and the interests of persons in actual
title in your jurisdiction and what are the registration occupation; and
consequences of any split? Are there any proposals to b) minor or equitable interests such as contracts for sale and
change this? interests under a trust of land. However, while these are
not required to be registered, they should be protected by
Yes, there is a split between legal and beneficial title to land in recording a notice or restriction on the register.
England and Wales.
If there is more than one legal owner of land, the beneficial 4.5 Where there are both unregistered and registered
interest is held “on trust” for themselves. The legal owner(s) land or rights is there a probationary period following
can also hold the beneficial interest on trust for one or more first registration or are there perhaps different classes
third parties. or qualities of title on first registration? Please give
Only the legal title is registrable at the Land Registry. However, details. First registration means the occasion upon
beneficial interests can be protected with a “restriction” against which unregistered land or rights are first registered in
the legal title to protect the beneficiaries’ interests. the registries.
We refer, in question 2.1 above, to the ROE and the registration
of certain beneficial ownership information of overseas entities. When an application to register a disposition of registered or
The ROE is separate to the land register. unregistered land is submitted, registration is not instantaneous
as the Land Registry will examine the application to ensure that
42 System of Registration it is satisfactory. If satisfied, the Land Registry will register the
disposition with one of four classes of title:
a) Title absolute – which is the best quality of title.
registered? What land (or rights) are unregistered? b) Possessory – where the title is based only on adverse
possession of the land for the requisite period.
c) Qualified – where the title is qualified because of a defect,
Yes. Unregistered land in England and Wales must be registered such as a missing title document.
on the occurrence of one of several “triggers”, including a d) Good leasehold – where the Land Registry is satisfied as to
transfer, the grant of a lease for more than seven years and the
the title to a lease but has not seen the lessor’s title to grant
grant of a mortgage.
the lease.
The Land Registry is aiming for 100% registration by 2030.
At present, about 12% of land remains unregistered.
guarantee?
Buying and selling land is usually a two-stage process.
The first stage ends with a contract to buy and sell land. It
Yes, a registered title is guaranteed by the state. In general terms,
is not an immediate transfer of ownership but this commits the
the Land Registry is required to indemnify anyone against loss
Real Estate 2024

46 England & Wales
parties to the transaction and passes beneficial ownership (and 5.5 Are there restrictions on public access to the
therefore risk) to the prospective buyer. The second stage ends register? Can a buyer obtain all the information he
with the payment of the purchase price and the transfer of legal might reasonably need regarding encumbrances and
ownership, subject to the registration requirement. other rights affecting real estate and is this achieved
It is possible (but not usual) for the two stages to be concluded by a search of the register? If not, what additional
simultaneously.
There are no restrictions on public access to the land register

4.7 Please briefly describe how some rights obtain and the documents referred to in them, although commercially
sensitive information can be withheld from copies of leases and
rights?
other documents, provided a prescribed procedure is followed.
The land register is not conclusive and a buyer would need
The basic rule is that the priority of rights is determined by the to conduct numerous other searches and enquiries to obtain all
date of creation. the available information relating to a property. These would
However, special priority rules apply in relation to registrable include a local authority search, formal enquiries of the seller
dispositions of registered land for value. When such a disposition and a physical survey of the property.
is registered, the only interests that take priority are “overriding
interests” and interests that have been protected by a notice on 62 Real Estate Market
the register – see question 4.4 above.
52 The Registry / Registries and the buyer’s finance provider) would normally be
jurisdiction? If more than one please specify their
differing rules and requirements. Solicitors attend to exchange (of the sale contract) and to
completion (of the transfer and ancillary documentation). The
There is one land registry for England and Wales: HM Land seller’s solicitors usually prepare the draft documents and, in
Registry. addition to negotiating the documents, the buyer’s solicitors
investigate title (including raising enquiries and searches) and
deal with post-completion matters including payment of Stamp
5.2 How do the owners of registered real estate prove Duty Land Tax (SDLT) (or, in Wales, Land Transaction Tax) and
their title? registration. Local lawyers may be engaged to provide foreign
legal opinions.
Title to registered land is proved by the information recorded Agents market the property and agree the main commercial
in the land register. Official copies of a registered title can be terms at the outset of the transaction. They may continue to
obtained as evidence of title. assist the parties in agreeing commercial matters throughout the
sale process.
Surveyors may be engaged to carry out structural surveys,
5.3 Can any transaction relating to registered real undertake environmental or other technical due diligence or
estate be completed electronically? What documents provide a valuation.
In the case of overseas entities, company service providers
on ownership of registered real estate be accessed
may also be involved to provide verification and registration
electronically? services in relation to the ROE (see question 2.1 above).
The Land Registry accepts registration transfers and certain 6.2 How and on what basis are these persons
other deeds that have been executed electronically, provided remunerated?
that specified requirements are complied with.
The Land Registry also has several projects underway to Solicitors (and accountants used for structuring or tax mitigation
extend electronic conveyancing further. purposes) are typically remunerated by reference to hourly rates,
Applications to register can be submitted electronically in sometimes subject to a cap or fixed-fee arrangement. Agents,
most cases. surveyors and company service providers generally operate on a
The documents needed to be provided for registration will fixed-fee structure, the former as a percentage of the sale price.
vary depending on the transaction, the parties and whether or
not the land is already registered. Many of the documents must 6.3 Is there any change in the sources or the
be in a prescribed form. availability of capital to finance real estate transactions
The land register is held in electronic format and ownership in your jurisdiction, whether equity or debt? What are the
information can be accessed electronically. main sources of capital you see active in your market?
5.4 Can compensation be claimed from the registry/ Debt remains available at competitive pricing for the right assets;
registries if it/they make a mistake? however, the increased cost of borrowing coupled with broader
economic uncertainty is undoubtedly impacting pricing and
activity across all sectors. JLL reports that commercial property
Yes, see question 4.2 above. investment volumes in H1 2023 were at approximately £14.2
billion, marking a 53% reduction during the same period in
2022. Consequently, H1 2023 is the weakest H1 since 2020, when
volumes fell as low as £13.3 billion as a result of the pandemic.
Real Estate 2024

Although overall investor confidence has reduced significantly 7.4 Do sellers usually give any form of title “guarantee”
in recent months, international investors continue to recognise or contractual warranties to the buyer? What would be
the opportunities in the UK, with JLL reporting that investment the scope of these? What is the function of any such
from the US and Asia Pacific continues to remain strong as a guarantee or warranties (e.g. to apportion risk, to give
result of the weaker pound. information)? Would any such guarantee or warranties
act as a substitute for the buyer carrying out his own
diligence?
6.4 What is the appetite for investors and/or
and what are the sectors/areas of most interest? Please Sellers generally do not give contractual warranties on the sale of
give examples. a property, although note the implied title covenants (see question
7.5 below) and the potential liability for misrepresentation (see
question 7.3 above). Where the acquisition of property is via
The instability of the UK economy and the corresponding the purchase of shares in the property-owning company, the
increased cost of borrowing has discouraged some investors; share purchase agreement would typically include contractual
however, there remains appetite for certain sectors, particularly warranties, which are intended both to apportion risk and to elicit
for overseas investors. An increasing demand for renewable disclosure of information from the seller but are not considered a
energy solutions has strengthened the energy sector, with the substitute for the buyer carrying out its own due diligence (even
industrial and logistics sector remaining strong and the leisure where warranty and indemnity insurance is used).
sector continuing its recovery. Interest in the office market
continues to be patchy, particularly as corporates continue to
assess their occupational requirements. 7.5 Does the seller retain any liabilities in respect of

sub sectors slowing down in your jurisdiction in terms of Property is generally transferred with full title guarantee or (less
their attractiveness to investors/developers? Please give commonly, for example, if the seller is a trustee) limited title
examples. guarantee. When these covenants for title are used, they imply
statutory warranties, although these can be modified by agreement.
The retail and leisure sectors are continuing a post-pandemic In both cases, the seller warrants that it has the title it purports
recovery and the hotel sector is seeing particular signs of to sell. Full title guarantee also implies that the property is free
improvement. In the office market, flexible working operators from encumbrances (other than those the seller does not know and
continue to fare well while taking advantage of the continued could not reasonably be expected to know about) and limited title
uncertainty of corporate occupiers adapting to new hybrid working guarantee implies that the seller has not encumbered the property.
practices. There appears to be a growing demand for alternative If land at the property is contaminated, responsibility for such
asset classes, with data centres and renewable energy projects being is allocated pursuant to the contaminated land regime established
a frontrunner for development projects in the year ahead. in the Environmental Protection Act 1990. The polluter-pays
principle means that if the seller caused any pollution, they may
retain liability post-sale for it including its remediation. There
72 Liabilities of Buyers and Sellers in Real is the ability to transfer liabilities of the seller to the buyer and
Estate Transactions this should be considered and negotiated during the transaction.
7.1 What (if any) are the minimum formalities for the
7.6 What (if any) are the liabilities of the buyer (in
sale and purchase of real estate?
English law requires that an agreement for the sale of land is in

Typically, buyers will give an indemnity covenant in the transfer
writing, contains all matters expressly agreed in one document
to comply with any ongoing liabilities of the seller relating to
(although terms may be incorporated by reference) and is signed
the property.
by all parties. Transfers (and certain other documents, including
With regard to contaminated land, please see our response at
leases) must be deeds and, in the case of registered land, a
question 7.5 above as the buyer may assume liability from the
transfer is required to be in a prescribed form and registered
seller and this should be considered during the transaction. It
at the Land Registry in order to confer legal title on the buyer.
should be noted that even if a buyer does not cause contamination
but knowingly permits any contamination, they may be liable for
7.2 Is the seller under a duty of disclosure? What such. Additionally, even if the buyer is not deemed a causer
matters must be disclosed? or knowing permitter of contamination, if no such person can
be found (or the entity is no longer in existence), liability for
The common law principle of caveat emptor means that the onus remediation may fall on the owner (buyer) or occupier (tenant)
is on the buyer to investigate title to the property and raise of the land depending on the terms of the lease.
enquiries. Title covenants given by a seller on a transfer require
the disclosure of encumbrances of which it is aware and latent 82 Finance and Banking
defects; however, there is no general duty of disclosure.
misrepresentation?
entities?
Yes, if the untrue statement induced the buyer to purchase and
the buyer suffers loss as a result. Lending to finance commercial real estate is generally not
subject to regulation. The exception is where the borrower is
Real Estate 2024

48 England & Wales
an individual where the lending may be subject to the Consumer the security taken. As indicated in question 8.2 above, the lender
Credit Act 2006. Lending institutions regulated by the Financial may prohibit the borrower from taking on additional financial
Conduct Authority, one of the UK’s financial regulators, will liabilities, disposing of its assets or granting other security. The
also be subject to the standards prescribed to it. security package itself limits the ability of other creditors to
More generally, lending activity undertaken by banks and make a claim against the secured assets.
insurance companies is subject to regulatory capital requirements
and this can have a bearing on the nature and amount of lending
undertaken by such entities.
8.2 What are the main methods by which a real Certain transactions entered into by a company within a
specified period before insolvency may be set aside, or otherwise
borrower?
adjusted by an order of the court, under the provisions of
the Insolvency Act 1986. Possible grounds for challenging a
Lenders can take a variety of measures to protect their transaction include that a transaction is at an undervalue or a
investment, depending on their risk appetite and to provide preference of a particular creditor.
alternative enforcement options:
1) The security package required by the lender may include:
a) A charge over the real estate asset. 8.7 What actions, if any, can a borrower take to
b) A charge over the rights of the owner in relation to the
asset and associated key contracts.
c) A third-party guarantee. Although there is no statutory power to stop a sale, it may be
d) A charge over the shares in the property-owning possible for the borrower to challenge enforcement on various
entity/borrower and its assets. grounds, such as the lack of sale at best price or unfairness under
2) The loan agreement may impose: the Consumer Credit Act 1974. A borrower may also be able to
a) Limitations on the borrower’s ability to dispose of or apply for postponement if it becomes apparent that it can repay
grant other security over its assets and other restrictions the sums due within a reasonable time.
in relation to the assets. A borrower may also use a rehabilitative or insolvency process
b) Financial covenants relating to the financial performance in a way that impacts on a lender – see question 8.8 below.
of the asset that is being financed.
c) Undertakings to manage the real estate asset to preserve
its value. corporate rehabilitation process on the position of a real
estate lender?
of mortgaged properties? Are there any options for a “Liquidation” is a distributive process, whereby the assets of an
insolvent entity are distributed amongst its creditors in order of
involving court proceedings or the contribution of the
mortgagor?
priority prior to the entity being wound up.
“Administration” is a rehabilitative process. Where there is a
better chance of recovery for creditors if the company continues
There are statutory rights of sale and possession for mortgagees to trade, it will enter into administration whilst an insolvency
of real estate assets under the Law of Property Act 1925, although practitioner seeks to sell any part of the business as a going
these will also usually be set out in the security document. The concern. During that period, a statutory moratorium applies,
mortgagee will be given the power to appoint a receiver to take preventing secured creditors from enforcing their security
possession of the property and sell it. There is no need to apply without the consent of the administrator or the leave of the court.
to the court to exercise these rights. The lender can choose to The Corporate Insolvency and Governance Act 2020
take the proceeds of lettings instead of selling the property. introduced two new restructuring tools:
Alternatively, a sale of the property may be achieved by selling i) A short moratorium against creditor action for companies
the shares in the property-owning entity by enforcing the share that are, or are likely to become, insolvent and where the
security. moratorium is likely to result in the rescue of the company
as a going concern. The company directors remain in
8.4 What minimum formalities are required for real control, under the supervision of a monitor, with a view to
estate lending? seeking resolution through an informal restructuring with
creditors, or a formal insolvency procedure. However,
There are no formalities for real estate lending, although if the monitor is not satisfied that the company is able to
there are certain formalities – such as execution, notice and meet its obligations to financial creditors for amounts due
registration requirements – that must be complied with to during the moratorium period, the moratorium process is
ensure that the security is valid and has the required priority not available. Also, if the company defaults on meeting
against third parties. its payment obligations to financial creditors during a
moratorium period, the moratorium will come to an end.
ii) A restructuring scheme of arrangement for companies
8.5 How is a real estate lender protected from claims that have encountered, or are likely to encounter, financial
difficulties that are affecting, or will or may affect, their
creditors?
ability to carry on business as a going concern. The aim is
to facilitate the implementation of a restructuring plan that
Protection against claims by other creditors is linked to the type achieves a compromise or arrangement with creditors or
of contractual protections that the lender has put in place and shareholders to eliminate, reduce or prevent such financial
Real Estate 2024

difficulties. Creditor classes will be asked to vote on the A potential 3% SDLT surcharge may be payable for a second/
restructuring plan. If 75% or more in value of claims in additional residential property, and is applicable to corporate
each creditor class vote in favour of the plan, the plan can purchasers of residential property. A higher rate of 15% applies
bind dissenting creditors of that class. In addition, a cross- to residential purchases over £500,000 by certain corporate
class cram-down of the claims of a class that did not vote in vehicles (although there are exemptions). Purchasers who
favour of the plan can occur if sanctioned by the court in are regarded as non-UK tax resident are also subject to a 2%
cases where at least one other class of creditors has approved surcharge on the acquisition of residential property.
the plan and the dissenting class of creditors is unlikely to be SDLT in relation to new leases is calculated by reference to the
worse off in the relevant alternative insolvency procedure. “net present value” of the total rent payable over the term of the
lease as well as the lease premium.
shares? Does a lender have a right to appropriate shares 9.2 When is the transfer tax paid?
The time limit for paying SDLT is currently 14 days from the
“effective date” of a transaction. The effective date is the earlier
of completion of the transaction or “substantial performance”
Where the lender has taken security over shares, they may also take of the contract (the point at which the buyer or tenant takes
a stock transfer form executed in blank so that they can enforce by possession of a property, makes the first payment of rent or pays
completing that transfer form to transfer the shares to a purchaser a substantial amount of the purchase price).
and apply the proceeds of sale towards the secured debt.
It is also possible to appropriate and take ownership of the shares
9.3 Are transfers of real estate by individuals subject to
in lieu of the secured debt, provided a fair method of valuation of
income tax?
the shares is agreed.
Generally, transfers by individuals of property held as an

92 Tax
investment are not subject to income tax (they could be subject
to capital gains tax, please see below), but individuals are subject
9.1 Are transfers of real estate subject to a transfer to income tax on rental profit received from rented property.

SDLT is payable on acquisitions of a chargeable interest in much? Who is liable? Are there any exemptions?
land. The terms “acquisition” and “chargeable interest” are
both widely defined and include sales, grants of new leases,
surrenders and re-grants of any estate, interest or right in or over The starting point is that supplies of UK land are exempt
land (subject to a few exceptions). from VAT, with some exceptions such as: i) the transfer of the
SDLT is charged on land and property in England and Northern freehold of a new (being less than three years old) or partially
Ireland. Land and Buildings Transaction Tax applies to property completed building (which can either be standard-rated or zero-
in Scotland and Land Transaction Tax applies to property in rated depending on the circumstances); and ii) the transfer of
Wales. These regimes are similar but not identical to SDLT. all or part of a business as a going concern, which is outside the
scope of VAT (subject to certain conditions being met).
The rate of SDLT will depend on whether the subject matter
A property owner can elect to charge VAT on supplies of
is residential or non-residential/mixed-use. For residential
commercial property. This means that VAT is charged to the
property, the rate will also depend on the nature of the purchaser
tenant or buyer at the standard rate (currently 20%) on the rental
and whether this would be an additional residence for them.
income or purchase price (unless the transaction is a transfer of
It is the purchaser who is liable for the tax, at the appropriate
a business as a going concern and the necessary conditions are
rate.
met – such as the sale of a property rental business – in which
case the sale is outside the scope of VAT). The seller is required
Non-residential/mixed-use SDLT rates
to account to the UK tax authority for VAT on the supplies it has
Rate per band Consideration band made, less its recoverable VAT, at the end of each VAT period.
0% £0–£150,000
9.5 What other tax or taxes (if any) are payable by the
2% £150,001–£250,000 seller on the disposal of a property?
5% Over £250,000
Gains realised on a direct or indirect disposal of UK land are
Residential use SDLT rates subject to capital gains tax (for individuals) and corporation tax
Rate per band Consideration band (for companies), subject to any exemptions and reliefs.
0% £0–£250,000* Individuals
5% £250,001–£925,000 Both UK and non-UK resident individuals are subject to
capital gains tax, which is charged at 18% or 28% on residential
10% £925,001–£1,500,000
property, depending on the individual’s tax band and subject to
12% £1,500,001+ applicable reliefs (including private residence relief ), and 10% or
20% on other chargeable assets (including commercial property
*until 31 March 2025, following which the 0% band is due and indirect disposals).
to revert to £0–£125,000, and the previous 2% band will be
reinstated for consideration between £125,001–£250,000.
Real Estate 2024

50 England & Wales
Companies of their lease so that, unless the landlord can show one of a
The current tax position for UK and non-UK resident companies limited number of grounds such as an intention to redevelop, the
is now aligned, so that any gain realised on a direct disposal of tenant can call for a new lease on substantially the same terms.
UK land or an indirect disposal of a “UK property rich” entity Generally, the tenant will be entitled to compensation (based on
will be subject to UK corporation tax on the chargeable gain. the rateable value of the premises and the duration of occupation)
The current rate of UK corporation tax is 25%, which increased in the event that it is required to vacate. It is possible to “contract
from 1 April 2023 for companies with annual profits exceeding out” of security of tenure by the service of prescribed form
£250,000. notices and declarations within certain timeframes.
The Landlord and Tenant (Covenants) Act 1995 (1995 Act)
Collective investment vehicles (CIVs) amends the “privity of contract” rule so that any tenant is
With the extension of the UK corporation tax regime to direct automatically released from its obligations as tenant on a sale
and indirect disposals of UK land to non-UK residents, the UK (provided that, if a landlord’s prior consent is required, it has
introduced a separate regime for CIVs. CIVs may be able to been obtained) and a landlord would be released on a sale of the
effect certain tax elections, the aim of which is to ensure that, reversion if it is reasonable in the circumstances and the correct
so far as possible, the tax on any gain, which would otherwise release procedure is followed.
arise at the level of the CIV, is instead borne by the investor at
the time of disposal of their interest in the CIV (and the investor
would be able to benefit from any investor tax exemptions).
There is no standard form lease; however, most registrable leases

9.6 Is taxation different if ownership of a company (or must contain certain clauses prescribed by the Land Registry.

While the capital gains tax treatment of a direct or indirect
disposal of real estate is broadly similar, there is currently length of term; (b) rent increases; (c) tenant’s right to
a difference in respect of SDLT and VAT. SDLT does not sell or sub-lease; (d) insurance; (e) (i) change of control
currently apply to indirect purchases of real estate, such as the of the tenant; and (ii) transfer of lease as a result of a
purchase of a property-owning company. Instead, if a property corporate restructuring (e.g. merger); and (f) repairs?
is held by a UK company and the company is sold, stamp duty
is payable at 0.5% of the consideration given for the shares. In The provisions contained in a commercial lease will depend on
addition, transfers of shares are currently exempt from VAT, the nature of the premises (age, use, condition and whether it
whereas the transfer of an interest in land may be subject to is a lease of part or whole). The following would be typical for
VAT (at either 0% or 20%) unless it is treated as a transfer of a an office lease within a building, which is usually let on a fully
business as a going concern by operation of law. repairing and insuring (FRI) basis:
■ Length of term: five, 10 or 15 years is common, sometimes
9.7 Are there any tax issues that a buyer of real estate with break rights (usually but not always tenant-only).
should always take into consideration/conduct due More agile tenants, such as start-ups or tech companies,
diligence on? may want shorter leases.
■ Rent increases: every five years on an upward-only open-
A buyer of real estate should always consider: market basis. Stepped rent or annual index-linked increases
a) the VAT position; are also seen and turnover rents are becoming more
b) the availability of any capital allowances (the tax equivalent prevalent in the retail sector as a result of the COVID-19
of depreciation for capital expenditure) that may be available pandemic.
to reduce future tax on income; ■ Tenant’s right to sell or sub-lease: assignment or under-
c) SDLT or stamp duty on acquisition; letting of whole is usually permitted with the landlord’s
d) corporation tax on net rental income (or income tax for consent (not to be unreasonably withheld) subject to condi-
individuals); tions, such as the rent being fully paid. Assignment of
e) possible capital gains tax on a future disposal, including part is usually prohibited and subletting of part(s) may
any latent gains on a share purchase; be limited, although flexible working arrangements are
f) the usual tax and financial due diligence on a share purchase increasingly popular, resulting in a relaxation of such
(including compliance with the register of overseas entities, restrictions in some instances.
where appropriate); and ■ Insurance: typically, the landlord insures the building and
g) in the case of residential property, the Annual Tax on the tenant contributes proportionately.
Enveloped Dwellings (which, in simple terms, is an annual ■ Change of control: such provisions are rare.
charge levied on owner-occupied residential property held ■ Repairs: the tenant typically covenants to repair the
within a corporate structure). premises and to contribute proportionately to repair and
maintenance of the building via a service charge.
If the lease is for the whole building, the tenant may insure
and repair the entire structure.
leases of business premises. 10.4 What taxes are payable on rent either by the
The Landlord and Tenant Act 1954 gives security of tenure to
occupying tenants of business premises at the contractual expiry SDLT (or, in Wales, Land Transaction Tax) is a one-off tax
payable at the commencement of the lease by the tenant.
Real Estate 2024

VAT is an ongoing tax payable by a tenant on rent where the 10.8 Are there any trends in your market towards more
landlord has elected to waive the commercial property VAT flexible space for occupiers, such as shared short-
exemption. The landlord must account to the UK tax authority term working spaces (co-working) or shared residential
for VAT and the tenant may, depending on its VAT status, be spaces with greater levels of facilities/activities for
able to recover VAT. residents (co-living)? If so, please provide examples/
details.
The landlord’s rental income will be subject to income or
corporation tax (as applicable). Rent should be a deductible
expense for the tenant. Shared space continues to be popular across both the office
and residential sectors, with the flexible office market thriving
both as a result of changing space requirements and the need for
10.5 In what circumstances are business leases occupiers to offer enhanced facilities to encourage staff back to
offices. There is also an increasing focus on the sustainability
tenant to extend or renew the lease or for either party of buildings, both in construction and operation and on how
to be compensated by the other for any reason on enhanced wellbeing for occupiers can be delivered in the built
termination? environment.
If a lease does not have security of tenure (see question 10.1 above), 112 Leases of Residential Premises
it will expire and the tenant must vacate on the contractual expiry
date (unless a contractual renewal right has been exercised). 11.1 Please briefly describe the main laws that regulate
Tenants with security of tenure can “hold over” after contractual leases of residential premises.
expiry and seek statutory renewal.
Leases typically include forfeiture provisions under which the There are two types of lease for residential premises:
lease can be terminated by the landlord for tenant default (such as a) long leases granted for a premium and with a low or nominal
non-payment of rent, breach of covenant and insolvency), subject “ground” rent (long leases); and
to certain statutory protections for the tenant. b) short-term leases or tenancies at a market rent (tenancies).
Break rights (usually in favour of the tenant only) allow the lease Each type is regulated by its own complex legislative regime,
to be terminated on a particular date. Break rights of part may be generally intended to provide protection to tenants.
negotiated in the context of flexible working arrangements. In the case of long leases, the Landlord and Tenant Act 1985
Otherwise, landlords and tenants may negotiate a surrender or, provides protection in relation to the level of service charges and
if the tenant is insolvent, its liquidator may terminate by disclaimer. the Landlord and Tenant Act 1987 gives tenants a right of first
refusal in certain circumstances if the landlord wants to dispose
10.6 Does the landlord and/or the tenant of a business of its interest. The Leasehold Reform Act 1967 and the Leasehold
lease cease to be liable for their respective obligations Reform, Housing and Urban Development Act 1993 give tenants
under the lease once they have sold their interest? Can the right to “enfranchise” – to acquire the freehold – and the
they be responsible after the sale in respect of pre-sale Commonhold and Leasehold Reform Act 2002 entitles tenants
non-compliance? to take over the management of their building. The Leasehold
Reform (Ground Rent) Act 2022 abolishes escalating ground rents
Under the 1995 Act, a tenant is automatically released on in most long residential leases granted on or after 30 June 2022,
assignment (see question 10.1 above); however, they may restricting them to zero financial value throughout the term.
be required to guarantee the obligations of their immediate The main legislation for regulating tenancies is the Rent Act
successor under an authorised guarantee agreement. 1977 (RA 1977), the Housing Act 1988, and the Housing Act
Landlords are not automatically released on an assignment of 1996. Each provides a different level of tenant protection and
their interest but can apply for a release from the tenant (not to which will apply depends on when a tenancy was granted. The
be unreasonably withheld). Tenant Fees Act 2019 also limits the payments that landlords of
“tenancies of housing” can demand from their tenants.
The government is considering a number of further legislative
changes both in relation to long leases and tenancies, aimed at
landlords and tenants designed to promote greater
sustainable use of buildings and in the reduction of further protecting tenants. For example, the Renters (Reform)
the “environmental footprint” of a building. Please Bill aims (amongst other things) to abolish “no fault” evictions
briefly describe any “green obligations” commonly and fixed term tenancies, replacing the latter with a single system
found in leases stating whether these are clearly of periodic tenancies. Note also, that residential tenancy law in
defined, enforceable legal obligations or something not England and Wales has diverged and our comments in section 11
amounting to enforceable legal obligations (for example reflect the law in England.

Green lease obligations are not typical, although there is multiple different residential occupiers?
increasing focus on the energy efficiency of buildings – see
question 12.10 below. Some leases restrict alterations that may
adversely affect the building’s Energy Performance Certificate Some laws only apply to multi-occupied properties. For example:
(EPC) rating. The Law Society published guidance on green a) in terms of long leases, some of the rights referred to in
leases and minimum energy efficiency standards for commercial question 11.1 above – such as the right of first refusal and
properties in January 2023. In addition, new buildings are right to manage – only apply in the case of a multi-tenanted
subject to requirements under the Environment Act 2021 – see building; and
question 13.3 below. b) as for tenancies, “Houses in Multiple Occupation” are
governed by the Housing Act 2004, and most are regulated
through a licensing regime run by the local housing authority.
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52 England & Wales
11.3 What would typical provisions for a lease of The Housing and Planning Act 2016 introduces various plan-
residential premises be in your jurisdiction regarding: ning reforms that simplify the requirements for neighbourhood
(a) length of term; (b) rent increases/controls; (c) the and local planning.
tenant’s rights to remain in the premises at the end of The Environmental Protection Act 1990 regulates the
the term; and (d) the tenant’s contribution/obligation to deposit, treatment and disposal of waste and liability in respect
of contaminated land.
The Environmental Permitting (England and Wales) Regula-
For long leases, a typical term would be a minimum of 99 years, tions 2016 requires certain types of activities to have a permit.
usually with the right to a new lease at the expiry of the initial The Environment Act 2021 provides the statutory basis for
term. The rent would typically be a nominal or low “ground” the setting of binding environmental targets, obligations and
rent (as a premium would have been paid). Some existing long enforcement of environmental law and the provisions will have
leases contain controversial escalating ground rents, although an impact on planning and developments.
such rents have now been banned in most leases granted on or The Building Safety Act 2022 introduces a new regime regu-
after 30 June 2022 (see question 11.1 above). Property costs lating building safety, including fire safety planning requirements.
incurred by the landlord would be recovered through a service
charge levied on the tenant.
Tenancies are either for a fixed term or are periodic, usually
running on a month-by-month basis (although the proposals mechanism.
for change referred to in question 11.1 above should be noted).
Longstanding tenancies governed by the RA 1977 have the
benefit of regulated rents. Otherwise, the amount of rent during Certain bodies have statutory compulsory purchase powers,
the fixed term of a tenancy will be governed by its contractual for example, under the Compulsory Purchase Act 1965. These
terms. If the tenancy is periodic, the landlord has the right powers can also be obtained for infrastructure projects under
to adjust the rent once a year. Property costs incurred by the the Planning Act 2008. In order to exercise the powers, the
landlord are typically included in the rent. acquiring authority must usually show that the compulsory
acquisition of land will be in the overall public interest and fair
compensation should be paid, taking into account market value
11.4 Would there be rights for a landlord to terminate and possibly factors including the costs of relocating businesses.
a residential lease and what steps would be needed to
for the right to be exercised? 12.3 Which bodies control land/building use and/
buyers obtain reliable information on these matters?
In terms of long leases, the landlord’s right to terminate is very
limited. While most leases include an express right to forfeit if
the tenant is in breach, there are statutory rules and limitations Land use and occupation is primarily overseen by the local
on the exercise of that right. planning authority (LPA). In certain circumstances, the
In the case of tenancies, the landlord’s rights to terminate will Secretary of State or an elected Mayor is entitled to “call in” and
depend on when the tenancy was granted as this will dictate which decide an application, for example, if it conflicts materially with
protection regime applies – see question 11.1 above. The default national or regional policy. Nationally, significant infrastructure
position for tenancies granted since 1997 is that they are “assured projects (for example energy projects with a capacity of 50MW
shorthold tenancies” (ASTs). In general terms, the landlord of or greater) are always determined by the Secretary of State.
an AST has the right to regain possession of the property at the Planning application documents and decision notices can
end of the fixed term on giving two months’ notice. If a tenant be obtained from the relevant LPA. Each LPA must maintain
remains in occupation after the fixed term expires, the landlord a planning register, and this can be accessed via an LPA’s
can recover possession under a fast-track “no fault” procedure, website. Official searches of LPAs’ databases can be made
provided certain conditions have been met. to obtain information on planning, building regulations and
The government is considering the abolition of ASTs and if environmental matters, as well as any enforcement proceedings
it does so, it is likely that possession will only be regained on in respect of a particular property or land.
specific grounds, such as non-payment of rent. The principal bodies responsible for the regulation, enforcement,
protection and general improvement of the environment are the
Environment Agency (EA) and Natural Resources Wales (NRW),
122 Public Law Permits and Obligations
although in some cases the Health and Safety Executive and local
authorities (LAs) carry out these functions. The Environment
12.1 What are the main laws which govern zoning/ Act 2021 establishes the Office for Environmental Protection
(OEP) to hold the government and public authorities to account
describe them and include environmental laws. in relation to environmental obligations.
The EA/NRW and LAs must keep public registers of
environmental information. These registers are available for
The Town and Country Planning Act 1990 and the Planning Act inspection by any member of the public. The public can also
2008 set out a framework for maintaining planning control and request environmental information from public authorities and
the development of land and buildings in England and Wales bodies carrying out a public function (such as utility companies),
(including the delivery of nationally significant infrastructure subject to various exceptions including commercial confidentiality.
projects).
The Planning (Listed Buildings and Conservation Areas) Act
1990 imposes special controls in respect of buildings and areas
of special architectural or historic interest (including works of
demolition or alteration).
Real Estate 2024

12.4 What main permits or licences are required for often agreed in writing with the applicant. The statutory time
building works and/or the use of real estate? limit is eight weeks for most types of development and 13 weeks
for major developments. The statutory time limit is 10 weeks
for applications for technical details consent and applications
Planning permission is generally required for any “operational
for public service infrastructure development. If the works are
development” (which includes building, engineering, mining or
likely to impact the environment, a 16-week time limit applies.
other operations in, on, over or under land, including demolition)
The maximum time permitted for a decision to be made is 26
or a material change of the use of land. A planning application
weeks under the government’s planning guarantee, where no
for express planning permission may not be required for such
time period has been otherwise agreed with the applicant.
development if the proposals fall within the scope of permitted
The DMPO sets out the procedures for applicants to gain
development rights granted by statute. A development consent
deemed consent if an application for consent, agreement or
order is required (rather than planning permission) for nationally
approval on a planning condition has not been determined by
significant infrastructure projects.
the LPA within eight weeks or an agreed extended period. There
Building regulations approval may be required to certify that
are exemptions to the deemed consent provisions for some types
the relevant works comply with minimum standards under the
of development or for some types of conditions.
Building Act 1984.
An Environmental Permit is required to be held by an
Listed building consent may be required to carry out works
operator of any “regulated activity”, as prescribed under the
for a listed building. Failure to obtain (and comply with) listed
Environmental Permitting (England and Wales) Regulations
building consent, if required, is a criminal offence.
2016, that risks polluting air, water or land. Depending on
An environmental permit may be required where there
the activity and location, applications are determined by the
are water or effluent discharges, waste storage, emissions or
Environmental Agency for England or Natural Resources Wales
chemicals used at a site either for building works or use of the
for Wales or by local authorities. An operator may apply for
site. Additionally, if building works are undertaken near to a
an Environmental Permit before or after planning permission
watercourse, a specific environmental permit for such works
is obtained or simultaneously in conjunction with the planning
may be required.
permission application. The statutory time limit for the
Other permissions or consents may be required, for instance,
regulator to consider the application is four months where
when carrying out development involving protected trees,
public consultation is required, two months for the transfer of
hazardous substances and advertisements.
an Environmental Permit (or for flood risk activities only), and
If a development involves the closure or diversion of all or
three months in any other case.
part of a highway, then an order will be required to effect this.

historic monuments in your jurisdiction? If any, when
and how are they likely to affect the transfer of rights in
Development is usually authorised by planning permission in

The Planning (Listed Buildings and Conservation Areas) Act
England and Wales, whether pursuant to express permission or
1990 creates special controls over the demolition or alteration of
permitted development rights. The Town and Country Planning
buildings, objects or structures that are considered of historical
Act 1990 specifies the period of time within which breaches of
or architectural significance, as well as in respect of buildings
planning control (e.g. unauthorised works or use of land) can be
that are within conservation areas. Similarly, the Ancient
acted upon by an LPA. If no enforcement action is taken within
Monuments and Archaeological Areas Act 1979 provides
the specified time limits, the unauthorised works or use of land
the legislative framework for the protection of “Scheduled
may become immune from enforcement action and therefore
Monuments”, although certain works affecting them may be
lawful, provided certain conditions are met. There is no ability
permitted with the Secretary of State’s consent.
to gain immunity from enforcement in relation to unauthorised
Due to the additional planning restrictions and controls that
works to listed buildings.
apply to listed buildings, historic monuments and properties
It is also common to procure building regulations consent.
in conservation areas, their commercial value may be affected,
although the very nature of the real estate does not prevent
12.6 What is the typical cost of building/use permits and them from being transferred, nor are alterations to protected
the time involved in obtaining them? buildings unusual.
The cost varies depending on the scale, complexity and nature 12.8 How can, e.g. a potential buyer obtain reliable
of the work to be carried out, as provided for in the Town and information on contamination and pollution of real
Country Planning (Fees for Applications, Deemed Applications, estate? Is there a public register of contaminated land in
Requests and Site Visits) (England) Regulations 2012 (as amended) your jurisdiction?
and the Town and Country Planning (Fees for Applications,
Deemed Applications and Site Visits) (Wales) Regulations 2015 The EA/NRW and LPAs must keep public registers of
(as amended), as relevant to England and Wales, respectively. contaminated land. A site not being registered is by no means an
There are statutory time limits for planning decisions, as assurance that the land is not contaminated as the land may not
specified in the Town and Country Planning (Development have been inspected. Buyers may also commission environmental
Management Procedure) (England) Order 2015 (as amended) consultants to undertake an environmental report as part of the
(DMPO). In Wales, the relevant order is the Town and Country due diligence process. There are various levels of environmental
Planning (Development Management Procedure) (Wales) Order report, depending on the nature of and risks identified at a site.
2012 (as amended), although, in each case, a longer period is
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54 England & Wales
12.9 In what circumstances (if any) is environmental 13.2 Are there any national greenhouse gas emissions
clean-up ever mandatory? reduction targets?
If contamination is identified that is causing significant harm The Climate Change Act 2008 was amended in June 2019 to set
or there is a significant possibility of harm to human health or a new target of net-zero greenhouse gas emissions by 2050.
the environment, the LA, or for more complex cases the EA or In July 2022, the UK High Court ruled by judicial review
NRW, will issue a remediation notice to the appropriate persons that the UK government’s plan to reduce greenhouse gas
to enforce clean-up action. It is a criminal offence not to comply emissions to net-zero was too vague and unlawful and ordered
with the terms of a remediation notice. An LPA may also impose the government to publish an updated climate strategy by March
a planning permission condition that environmental clean-up is 2023. In March 2023, the government published a policy paper
carried out before a development can proceed. setting out in detail the steps it will take to meet the net-zero
goal. In September 2023, the government announced that some
of the policy goals as set out in that strategy were to be delayed or
requirements for the assessment and management of abandoned. However, the 2050 net-zero target remains in force.
the energy performance of buildings in your jurisdiction.
An EPC is required for any property (residential or commercial) (not already mentioned) which aim to improve the
that is constructed, altered, sold or let. These are issued sustainability of both newly constructed and existing
buildings?
and registered by commercial energy assessors and provide
information about the energy efficiency of the premises and detail
where improvements can be made to increase the rating and Please see question 12.10 above.
improve the energy efficiency of the premises. EPCs are valid The Environment Act 2021 imposes statutory requirements
for 10 years unless any alterations are undertaken. It is mandatory for new developments to include in their plan at least 10%
for any building occupied by public authorities or institutions biodiversity net gain and these provisions are expected to
providing public services to show a Display Energy Certificate. come into force from January 2024 for planning applications
Since 1 April 2018, minimum energy efficiency standards under the town and country planning regime. It also extends
(MEES) regulations have prohibited landlords from granting accountability for construction waste via charges for disposal
a new tenancy of a privately rented commercial or domestic and plastic packaging and electronic waste tracking. In
property with an EPC rating below “E”. Since 1 April 2020, addition, the government set environmental targets for waste,
landlords have only been able to continue to let private water resources and air quality under the Act in December 2022.
residential properties with an EPC rating of E or higher and, on The government has indicated that, from 2025, the Future
1 April 2023, this requirement also came into force in respect Homes Standard will require new homes to be “zero carbon
of landlords that continue to let private commercial premises. ready” and to have carbon emissions that are 75%–80% lower
than those being built under current standards.
132 Climate Change
142 COVID-19
any regulatory measures for reducing carbon dioxide 14.1 Please detail any laws that govern real estate in
emissions (including any mandatory emissions trading your jurisdiction which were introduced in response to
scheme). the effect of the Coronavirus (COVID-19) pandemic and
The Energy Savings Opportunity Scheme (ESOS), implemented
in July 2014, applies to large UK companies and non-public The Coronavirus Act 2020 was a piece of emergency legislation
sector organisations subject to certain exemptions. ESOS prompted by the pandemic. It gave the government powers to
requires qualifying companies to carry out energy-saving contain the spread of COVID-19, including powers to issue
assessments, conduct energy audits and identify where energy directions in relation to the closure of premises. It also imposed
savings can be made in their business. a temporary moratorium on commercial landlords forfeiting a
The qualification date for ESOS Phase 3 was 31 December business lease for non-payment of rent and gave the government
2022. Changes to the assessment in Phase 3 are intended to a temporary power to restrict residential landlords’ abilities to
strengthen enforcement of the ESOS audit and disclosure recover possession of residential premises. However, these and
requirements. The deadline for compliance with Phase 3 other temporary restrictions on commercial landlords pursuing
measures has recently been extended from 5 December 2023 rent arrears have now expired.
to 5 June 2024. ESOS is supplemented by the UK Emissions Insofar as commercial premises are concerned, the restrictions
Trading Scheme (ETS), which replaced the UK’s participation were replaced by The Commercial Rent (Coronavirus) Act 2022.
in the EU ETS on 1 January 2021, setting out a “cap and trade” This ring-fenced unpaid commercial rent built up by tenants
scheme for organisations to tackle greenhouse gas emissions. forced to close by measures taken in response to the pandemic
In July 2023, the UK ETS Authority announced a package of and required parties to work together to agree terms for
reforms to the ETS to be implemented from the 2024 scheme payment or, if a resolution was not possible, to refer the matter
year onwards that are aligned with achieving the government’s to a new legally binding arbitration scheme. This was a short-
net-zero target. term measure only and the deadline for applications to refer a
A Streamlined Energy and Carbon Reporting (SECR) pandemic rent dispute to arbitration under the scheme expired
framework was also introduced on 1 April 2019. This applies to on 23 September 2022.
large companies and limited liability partnerships.
Real Estate 2024

Rowenna Butler is a real estate lawyer based in London. She advises on a broad range of real estate matters, including development
projects, landlords and tenants and property finance transactions. Rowenna has particular experience working on the real estate aspects of
renewable energy projects.
Norton Rose Fulbright LLP Tel: +44 20 7444 3403

3 More London Riverside Email: rowenna.butler@nortorosefulbright.com
London, SE1 2AQ URL: www.nortonrosefulbright.com
United Kingdom
Norton Rose Fulbright is a global law firm. We provide the world’s Norton Rose Fulbright Verein, a Swiss verein, helps coordinate the
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Real Estate 2024

56 Chapter 7
Germany
Germany
Dr. Stefanie Minzenmay
Oppenhoff & Partner Rechtsanwälte Steuerberater mbB Dr. Ann Margret Herzhoff
12 Real Estate Law 22 Ownership
1.1 Please briefly describe the main laws that 2.1 Are there legal restrictions on ownership of real
govern real estate in your jurisdiction. Laws relating estate by particular classes of persons (e.g. non-resident
to leases of business premises should be listed in persons)?
12.1. Those relating to tax should be listed in response to There are no legal restrictions on ownership of real estate by
questions in Section 9. particular classes of persons. Natural or legal persons or
partnerships with legal capacity are permitted to own real estate.
The most important code concerning real estate law is the
German Civil Code (Bürgerliches Gesetzbuch). This elementary 32 Real Estate Rights
statute book contains the rules of general contract law as well
as special rules for rental contracts, regulates damage claims and 3.1 What are the types of rights over land recognised
defines the respective processes for a transfer of ownership and in your jurisdiction? Are any of them purely contractual
possession under property law, including encumbrances of the between the parties?
property, e.g. mortgages or land charges.
In addition to the German Civil Code, the most important The German legal system distinguishes between different forms
sources of law are the Condominium Act (Wohnungseigentumsgesetz ), of ownership and rights to property. The strongest property
which regulates residential and partial ownership and the related right is ownership. The ownership position is registered in
community regulations, and the Hereditary Building Rights Act section I of the land register. Two or more persons can also
(Erbbaurechtsgesetz ), which regulates matters relating to heritable co-own a piece of land (Miteigentum). Since the property as such is
building rights. In addition, due to the federal structure existing uniformly preserved as a real undivided property in this case, the
in Germany, almost all German federal states have their own co-ownership share is to be understood ideally. Of considerable
supplementary civil neighbourhood law. practical relevance is ownership of a single apartment in a
The relevant procedural regulations for land registration are building, i.e. condominium ownership (Wohneigentum), or of
to be found in the Land Register Code (Grundbuchordnung). non-residential premises within a building (Teileigentum).
Ownership must be differentiated from possession. The
possessor is the one who has actual control over the property.
In real estate matters, for example, the tenant has actual control
over the leased property, whereas the landlord is typically
simultaneously the owner of the property.
A prerequisite for the emergence of common law is a combination In the case of heritable building rights, the land is encumbered
of an objective and subjective element, with the objective element in such a way that the party in whose favour the encumbrance
being many years of legal practice and the subjective element is made has the alienable and heritable right to erect a building
being the generally held conviction that the common law norm is on a third party’s property, usually against payment of a regular
valid. However, there are hardly any areas of German real estate ground rent.
law that are not already regulated by law. Therefore, common law In addition, there are various kinds of encumbrances that
does not play a significant role in German law. constitute rights in rem in respect of a property for the purpose
of toleration, omission, or the payment of recurring benefits,
1.3 Are international laws relevant to real estate in your e.g. a right of way located on the property of a neighbour (Grund-
jurisdiction? Please ignore EU legislation enacted locally dienstbarkeit). Limited personal easements entitle a specific
in EU countries. person to use the property in a defined way (beschränkt persön-
liche Dienstbarkeit).
International laws are usually not relevant in the German Such rights in rem are registered in section II of the land register.
jurisdiction in relation to real estate. In all events, mortgages (Hypotheken) or land charges
(Grundschulden) are economically relevant for financing purposes.
They are registered in section III of the land register. These rights
oblige the owner whose property is encumbered accordingly to
Real Estate 2024

Oppenhoff & Partner Rechtsanwälte Steuerberater mbB 57
tolerate compulsory execution on the property. Mortgages often 4.5 Where there are both unregistered and registered
secure a loan that has been taken out with a bank to finance the land or rights is there a probationary period following
purchase price. first registration or are there perhaps different classes
Rights of possession can be purely contractual, whilst rights in or qualities of title on first registration? Please give
rem always require registration in the land register. details. First registration means the occasion upon
which unregistered land or rights are first registered in
the registries.
thereon? There is no probationary period following first registration.
Moreover, there are no different classes or qualities of titles on
first registration.
In principle, the ownership of a parcel of land and the buildings
erected on it form a unit in the sense of an essential component
(wesentlicher Bestandteil ). Only in the case of hereditary building 4.6 On a land sale, when is title (or ownership)
rights do these rights deviate from each other in such a way transferred to the buyer?
that the construction and use of a plot of land is made possible
without the acquisition of ownership of this land. Additionally, The transfer of ownership requires a multi-act legal transaction:
there are exceptions for facilities installed for a temporary the notarisation of an agreement between the acquirer and the
purpose or when executing a right in rem (Scheinbestandteil ). transferor, including the declaration of conveyance and the
subsequent registration of the change of title in the land register.
Upon registration, the transfer of title is completed.
consequences of any split? Are there any proposals to 4.7 Please briefly describe how some rights obtain
change this? priority over other rights. Do earlier rights defeat later
rights?
There is no split between legal and beneficial title. However, a right
of usufruct in the sense of a right in rem can be granted (Nießbrauch). Rights obtain priority over other rights if they have been entered
on an earlier date. The date of entry of a certain right in the land
42 System of Registration register ranks it. This means that, in principle, rights that were
entered earlier and have not yet been deleted take precedence
4.1 Is all land in your jurisdiction required to be over later rights. However, the ranking can be subsequently
registered? What land (or rights) are unregistered? changed if the retiring and advancing beneficiary agree on this
and enter the change in the land register and if, in the case of a
real estate mortgage, the owner also consents. Furthermore, it is
All land must be registered in the land register. An exception
also possible that, when encumbering a plot of land with a right
to this principle is made for buildings that serve public or
in rem, the owner reserves the right to have another specific right
ecclesiastical purposes and that are exempt from the registration
registered with priority (Rangrücktritt).
obligation. Real estate rights without effect in rem are also not
registered in the land register.
52 The Registry / Registries
guarantee?
Article 14 I 1 of the German Constitution (Grundgesetz ) guarantees
the right to property as a fundamental right by institutional In Germany, there is no centralised registration system; instead,
guarantee. the various local district courts (Amtsgerichte) are responsible as
land registry offices for the properties located in their district on
4.3 What rights in land are compulsorily registrable? the basis of the register law.
Real property rights with effect in rem must be registered in the land their title?
register. The land register is thus a register in which land, rights
equivalent to land, the existing ownership relationships pertaining If an owner wishes to prove his title, he may request an extract
thereto and the associated rights and encumbrances are recorded. from the land register (Grundbuchauszug) from the competent
Registration in the land register is essential in order to obtain land registry office that contains information on ownership in
the absolute effect in relation to any third party. If rights are section I, rights in rem registered in section II or land charges and
not registered in the land register, there is no public faith as to mortgages registered in section III.
their existence.

registered?
Contractual rights to land, e.g. rental agreements, without effect

in rem are not registered.
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58 Germany
5.3 Can any transaction relating to registered real 6.3 Is there any change in the sources or the
estate be completed electronically? What documents availability of capital to finance real estate transactions
need to be provided to the land registry for the in your jurisdiction, whether equity or debt? What are the
registration of ownership right? Can information main sources of capital you see active in your market?
electronically?
There are several ways in which to finance real estate transactions.
In addition to investing in individual properties, it is also
No transaction on real estate can be completed electronically. possible to participate in real estate funds. Usually, financing
The following documents are required in all events to transfer is partly equity, partly debt, but it is also possible to complete
ownership in the land register: the notarial declaration of a transaction by financing it fully with either equity or debt.
conveyance; verification from the competent public authority However, the banks have tightened their lending policies. This
that no pre-emption right is going to be exercised; and a tax particularly affects added value and opportunistic investments
clearance certificate (steuerliche Unbedenklichkeitsbescheinigung).
in terms of financing levels, margin and covenants. In addition,
the banks’ stricter requirements regarding the equity ratio and
5.4 Can compensation be claimed from the registry/ the pre-letting ratio must be met for a financing request.

If the land registry has made a mistake, claims for official developers to invest in your region compared to last year
liability can be asserted against it. However, the damage caused and what are the sectors/areas of most interest? Please
by the mistake must be covered by the protective purpose of the give examples.
violated land register regulation. This is the case, for example,
with incorrect or omitted registrations. The residential sector continues to be the leading sector of real
estate investment. The ongoing boom in e-commerce has led
5.5 Are there restrictions on public access to the to a higher demand for logistics properties and data centres,
register? Can a buyer obtain all the information he both of which are experiencing a shortage of suitable properties.
might reasonably need regarding encumbrances and Competition for the financing of core properties and green
other rights affecting real estate and is this achieved buildings is also steadily increasing.
Since the land register contains personal and sensitive data, a
legitimate interest (berechtigtes Interesse) must be presented in order examples.
to inspect it. The owner, for example, is an entitled party, but
also a person who is entitled in rem under the property, such as a
neighbour who has a right of way. Therefore, the land register is Rising interest rates and higher construction costs are currently
not open to inspection by anyone or in general for information leading to increased uncertainty among investors, greater risk
purposes in the sense of a public register. aversion on the part of banks and a mismatch between supply
A potential purchaser has no right as such, but will be able and demand. The total project development volume in the seven
to gain access via the owner by the latter either providing him German metropolitan regions is down on the previous year.
with current land register extracts or granting him a power of Residential real estate developments have been significantly
attorney to obtain extracts himself. affected, with transactions in this area declining sharply. In
addition to the economic component with falling letting
62 Real Estate Market figures, fundamental structural changes are having an impact
on the role of the office: factors here include changing working
environments, energy efficiency challenges, sustainability and
and the buyer’s finance provider) would normally be regulatory requirements. Many companies do not yet have a
involved in a real estate transaction in your jurisdiction? clear strategy on how to bring employees back to the office or
Please briefly describe their roles and/or duties. how they want to shape the working world of the future.
In addition to the buyer and seller, a notary is always involved 72 Liabilities of Buyers and Sellers in Real
in a real estate asset deal transaction. Lawyers and tax advisors Estate Transactions
regularly accompany both parties and advise on legal and tax
issues. Up front, real estate agents or consultants often market 7.1 What (if any) are the minimum formalities for the
the property and accompany the sales process, as well as sale and purchase of real estate?
technical consultants.
Sometimes, the tenant of a property to be transferred is also
For the purchase of real estate, the notarisation of at least the
involved, e.g. if the buyer requests changes to the existing lease
agreement upfront or if rent securities have to be exchanged. agreement between the acquirer and the transferor as well as
the declaration of conveyance is required. The contract must
contain all essential elements (essentialia negotii ) – in the case of
6.2 How and on what basis are these persons a purchase contract, these are the parties to the purchase, the
remunerated? object of purchase and the (determinable) purchase price.
Legal and tax consultants are typically paid on an hourly fee

basis. A notary is remunerated according to the statutory rate.
Real estate agents usually receive a broker’s commission.
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7.2 Is the seller under a duty of disclosure? What regard to inherited burdens, he remains contractually obligated
matters must be disclosed? in this respect.
The seller must provide the buyer with all information that 82 Finance and Banking
is essential for the purchaser’s decision and can normally be
expected, i.e. in particular, information about legal obstacles 8.1 Please briefly describe any regulations concerning
such as pre-emptive rights or encumbrances on the real property, the lending of money to finance real estate. Are the rules
but also material defects in the object of purchase that cannot different as between resident and non-resident persons
been detected by inspection (hidden defects). This information and/or between individual persons and corporate
entities?
must be disclosed to the buyer in good time and, even during a
due-diligence process; for example, it may not be added at short
notice or hidden somewhere unexpected among other data without The German Civil Code regulates loan agreements by which the
an appropriate notification. The seller can otherwise be sued for lender provides the borrower with a certain amount of money
fraudulent misrepresentation or be obliged to pay damages. against payment of interest. Consumer loan agreements are
governed by special consumer protection rules. No distinction
is made between resident and non-resident persons.
The provisions in the German Civil Code regarding the
misrepresentation?
lending of money to finance real estate are completed, in
particular, by corresponding provisions in the German Banking
The seller can be liable for misrepresentation if he provides Act (Kreditwesengesetz ).
false information or if he omits to provide relevant information. Finally, the banks’ lending policies, which were tightened as
However, exclusion of liability is possible in the case of simple a result of the COVID-19 pandemic, are of practical relevance.
negligence. Intent and gross negligence cannot be contractually
excluded.
7.4 Do sellers usually give any form of title “guarantee” borrower?
The lender can use loan collateral to protect itself against default
information)? Would any such guarantee or warranties by the borrower. In the real estate sector, this is achieved, in
act as a substitute for the buyer carrying out his own particular, through real collateral such as land charges and
diligence? mortgages, which are entered in section III of the land register. In
Germany, there is a significant difference between the collateral
There are a variety of legal provisions that govern warranty right “Hypothek” and “Grundschuld ”: the former is dependent on
claims and liability issues. Due to the freedom of contract, the existence of a specific claim. When the claim extinguishes,
the statutory rules are regularly deviated from. In contract the collateral right is also extinguished. The “Grundschuld ”, on
negotiations, the buyer tries as far as possible to get the seller to the other hand, is independent of the existence of a claim. For
accept guarantees, whilst the seller tries to avoid the granting of this reason, it is considerably more frequent in practice. This
guarantees. The seller’s guarantees can (economically) replace collateral interest can be used for further claims after the claim
the buyer’s own due diligence, which can be of particular has expired or can already be registered as a precautionary
relevance if a certain condition of the object of purchase, such measure. Additionally, personal collateral can be provided by
as the permit situation or inherited burdens (Altlasten), can no creating additional securities such as guarantees or sureties.
longer be traced due to a lack of complete documentation or if
certain issues were not inspected by a technical due diligence. 8.3 What are the common proceedings for realisation
As the existence of leases is particularly relevant to cash flow, of mortgaged properties? Are there any options for a
guarantees are also frequently requested with regard to the mortgagee to realise a mortgaged property without
existence of leases and their formal requirements. involving court proceedings or the contribution of the
mortgagor?
7.5 Does the seller retain any liabilities in respect of

The common procedure for realising mortgaged properties is
a forced sale, which is aimed at the realisation of the real estate,
which – in contrast to a forced administration (which is also
The seller remains liable for the property after the sale if he possible and aimed at the earnings of a property) – is aimed at the
intentionally concealed certain defects that resulted in significant realisation of the substance of the property.
losses for the buyer. In addition, the contractually declared and Enforcement requires an enforcement title. Since corresponding
assumed guarantees may constitute post-sale liability. court proceedings are lengthy, the debtor regularly already submits
to execution in respect of a specific amount upon creation of the
7.6 What (if any) are the liabilities of the buyer (in land charge, which is notarised. Execution can then take place on
addition to paying the sale price)? the basis of this notarised document/land charge.
The primary legal obligation of the buyer is to pay the purchase 8.4 What minimum formalities are required for real
price. He is therefore liable for all breaches of this duty, such as, estate lending?
in particular, the delay in payment.
In addition, the buyer often bears the real estate transfer tax If the borrower is a consumer, the written form is required,
(Grunderwerbsteuer) and the notary fees. If the buyer has assumed unless a stricter form is prescribed. In addition, the lender must
indemnification obligations in the contract, for example, with
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60 Germany
inform the consumer borrower of his rights. If the creditor the other shareholders outside insolvency proceedings. Should
requires submission to foreclosure in the course of securing the the shareholding be pledged before the opening of insolvency
loan, notarisation is required. proceedings, the creditor is also entitled to participate during
the insolvency proceedings. In the case of the borrower’s
insolvency, however, the shares in the insolvent company are
against the borrower or the real estate asset by other usually worth nothing.
creditors? Shareholdings in the borrower may also be acquired by way of
a so-called conversion of receivables into corresponding shares
in the context of insolvency plan proceedings.
A real estate lender is protected from claims by other creditors
only if he has secured his claim, primarily through the
aforementioned security instruments of mortgages and land 92 Tax
charges. In the case of multiple creditors, the ranking of the
collateral is decisive. Legal action against other creditors of 9.1 Are transfers of real estate subject to a transfer
the debtor may nevertheless be required in order to assert the tax? How much? Who is liable?
priority of the debtor’s own right; for example, by way of third-
party claims or an action for preferential satisfaction. The transfer of real estate is subject to real estate transfer
tax, which varies between 3.5% and 6.5% of the respective
assessment base, depending on the federal state in which the
lender be avoided or rendered unenforceable? real estate is located. In principle, the purchase price agreed
between the parties is the tax assessment base for the real estate
transfer tax. The parties are tax debtors alongside each other.
For an avoidance, formal or substantive objections can be filed In some special cases, the assessment base is determined by the
against security taken by a lender, which must be asserted by tax office according to the requirements of German assessment
way of a legal action. The same applies to objections raised by law. The transfer of heritable building rights or buildings on
a third party. land owned by third parties is also subject to real estate transfer
In addition, initial over collateralisation may be invalid, that tax. Likewise, the transfer of ownership in partnerships and
is to say immoral, if there is a major disproportion between the companies that own real estate can, under certain additional
collateral value and the collateral interest (i.e. the secured claim). requirements, trigger real estate transfer tax, e.g. if at least 90% of
the shares are transferred or combined in one hand. One should
8.7 What actions, if any, can a borrower take to bear in mind that the rules concerning the transfer of ownership
frustrate enforcement action by a lender? in partnerships and companies that own real estate have been
tightened as of July 1, 2021 and that transitional regulations may
The borrower can take action to prevent enforcement by taking apply. As a result, questions relating to real estate transfer tax
several different types of action, in particular: he can raise have become significantly more complex and any consequences
substantive objections to the enforcement of the titled claim must be assessed on a case-by-case basis, taking into account the
(Vollstreckungsabwehrklage); he can take action against the manner relevant legal provisions.
of enforcement (Vollstreckungserinnerung); he can raise objections
to the enforcement title itself (Titelgegenklage); and, in cases of 9.2 When is the transfer tax paid?
hardship, he can file an application for temporary protection
against enforcement.
In general, real estate transfer tax is generally triggered at the
time the contract is concluded and not at the time of the in rem
8.8 What is the impact of an insolvency process or a transfer. If a notary public is involved, the notary public must
corporate rehabilitation process on the position of a real file a notification to the competent tax office. If no notary public
estate lender? is involved, this obligation lies with the contracting parties. The
tax office then determines the tax basis and assesses the tax by
The opening of insolvency proceedings against the borrower’s means of a tax assessment notice. The tax is due one month after
assets impedes the lender’s access to the assets. However, the the tax assessment notice has been received by the tax debtor.
lender is entitled to separate satisfaction if he has had one of Late payment incurs late payment penalties. In addition, the
the above-mentioned security interests, such as a land charge or land registry office usually requests a certificate from the tax
mortgage, created to secure his claim. The proceeds from the office to the effect that the real estate transfer tax has been paid
liquidation/sale of the real estate are used to satisfy the lender in full (Unbedenklichkeitsbescheinigung).
on a priority basis. The remaining assets are distributed among
the other creditors.
income tax?
shares? Does a lender have a right to appropriate shares If the real estate is qualified as a business asset (Betriebsvermögen),
any profit arising from the transfer of the real estate is subject
to income tax (Einkommensteuer) plus solidarity surcharge
(Solidaritätszuschlag).
If the property is private property of an individual, any
Without any agreement between the borrower, or his company, profit from the transfer is subject to income tax (plus solidarity
and the creditor, the latter shall not be entitled to appropriate surcharge) if the time period between acquisition and transfer is
shares as collateral. In order to realise a right to participate, a less than 10 years. However, an exception applies to the transfer
shareholding must be offered for sale or pledged as collateral by of real estate that has been used solely for the individual’s own
Real Estate 2024

residential purposes in the period between the acquisition A liability may also exist for outstanding property tax
or completion and sale or for the individual’s own residential (Grundsteuer). With regard to trade tax, it is advisable for companies
purposes in the year of sale and the two preceding years. claiming the extended deduction for trade tax (erweiterte Kürzung
bei der Gewerbesteuer) to review whether only real estate is being
rented out. If movable assets are also being rented out, this would
generally be harmful overall and could result in an additional
tax burden. However, an exception applies to the co-letting of
operating equipment if the income generated from this does not
As the transfer of real estate is subject to real estate transfer exceed 5% of the rental income from the real estate.
tax, it is exempt from VAT. The parties may opt for VAT. A
prerequisite of opting for VAT is that the transfer is made to 102 Leases of Business Premises
another entrepreneur for his own business, i.e. in particular, if he
uses the real estate for his business activities. The option must be
declared in the notarised purchase agreement. If VAT is opted
for, the tax rate is currently 19% and is owed by the purchaser
(so-called reverse charge procedure). However, the transfer is not
subject to VAT and there is no possibility of opting for VAT if The German Civil Code contains all essential regulations on
the transfer of the real estate is deemed a transfer of an entire leases of business premises (as well as for leases in general). The
business (Geschäftsveräußerung im Ganzen), e.g. the transfer of rented second book of the German Civil Code regulates the law of
real estate. In this case, from a VAT perspective, the purchaser contractual obligations. Lease agreements as such are regulated
succeeds to the legal position of the seller. in the eighth section.

The two main distinctions are the lease of spaces and the
There is a risk of an additional tax burden if several properties usufructuary lease (Pachtvertrag).
are transferred in close temporal connection. The activities
could then qualify as commercial real estate trading ( gewerblicher 10.3 What are the typical provisions for leases of
Grundstückshandel ) and trigger (retroactively) trade tax in addition business premises in your jurisdiction regarding: (a)
to income tax. The trade tax rate is a local tax rate and therefore length of term; (b) rent increases; (c) tenant’s right to
varies from municipality to municipality. Under certain conditions, sell or sub-lease; (d) insurance; (e) (i) change of control
real estate companies may be exempt from trade tax.
9.6 Is taxation different if ownership of a company (or (a) Length of term

A business premises lease is usually concluded for a fixed term,
although this is not mandatory. A rental contract can also be
The transfer of ownership in partnerships and companies that concluded for an indefinite term. In this case, the lease may be
own real estate can, under certain additional requirements, trigger terminated after the statutory or agreed notice periods. In most
real estate transfer tax. Due to recent legislative amendments, cases, (several) renewal options are agreed upon, as well as the
real estate transfer tax is applied relatively broadly to most modalities for exercising these options. During a fixed lease
indirect transfers of real estate. For example, real estate transfer period, the lease cannot be terminated within the normal statutory
tax is triggered, among other things, if at least 90% of the shares period, unless there are extraordinary reasons, such as if a party has
in a partnership or company that owns real estate are transferred breached an essential obligation under the lease. The maximum
to new shareholders within 10 years. In addition, a transfer of fixed term of a lease is 30 years.
shares is subject to real estate transfer tax if it results in at least Commercial leases are usually concluded for a specifically
90% of the shares being held directly or indirectly by one hand. defined period (often 10 years) in order to secure the rental duration
and indexation procedures. This is because the essential aspect of
an indefinite lease is that it can be terminated at any time within the
statutory notice period. This legal consequence also and especially
diligence on?
applies in case of a breach of the written form requirements, which
results in the tenancy being fictitious as regards it having been
concluded for an indefinite period. Therefore, the written form
In the course of a share deal, share transfers conducted in the requirements must always be precisely adhered to.
past should be included in the risk assessment due to the new
rules, according to which real estate transfer tax can be triggered (b) Rent increases
upon a transfer of 90% of the shares within 10 years. During the tenancy, the parties may negotiate an increase of the
If real estate is acquired as part of an asset deal, this could rent.
constitute a transfer of an entire business from a VAT perspective. They can also agree on future changes in the amount of rent
A transfer without opting for VAT (i.e. VAT-exempt) may either as graduated rent (Staffelmiete) or as index-linked rent
possibly result in input tax adjustments if the real estate was (Indexmiete). The graduated rent determines exactly when the rent
previously acquired subject to VAT and input taxes were claimed will increase and by how much. When agreeing an index-linked
by the entrepreneur. The transfer of real estate may also lead to rent, the rent adjustment amount can be coupled to a consumer
a liability on the part of the business transferee pursuant to section price index. However, correspondence to the consumer price
75 of the German Fiscal Code (Abgabenordnung), according to which index requires that the landlord is bound to the lease by more
the business transferee is liable for overdue business-related taxes. than 10 years, including the tenant’s extension options.
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62 Germany
In the case of residential tenancies, the landlord may also 10.5 In what circumstances are business leases
increase the rent, in accordance with the statutory provisions, usually terminated (e.g. at expiry, on default, by either
to the local comparative rent or increase it if modernisation party etc.)? Are there any special provisions allowing a
measures have been carried out. tenant to extend or renew the lease or for either party
to be compensated by the other for any reason on
(c) Tenant’s right to sell or sub-lease termination?
A tenant is not entitled to sell the lease. However, the tenant may
sublet the leased object. However, the consent of the landlord is Business leases generally end upon expiry of the fixed lease
a prerequisite for this. The landlord may only refuse this if there term and all renewal options or with an extraordinary right of
is an important reason lying in the person of the third party, termination. If a lease has been concluded for an indefinite
otherwise the tenant can terminate the lease extraordinarily period, it can only be terminated with the statutory notice
with the statutory notice period if permission is refused. In the period. However, the parties may agree on other notice periods
case of commercial leases, subleases are sometimes excluded in or special termination rights.
their entirety by contract. The tenant may only change party by In order to allow a tenant to extend the lease agreement
mutual agreement with the landlord. unilaterally, there are renewal options that must be exercised by
the tenant within a certain period of time. This extends the
(d) Insurance existing lease but does not renew it.
As a rule, the landlord contractually agrees to take out property If the tenant nevertheless continues to use the leased property
and construction liability insurance, as well as all-risk insurance. after the lease expires, the lease is tacitly renewed for an indefinite
The costs incurred within the scope of the insurance taken period by force of law. This provision is usually excluded by the
out are regularly transferred to the tenant via the ancillary contracting parties.
costs. Usually, the tenant itself additionally takes out further
insurances, such as insurance for brought-in items, public
liability insurance, business interruption, etc. lease cease to be liable for their respective obligations
under the lease once they have sold their interest? Can
(e)(i) Change of control of the tenant they be responsible after the sale in respect of pre-sale
If the lease agreement does not contain any change of control non-compliance?
provisions, the tenant remains a party to the agreement even in
the event of a change of control. However, contractual clauses An assignment of the rights and obligations of the tenant under
may grant the landlord a reservation of approval or a special the lease to third parties requires the landlord’s consent. However,
right of termination in such cases. a sale of the leased property by the landlord is possible. As a rule,
the sale does not lead to the termination of the lease. If a landlord
(e)(ii) Transfer of lease as a result of a corporate sells the leased property, the purchaser takes the landlord’s place
restructuring (e.g. merger) in terms of the landlord’s rights and obligations upon its entry in
If a new legal entity is created as a result of a corporate the land register. If the purchaser fails to fulfil the obligations,
restructuring (e.g. merger), the lease agreement remains with the the landlord is liable for the damage to be compensated by the
new legal entity. purchaser like a guarantor. If the tenant obtains knowledge of
the transfer of ownership through notification by the landlord,
(f) Repairs the landlord is released from liability unless the tenant terminates
According to the initial statutory regulation, the landlord is the tenancy on the first date on which termination is permitted.
responsible for maintaining the rental object in a condition
suitable for use in accordance with the contract during the
rental period. However, it can be – and often is – contractually 10.7 Green leases seek to impose obligations on
agreed that the tenant is responsible for maintenance and repair, landlords and tenants designed to promote greater
excluding the essential building substance such as the roof and
structure, which remains with the landlord. briefly describe any “green obligations” commonly
10.4 What taxes are payable on rent either by the defined, enforceable legal obligations or something not
landlord or tenant of a business lease? amounting to enforceable legal obligations (for example
Income from leasing of real property is subject to income or

Financing banks, landlords, but also tenants are placing
corporate income tax at the level of the landlord. This also
increasing emphasis on so-called green regulations in commer-
applies if the landlord is not resident in Germany, but the real
cial leases, although the binding nature of such regulations
estate is located in Germany. At the level of the tenant of a
currently still varies widely. Nowadays, there are many national
business lease, the rental expenses can be deducted as business
and international certificates and quality seals that document
expenses. In the case of the exclusive leasing of real estate, the
the sustainable standard of buildings. The topic of environ-
income is generally not subject to trade tax. For companies,
mental social governance is increasingly in demand and the
this only applies after an application for an extended deduction
discussion continues to progress, with the consequence that
for trade tax. The application is possible if the companies
various measures that can be seen as a first step towards estab-
exclusively rent out real estate. However, the co-letting of
lishing uniform green lease standards are already being recom-
operating equipment is harmless if the income generated from
mended. For example, rental contract provisions refer to energy
this does not exceed 5% of the rental income from the real
consumption, ideally from renewable energies, but also to the
estate. To the extent the landlord has not opted for VAT, the
transmission of user-specific data or the use of sustainable mate-
lease of real estate is VAT-exempt.
rials in improvements by the tenant or landlord.
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10.8 Are there any trends in your market towards more (b) Rent increases/controls
flexible space for occupiers, such as shared short- As with the business premises lease, the parties may negotiate
term working spaces (co-working) or shared residential an increase in the rent during the tenancy and can agree on a
spaces with greater levels of facilities/activities for graduated rent or an index-linked rent. Furthermore, the landlord
residents (co-living)? If so, please provide examples/ is also entitled to increase the rent up to the local comparative
details. rent or to increase it after conducting modernisation measures.
The above does not apply to leases of living space that is
Triggered not least by the COVID-19 pandemic, the trend rented for only temporary use, living space that is part of the
on the German market is towards more flexible working and dwelling occupied by the landlord himself and is not rented on
thus also towards shared offices. Spaces are being used more a permanent basis, living space that has been rented by public
flexibly and the need for space is being re-examined in view entities in order to provide it to persons with urgent housing
of increasing home-office activities. The conversion of office needs, or to living space in a student or youth hostel. Special
space into living space is being considered. In the housing provisions also apply to residential tenancies in areas with
market, especially in urban areas, there is a trend towards tight housing markets, which – as an exception to the civil law
so-called microhousing. Microapartments are small, furnished principles – can lead to a temporary (but extendable) restriction
apartments that can ideally be used for specific groups of people on rent adjustments.
such as students or commuters. In contrast, there is increasing
demand for larger living space in locations on the periphery to (c) The tenant’s rights to remain in the premises at the end
urban areas, enabling the establishment of home offices. of the term
At the end of the rental period, the tenant is not permitted to
112 Leases of Residential Premises remain in the premises. On the contrary, he is obliged to return
the rented property to the landlord, vacated at the end of the
tenancy, and is even obliged to compensate the landlord in the
leases of residential premises. event of its late return.
(d) The tenant’s contribution/obligation to the property

The lease of residential premises is also regulated by the German “costs” e.g. insurance and repair
Civil Code. Leases of residential premises are subject to the In addition to the monthly rent, the parties usually agree
general rules on leases but are supplemented and modified on advance payments for ancillary costs, which the tenant
by special regulations. These regulations are stricter for the undertakes to pay in the rental agreement. The ancillary costs to
landlord, as the tenant of residential premises is afforded special be imposed on the tenant are regulated in the Operating Costs
protection by both substantive and procedural regulations on Ordinance (Betriebskostenverordnung). As a rule, the tenant pays
the grounds of the basic concept of social tenancy law, which a monthly lump-sum advance payment for the ancillary costs,
takes into account the paramount importance of the residential which is then settled by the landlord once a year.
apartment as the centre of a person’s existence. These regulations
therefore cannot be waived to the detriment of the tenant.
11.2 Do the laws differ if the premises are intended for achieve vacant possession if the circumstances existed
multiple different residential occupiers? for the right to be exercised?
The civil laws generally do not differ if the premises are intended A residential lease can only be terminated with the statutory
for multiple different residential occupiers. However, the notice period if the landlord has a justified interest. Such an
legal consequences may differ as to which of the tenants is the interest exists, in particular, if the tenant culpably breaches his
contractual partner and therefore the landlord’s debtor. In the contractual obligations to a more than inconsiderable extent, if
event of subletting, permission from the landlord is generally the landlord requires the premises as living space for himself
required. The number of persons can also make a difference or members of his family (termination due to own need –
to the calculation of operating costs if these are charged on a Eigenbedarfskündigung), or if the landlord must terminate the
person-related basis. In the event of an enforced eviction, it may tenancy in order to economically exploit his property.
be relevant whether there are several different users. In addition, there are also rights to extraordinary termination
without notice. This is the case if the terminating party can no
11.3 What would typical provisions for a lease of longer reasonably be expected to continue the rental agreement.
residential premises be in your jurisdiction regarding: For the landlord, this is the case if the tenant endangers the
(a) length of term; (b) rent increases/controls; (c) the rented property or leaves it to a third party without authorisation,
tenant’s rights to remain in the premises at the end of fails to pay the rent for a certain period or disturbs the peace at
the term; and (d) the tenant’s contribution/obligation to the house on a sustained basis.
the property “costs”, e.g. insurance and repair? After termination of the lease agreement, the tenant is obliged
to return the premises to the landlord in a vacated condition. If
(a) Length of term this is not the case, the landlord may seek an action for eviction.
In principle, residential leases are concluded for an indefinite Special criteria must be met here in the case of residential premises:
period. The law stipulates only limited special reasons for the if the landlord’s action is successful, the court sets the tenant a
conclusion of fixed-term leases of residential premises. Such reasonable deadline for eviction, which may not exceed one year
reason only exists if the landlord’s subsequent intentions for use in the case of tenancies with an indefinite term. In proceedings
of the residential premises merit protection; for example, if he for interim relief, on the other hand, the eviction from living
wishes to subsequently rent the rooms to relatives or employees space can only be ordered in extreme exceptional cases, meaning
or wants to dispose of or repair them. that the tenant is protected against unauthorised enforcement.
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64 Germany
122 Public Law Permits and Obligations 12.4 What main permits or licences are required for

permitting and related matters concerning the use, The main permit is the building permit. It must be granted if
development and occupation of land? Please briefly the project does not conflict with any regulations under public
describe them and include environmental laws. law. There are exceptions to the principle of the building
permit requirement, for example for smaller structures, which
are regulated differently under state law. In principle, however,
Building law regulates land use, regional planning, structural
a building permit is required for construction, alteration and
safety requirements and the permits and procedures required in
changes of use.
each case. Please note that land-use planning is governed by
Other relevant permits are the emission permits for buildings
national law, whilst building safety requirements are regulated
that may potentially cause environmental impacts, or personal
by state law in the individual federal states, by their respective
business licences that are required to operate various businesses
building codes (Landesbauordnungen). and that may limit the use of the building to a certain time of
A zoning plan (Bebauungsplan) regulates the way in which day or night.
land can be built on and used. It is an instrument of spatial
planning and contains the legally binding specifications for
urban development. Each municipality defines the permitted 12.5 Are building/use permits and licences commonly
uses on a plot of land in terms of its type and scope in the obtained in your jurisdiction? Can implied permission be
zoning plan, by way of statutory resolution of its municipal
council. The legal bases for land-use planning are the
nationwide Building Code (Baugesetzbuch) and the Building Building permits and use licences are required in the German
Use Ordinance (Baunutzungsverordnung). Other legal sources, jurisdiction and are only issued upon completion of a formal
such as certain environmental laws, may also be included in procedure. A permit cannot be obtained through long-term
the planning, development and approval process. There are actual use.
ongoing adjustments to building law in response to current The authorities’ duty to intervene in case of conditions that
developments, such as, most recently, the prioritisation of the violate building law does not expire by the statute of limitations.
creation of residential space. Formal illegality entitles the local building authorities to
intervene. The authorities can still take official action against
unlawful construction decades later.
mechanism. 12.6 What is the typical cost of building/use permits and
The German Constitution guarantees freedom of ownership

in article 14. Expropriations may be permissible in exceptional It is not possible to quantify the typical costs of a building permit
cases for the common good (e.g. expropriation necessary for or the length of the procedure, as both are highly dependent on
the individual case and may depend, for example, on the degree
the construction of a highway or in connection with coastal and
of complexity of the project and the situation under planning
flood protection), but they encroach upon the constitutional
law. The amount of the fees depends on the administrative fee
right and require appropriate compensation. This compensation
regulations of the respective federal states.
must be determined by fairly weighing the interests of the general
public and those of the party involved. Compensation is usually
calculated on the basis of the market value of the property at the 12.7 Are there any regulations on the protection of
time of the expropriation decision. historic monuments in your jurisdiction? If any, when
In Germany, there are approximately one million properties
listed as historic monuments. Each federal state has its own
law regulating the protection of monuments. Such laws might
The use of land and buildings is controlled by the local building have an effect on their usage and on construction measures,
authorities (Bauaufsichtsbehörden), which are often located within as they determine how the building may be used and whether
larger authorities such as district authority offices. In contrast and to what extent conversions may be permitted. Any change
to the municipal building planning authorities, the building of use or structural alteration, and especially the removal
authorities monitor compliance with building regulations and of a monument, requires a special permit under monument
issue both the building permit and any usage prohibition orders, protection law. However, historic preservation also offers
and even demolition orders. advantages in terms of the tax implications, such as the historic
Zoning plans can be accessed either via the municipality’s preservation depreciation. The sale of a listed building must be
websites or are made available upon request. Information on the reported to the monument protection authorities.
permit situation of individual properties can also be obtained
from the local building authorities with the owner’s permission/ 12.8 How can, e.g. a potential buyer obtain reliable
power of attorney. Also of possible relevance is the existence of information on contamination and pollution of real
public building encumbrances, which can be derived from the estate? Is there a public register of contaminated land in
building encumbrance register (Baulastenverzeichnis). your jurisdiction?
The environmental agencies provide excerpts from a register of

contaminated sites (Altlastenkataster), from which information
Real Estate 2024

on known contaminated sites and historical previous use can be change plan. The Federal Climate Protection Act (Bundes-
obtained. This register also records any suspected cases. Klimaschutz gesetz ) is intended to ensure that national climate
protection targets are met and that European requirements
are fulfilled. This achievability is to be ensured in particular
12.9 In what circumstances (if any) is environmental
clean-up ever mandatory? through the introduction of CO2 pricing.
In addition, emissions trading systems provide economic
incentives to reduce pollutant emissions. In Germany, the scope
According to the Soil Protection Code (Bundesbodenschutz gesetz), of emissions trading goes further than the requirements of the
the owner, the user and/or the polluter are obliged to remediate European emissions trading system and also covers the heating
areas with contaminated soil or facilities. Each of the foregoing and transport sectors. The basis for trading in certificates for
remain under such obligation vis-à-vis the authority even if the emissions from fuels is regulated in the Fuel Emissions Trading
property is resold. Act (Brennstoffemissionshandelsgesetz ).
The extent and cost of such an environmental clean-up
depends largely on how dangerous the waste is to human health
and the environment. 13.2 Are there any national greenhouse gas emissions
reduction targets?

requirements for the assessment and management of With the amendment of the Climate Protection Act in 2021,
the energy performance of buildings in your jurisdiction. the German government tightened climate protection targets
and anchored the goal of net greenhouse gas neutrality by 2045.
Emissions are to be reduced by 65% by 2030 and by 88% by
The energy performance of buildings in Germany is regulated
2040 compared with 1990 levels.
by the Building Energy Code (Gebäudeenergiegesetz ). This Code
regulates requirements for new buildings and existing buildings,
contains regulations on heating and cooling systems and governs 13.3 Are there any other regulatory measures
Energy Certificates. For example, with regard to heating systems, (not already mentioned) which aim to improve the
this law stipulates that certain heating systems may no longer sustainability of both newly constructed and existing
buildings?
operate 30 years after installation. From 2024, a switch to a 65%
share of renewable energies will be mandatory for new buildings
in new development areas when installing new heating systems. The sustainability of newly constructed and existing buildings
The aim is to phase out the use of fossil fuels in buildings by is to be improved through the requirement of Energy
2045 at the latest. The Code also regulates financial support for Certificates. The Energy Certificate is a document intended
the use of renewable energies. The specific requirements are to provide information on the energy efficiency and energy
regularly specified in the Code by reference to DIN (Deutsches costs of a building. Buildings are categorised into different
Institut für Normung) standards. The aim of the legislation is to energy efficiency classes, which in some scenarios is linked to
encourage the most economical use of energy in buildings and to public subsidies. This encourages reduced energy consumption
strengthen the increasing use of renewable energies. through recording regulations and supports energy-efficient
In an ongoing process, new laws are passed on the subject of refurbishment through financial incentives.
the energy transition. Since 2023, for example, a law has regulated
the distribution of CO2 costs between landlords and tenants 142 COVID-19
(Kohlendioxidkostenaufteilungsgesetz ). This law aims to encourage
both sides to behave in a climate-friendly manner by distributing 14.1 Please detail any laws that govern real estate in
the CO2 price. your jurisdiction which were introduced in response to
132 Climate Change which remain in place.
13.1 Please briefly explain the nature and extent of The legal issues associated with the COVID-19 pandemic have
any regulatory measures for reducing carbon dioxide been resolved by jurisprudence and mainly relate to rental
emissions (including any mandatory emissions trading constellations. However, many lease agreements now contain
scheme). so-called speech clauses in the event that cases of COVID-19/
pandemic conditions, and subsequent officially ordered
Following the Paris Agreement and the EU’s climate policy, closures, occur again.
Germany has set its climate change targets in the 2050 climate
Real Estate 2024

66 Germany
Dr. Stefanie Minzenmay specialises in real estate transactions. She has many years of experience in advising national and international
enterprises, investors and family offices on the purchase, sale and development of properties, real estate (portfolios), industrial plants,
business parks and hotels. She also advises on commercial and high street tenancy law and public law-related real estate matters.
She is listed as one of Germany’s top lawyers for real estate law.
Oppenhoff & Partner Rechtsanwälte Steuerberater mbB Tel: +49 0 221 2091 331
Konrad-Adenauer-Ufer 23 Email: stefanie.minzenmay@oppenhoff.eu
50668 Cologne URL: www.oppenhoff.eu
Germany
Dr. Ann Margret Herzhoff, LL.M., specialises in real estate management law. She advises and represents national and international enterprises
and investors on, among other things, the purchase and sale of properties and real estate (portfolios), as well as on matters of tenancy law.
In particular, her activities include the legal examination of real estate transactions and the drafting of real estate purchase agreements and
commercial lease agreements. She also handles matters concerning public building law and private energy management law.
Oppenhoff & Partner Rechtsanwälte Steuerberater mbB Tel: +49 0 221 2091 430
Konrad-Adenauer-Ufer 23 Email: annmargret.herzhoff@oppenhoff.eu
50668 Cologne URL: www.oppenhoff.eu
Germany
Oppenhoff is one of the leading independent law firms in Germany. We

master the complex challenges of today and tomorrow – building on the
experience of over 110 years of law firm history. Our aspiration: through
personal and comprehensive advice, we create economic added value and
the best possible solutions for a changing world.
As an independent full-service commercial law firm with offices in
Cologne, Frankfurt and Hamburg, we advise you on all important areas
of commercial law – nationally and internationally. Our more than 100
lawyers and our global partner law firms are among the leading experts in
their fields of law and industry sectors.
Our experience in commercial law ranges from medium-sized to
internationally active companies, and all of our employees know the
market and the relevant players. In our Frankfurt office, our notary’s office
is at your disposal for the entire range of notarial services, with a particular
focus on corporate law and real estate law.
www.oppenhoff.eu
Real Estate 2024

Chapter 8 67
Greece
Greece
Alexandra Petsa
Fay Vetouli
Sardelas Petsa Law Firm Nicolas Tarantilis
Αrticle 24 (1) of Law 1982/1990 stipulates certain provinces
questions in Section 9. and islands as border regions. In these regions, non-EU or
non-European Free Trade Association citizens/legal entities
may acquire property only by a special permit. Specifically,
Article 17 of the Hellenic Constitution recognises the right to this prohibition may be lifted by application to the regional
property as a fundamental right, protected by the State. The Decentralized Administration Authority, whereby the person/
principal law that governs real estate in Greece is the Hellenic entity concerned states the exact purpose of real estate
Civil Code (Section Three thereof, under the title Property Law). acquisition, subject to approval by this authority. Furthermore,
Specific real estate matters are also dealt with in the Hellenic in accordance with article 28 paragraph 1 of Law 1982/1990,
Code of Civil Procedure, Laws 2308/1995 and 2664/1998, real estate property on private islands can be obtained following
which govern the procedure before the Cadaster Offices, as well authorisation by the Ministry of Defence.
as Law 3741/1929, which governs horizontal ownership. There
are also specific laws governing real estate owned by the Greek 32 Real Estate Rights
Orthodox Church and the orthodox monasteries in Greece.
1.2 What is the impact (if any) on real estate of local in your jurisdiction? Are any of them purely contractual
common law in your jurisdiction? between the parties?
In Greece, real estate is governed by statutory law. However, The Hellenic Civil Code recognises a restricted number of types
established case law of the Supreme Court and Civil Courts of rights over land (numerus clausus of rights in rem), which are
is generally taken into account as judicial precedent, and is stipulated in article 973 thereof. These rights are: (1) ownership
frequently cited by lawyers and judges. (full ownership, bare ownership and usufruct); (2) servitude
(real or personal); and (3) mortgage and pre-notice of mortgage.
None of the abovementioned rights are purely contractual
1.3 Are international laws relevant to real estate in your between the parties.
in EU countries.
There are not any provisions of international law governing real thereon?
estate in Greece.
In principle, any construction onto land is owned by the owner
of the land itself. However, pursuant to article 18 paragraph 1 of
Law 3986/2011, a natural person or a legal entity may construct
a building over a plot of land owned by the State. This right is
Real Estate 2024

68 Greece
recognised as “right over surface”, amounting to the right of first registration. In the case of non-registered rights, there is no
ownership between private parties and is of limited duration from protection against bona fide acquisition by third parties. However,
five up to 99 years. as far as mortgages are concerned, the time of registration is crucial
to determine their rank towards other mortgages on the same land.
title in your jurisdiction and what are the registration 4.6 On a land sale, when is title (or ownership)
consequences of any split? Are there any proposals to transferred to the buyer?
change this?
Ownership of land is obtained strictly upon the registration of
There is no split between legal title and beneficial title in the the respective title deed with the competent Land Registry or
Greek legal system. Cadaster Office, depending on whichever operates in the area
where a plot of land is located. As a result, among multiple
42 System of Registration buyers, the owner is the one whose title deed is registered first.
4.1 Is all land in your jurisdiction required to be 4.7 Please briefly describe how some rights obtain
registered? What land (or rights) are unregistered? priority over other rights. Do earlier rights defeat later
rights?
In Greece, all land is required to be registered at the competent
Land Registry or Land Cadaster. Every deed registration is given a serial number. The earlier
of two registrations will always rank prior to the subsequent
one. Furthermore, as indicated in question 4.5 above, as far
as mortgages are concerned, the time of registration is crucial
guarantee?
to determine their rank towards other mortgages on the same
land. However, a different ranking order may be agreed with the
Greek law recognises no state guarantee of title. consensus of all registered secured creditors.
4.3 What rights in land are compulsorily registrable? 52 The Registry / Registries
Registration of the title deed, as provided for by the Hellenic jurisdiction? If more than one please specify their
Civil Code, is compulsory for the establishment, abolishment or
transfer of rights in rem over land.
In particular, notarial purchase agreements, donations inter There are several Land Registries or Cadaster Offices in every
vivos, donatios causa mortis, notarial parental donations, inheritance region. Upon completion of the cadastral survey of all regions
acceptance deeds, court decisions that pronounce rights in in Greece, the system of “Operative Cadastre” will replace
rem, rural expropriation decisions, implementation acts of the Land Registries. Despite the large number of Land Registries
town plan, establishment of horizontal or vertical properties, and Cadaster Offices in Greece, there are no differing rules and
establishment of a surface right, mortgage and pre-notice of requirements among them.
mortgage, etc. are mandatorily registered at the competent Land
Registry or Cadaster Office. 5.2 How do the owners of registered real estate prove
their title?
registered? Certificates of ownership are issued by the competent Land
Registry or Cadaster Office. Registration of real estate deeds is
Registration of contractual rights, such as lease agreements, also proven by a certified copy of the title deed by the competent
is not required by Greek law. However, in the case of a long- Land Registry or Cadaster Office. Besides these, a lawyer has
term lease agreement with a minimum duration of nine years, the competency to certify the ownership in this context, after
the parties may sign a notarial contract, which is subject to performing due diligence to the relevant registries.
registration at the competent Land Registry or Cadaster Office,
to ensure the validity of the agreement and enhance protection 5.3 Can any transaction relating to registered real
in the case of transfer of the land vis-à-vis the new owner. estate be completed electronically? What documents
4.5 Where there are both unregistered and registered on ownership of registered real estate be accessed
land or rights is there a probationary period following electronically?
details. First registration means the occasion upon Electronic completion of transactions relating to registered real
which unregistered land or rights are first registered in estate has recently been made possible to the Cadastral Offices,
the registries. but not the Land Registries of each region. This development
was expedited due to COVID-19, resulting in Cadastral Offices
providing both digital access for the issuance of certificates of
Under Greek law, the registration of all rights in rem is required;
ownership, and for the registration of titles and deeds.
therefore, there is neither a probationary period following
It must be noted that since 2018 all public auctions are
first registration, nor different classes or qualities of title on
conducted online.
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Sardelas Petsa Law Firm 69
The documents needed for the registration of ownership right the Notary’s payment is calculated based on the value of the
are the application for the registration, a certified copy of the land, taking into consideration the highest value between the fair
notarial title deed (also accepted as digitally issued or certified), a market value and the objective tax value, the number of pages
certified summary of the notarial title deed, both obtained by the of the notarial title deed and the number of certified copies
Notary, and the tax declaration. In the case of the registration requested. The tax (3.09%) and the registration fees (0.6–0.8%)
taking place at a Cadaster Office, a cadastral diagram extract are also calculated based upon the value of the land, taking into
must also be provided. consideration the highest value between the fair market value
and the objective tax value.
registries if it/they make a mistake? 6.3 Is there any change in the sources or the
in your jurisdiction, whether equity or debt? What are the
The Registrar of the Land Registry and the Director of the main sources of capital you see active in your market?
Cadaster Office are liable for compensation for any acts or
omissions related to the fulfilment of their duties.
Since 2016, there has been a gradually increasing interest,
mainly from foreign investors, in old urban residencies (mostly
5.5 Are there restrictions on public access to the in Athens and Thessaloniki), urban residential buildings and
register? Can a buyer obtain all the information he tourist buildings (mostly on the Greek islands). Therefore, the
might reasonably need regarding encumbrances and
availability of capital derives mainly from foreign equity. Apart
by a search of the register? If not, what additional from that, Greek real estate investment companies (REICs)
information/process is required? show significant interest in purchasing urban buildings to be
renovated as offices, large plots of land to be remodelled as
business parks and industrial buildings to be used as logistics
All public books in the Land Registries and the Cadaster
centres. Thus, there has been a considerable increase in the
Offices are accessible for due diligence by lawyers and other
availability of capital in the form of bond loans as well.
professionals (Notary Public, court bailiffs and civil engineers).
Moreover, the Land Registries and the Cadaster Offices are
obliged to provide certified copies of the registered title deeds 6.4 What is the appetite for investors and/or
and certificates of registrations to all applicants. After the developers to invest in your region compared to last year
digitalisation of the Cadaster Office system, individuals have and what are the sectors/areas of most interest? Please
restricted electronic access to the registry thereof, using their give examples.
digital tax credentials, albeit only for the property registered in
their own ownership. Only lawyers registered with the digital It is typical that the development of the high-end real estate
Cadaster Office system may obtain full information on any market is what gave a boost to the real estate market in general
registered property other than their own. in both 2022 and 2023 in Greece, despite any challenges that
have appeared at the international level, according to the latest
62 Real Estate Market report of the Bank of Greece.
The growing interest in green sustainable development and
its integration, in many cases, into the corporate policy of large
and the buyer’s finance provider) would normally be companies has already boosted the development of new high-
involved in a real estate transaction in your jurisdiction? quality properties and will gradually lead to a shift of buyers
Please briefly describe their roles and/or duties. towards them.
Developments of a hyper-local nature, particularly in the
Athenian Riviera, centred on the largest urban redevelopment
The parties involved in a real estate transaction are as follows:
in Europe, which is in full swing at Elliniko area, with projects
(1) The real estate agent, who introduces the interested parties.
having taken the road to delivery, are also attracting the interest
(2) The lawyers, who assist both the seller and the buyer in the
of the international media, which are reporting on the high
due diligence process, the issuing of the documentation
demand for property pre-sales from the start of the project.
needed for the signing of the title deed and the drafting of
According to the latest GEOAXIS Summer Holiday Homes
the title deed.
Observatory 2023, which refers to summer residences on the
(3) The civil engineer, who provides the seller with the energy
islands of Mykonos, Paros, Santorini, Serifos and Kea, an
efficiency certification, as well as the certification that the
increase in the median asking prices of summer holiday homes
property is free from unauthorised constructions and/or
is recorded for the fifth consecutive year. Compared to last year,
usages.
there is a horizontal increase in sales prices at a median price of
(4) The competent Tax Office, where the buyer pays the
3.4% for all five islands.
transfer tax and is provided with the tax declaration.
(5) The Notary, who executes the notarial title deed and
checks the validity of the documentation compiled. 6.5 Have you observed any trends in particular market
(6) The competent Land Registry or Cadaster Office, where sub sectors slowing down in your jurisdiction in terms of
the registration of the notarial title deed takes place for the their attractiveness to investors/developers? Please give
establishment of the transaction. examples.
Since the beginning of the financial crisis, the construction

remunerated? of new buildings has slowed down. Nonetheless, within the
past year, this sector has been showing signs of recovery due
to the increasing interest of foreign and domestic investors and
The real estate agent’s, the lawyers’ and the civil engineer’s fees investment companies in real estate. Prices have also increased,
are subject to an agreement between the parties. In most cases, especially in certain areas, in anticipation of market recovery.
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70 Greece
72 Liabilities of Buyers and Sellers in Real 7.5 Does the seller retain any liabilities in respect of
Estate Transactions
Apart from the aforementioned warranties given by the seller
and the liabilities for misrepresentation, the seller does not
retain any liabilities in respect of the property post-sale.
are as follows: 7.6 What (if any) are the liabilities of the buyer (in
(1) The payment (by the buyer) of the transfer tax to the addition to paying the sale price)?
competent Tax Office just before signing of the contract.
(2) The provision (by the seller) of the certificate of the property In addition to paying the sale price, the buyer pays the transfer
ownership tax, which indicates that the specific real estate tax, the notarial fees and the registration fees to the competent
has been correctly filed in the property tax declaration of Land Registry or Cadaster Office.
the seller and the ownership tax has been already paid.
(3) The provision (by the seller’ s engineer) of the certificate 82 Finance and Banking
that the real estate is free of unauthorised constructions
and unauthorised usages, or that the existing unauthorised 8.1 Please briefly describe any regulations concerning
constructions and unauthorised usages have been legalised the lending of money to finance real estate. Are the rules
in accordance with the provisions of law, along with the different as between resident and non-resident persons
energy environmental certificate. and/or between individual persons and corporate
(4) The provision (by the seller’s engineer) of an environmental entities?
certificate indicating the energy class of the specific real
estate. There are no specialised regulations concerning the lending of
(5) The provision (by the seller’s engineer) of the property’s money to finance real estate, nor any different rules as between
digital ID certificate. resident and non-resident persons and/or between individual
(6) The signing of the notarial transfer deed before the Notary persons and corporate entities. The regulatory framework
and the payment of the notarial fees (by the buyer). only concerns lending to REICs. According to article 26 of
(7) The payment (by the buyer) of the registration fees to the Law 2778/1999, they are allowed to receive loans and credits,
competent Land Registry or Cadaster Office. provided that these loans and credits do not exceed 75% of
their assets. Furthermore, REICS may receive loans and credits
7.2 Is the seller under a duty of disclosure? What for the acquisition of real estate assets, to be used for their
matters must be disclosed? operational needs, provided that the amount of loans and credits,
as a whole, does not exceed 10% of the total value of an REIC’s
equity reduced by the total amount of its real estate investments.
In the context of good faith, the seller ensures that both his
property deed and the property deeds of his predecessors
are valid. In addition, the seller is required to disclose any 8.2 What are the main methods by which a real
encumbrance or legal hindrance that may impede the buyer estate lender seeks to protect itself from default by the
from fully enjoying the property. The seller agrees by notarial borrower?
contract to those representations and warranties.
Under Greek law, real estate lending obligations are secured by
7.3 Can the seller be liable to the buyer for securities in rem, i.e. by mortgages or prenotation of mortgages.
misrepresentation? More specifically, security over real property (land) and plant is
created by mortgage (by virtue of a notarial mortgage deed) or by
mortgage prenotation (by virtue of a County Court decision) and
The seller can be liable for misrepresentations, which can lead
perfected by registration in the public books of the competent
to the reduction of the price, the annulment of the contract, or
Land Registry or cadaster, where the land and plant are located.
even compensation for the buyer.
Prenotation of mortgage provides its beneficiary with the
pre-emptive right to obtain a mortgage perfected as of the date
7.4 Do sellers usually give any form of title “guarantee” of registration of the prenotation of mortgage, once its claim
or contractual warranties to the buyer? What would be becomes final. Such security extends to all component parts and
the scope of these? What is the function of any such accessories of the real estate (i.e. machinery and equipment).
act as a substitute for the buyer carrying out his own 8.3 What are the common proceedings for realisation
diligence? of mortgaged properties? Are there any options for a
As indicated in question 7.2 above, the seller, in the notarial mortgagor?
deed of transfer, ensures the validation of his property title, that
the property is free of any encumbrance, mortgage, prenotation
of mortgage, claim by third party, lease, legal or real defect, Under applicable law, that is, pursuant to the provisions of the
contribution to land, expropriation, or that the existing matters relevant articles of the Greek Code of Civil Procedure, the
have already been known to the buyer. These warranties do not individual stages of the enforcement procedure are described
substitute the buyer’s due diligence obligation but may support a in detail and specific timeframes are set, within which
compensation claim if purposefully concealed. enforcement proceedings shall be effectuated. As a general
Real Estate 2024

rule, in order for the enforcement procedure to commence, the file an application at the competent Land Registry or Cadaster
creditor-beneficiary of the collateral security (i.e. the mortgagee Office, requesting that all securities registered prior to the
of mortgaged immovable assets) must obtain an enforceable auction are deleted and rendered null, so that ownership of the
title (i.e. mainly non-appealable judgments, arbitral awards, property is transferred free of any pre-existing securities, such as
payment orders, etc.). Subsequently, as far as pecuniary claims prenotations and seizures.
are concerned, the enforcement procedure involves the following
main stages: (a) the attachment of the debtor’s assets; (b) the
8.7 What actions, if any, can a borrower take to
intervention of other creditors; (c) the liquidation of the attached frustrate enforcement action by a lender?
assets through public electronic auction; and (d) the distribution
of proceeds. In particular, regarding the liquidation process, it is
noted that liquidation is performed by electronic auction, which Under the new Hellenic Civil Procedure Code, objections of the
is administered by a Notary Public who is certified to conduct borrower against whom the enforcement action is taken, as well
electronic auctions. As to the distribution of proceeds from the as any of their lenders invoking legitimate interest, which relate to
public electronic auction of a specific asset, it is noted that, in the validity of the enforcement title, the enforcement procedure
principle, the proceeds are distributed to all the creditors who or the claim shall be filed only with a caveat (articles 933 and 934).
participated in the liquidation process. In the case of electronic Any creditor against whom enforcement is directed shall have
auction proceeds, if the amount remaining after the deduction the right to intervene in enforcement proceedings (article 937).
of costs and expenses of the enforcement proceedings, is less
than the total claims of the creditors who participated in the 8.8 What is the impact of an insolvency process or a
respective proceedings, the amount is proportionally distributed. corporate rehabilitation process on the position of a real
However, certain categories of creditors have priority over others estate lender?
in the proportional distribution as follows: (a) claims equipped
with general privilege (i.e. claims of the State and of other public Pursuant to the provisions of Law 4738/2020, where a company
entities, claims for wages and personal maintenance, etc.) have is declared insolvent, a suspension of all individual enforcement
a minimum priority of 25% of the total proceeds; (b) claims actions against the company is imposed on all unsecured creditors
equipped with special privilege, that is, secured claims (i.e. and/or all priority creditors (i.e. creditors whose claims have a
collateral security on the specific asset on which enforcement general privilege for satisfaction from the whole of the debtor’s
takes place) as well as claims regarding the maintenance of the estate, such as the State or the Social Security Authorities). The
property and the production and harvest of its fruits, have a above suspension of the individual enforcement actions does
minimum priority of 65% of the total proceeds; and (c) unsecured not apply to the secured creditors (i.e. creditors whose claims
claims have a minimum priority of 10% of the total proceeds. are secured by special privilege or real security on a specific
The mortgagee cannot realise a mortgaged property and asset of the debtor’s estate), for a period of nine months after the
acquire ownership of such mortgaged property without involving declaration of insolvency.
court proceedings. The claims of the secured creditors are satisfied by the
liquidation of the asset secured by a special privilege or real security
8.4 What minimum formalities are required for real in favour of them. In case the amount collected by the liquidation
estate lending? of the secured asset is not sufficient for the full repayment of the
claim of the secured creditor, the latter may satisfy the remaining
amount of its claim by the whole bankruptcy estate.
The lender should acquire proof that the borrower is the owner
In addition to the above, interim measures may be ordered
of the real estate asset or that will use the proceeds of the loan to
by the competent Court after the filing of an application for a
buy and/or develop a real estate asset.
debtor to be declared insolvent in order to prevent a reduction
of the bankruptcy estate value and any material adverse effect
8.5 How is a real estate lender protected from claims that may jeopardise the interests of the creditors. The above
against the borrower or the real estate asset by other interim measures do not apply to the secured creditors and do
creditors? not affect the rights of a creditor under a financial collateral
arrangement (Law 3301/2004) or the rights of the assignee under
Real estate lenders are protected from other creditor’s claims an assignment security agreement. Finally, the interim measures
against the borrower by establishing a first rank mortgage over ordered by the Court are automatically ceased on the date that
the real estate asset. In more detail, certain categories of creditors the Court decision for the declaration of insolvency is published.
have priority over others in the proportional distribution of the As far as pre-insolvency proceedings are concerned, under the
auction, as set out in detail under question 8.3 above. relevant provisions of the New Insolvency Law – which provide
Moreover, under Greek Law, the legal principle “prior in tempore for the conclusion of a restructuring Rehabilitation Agreement
prior in jure” applies in mortgages, so the lenders establishing between the debtor and a certain percentage of its creditors
mortgages prior to subsequent mortgagees have a priority in the (i.e. at least 50% of the debtors’ total secured liabilities, as well
proportional distribution from the auction. as creditors representing at least 50% of the debtors’ other
liabilities) – and the subsequent ratification from the Court of
such agreement, from the filing of the Rehabilitation Agreement
lender be avoided or rendered unenforceable? for ratification until the issuance of the decision of the Court,
all individual and collective enforcement action is automatically
suspended. This moratorium may not normally exceed
A court order can render a security unenforceable in the event, four months. It should also be noted that the Rehabilitation
e.g. that it was granted to defraud third creditors and a third Agreement may include more specific provisions concerning
creditor seeks, e.g. an injunction from the competent Court such moratorium. However, it should be mentioned that the
rendering it unenforceable. Moreover, if a property is sold via above-mentioned moratorium does not affect the rights of the
enforcement measures (in an auction), the highest bidder may
Real Estate 2024

72 Greece
secured creditor under a financial collateral arrangement based 9.5 What other tax or taxes (if any) are payable by the
on the provisions of Law 3301/2004. seller on the disposal of a property?
8.9 What is the process for enforcing security over A tax on capital gains is imposed for the sale of property that has
shares? Does a lender have a right to appropriate shares been purchased within five years of their acquisition. The tax
in a borrower given as collateral? If so, can shares be is 15% of the gain produced by the sale (the difference between
appropriated when a borrower is in administration or has the sale price and acquisition price). For sales that are made
more than five years after the acquisition of the property, no tax
is imposed for proceeds under €25,000. The application of this,
The process for enforcing security over shares follows the however, has been suspended by law until 31.12.2024.
general rules and procedure of enforcing security over assets in
general, as set out in detail under question 8.3 above. The lender
9.6 Is taxation different if ownership of a company (or
has a right to appropriate shares in a borrower given as collateral
only if the share pledge agreement is governed by Law 3301/2004
on financial collateral agreements, which provides that the
satisfaction of the pledgee-creditor is effectuated through sale, The taxation is identical if ownership of a company (or other
set off or application of the financial instruments and/or cash entity) owning real estate is transferred. REICs are exempt from
in discharge of the relevant obligations. Furthermore, the real estate transfer tax on the purchase of real estate (3.09% on
secured creditor/pledgee may satisfy the secured claims without the value of the property).
necessarily resorting to court proceedings and subsequently to
the liquidation of the debtor’s assets through public electronic 9.7 Are there any tax issues that a buyer of real estate
auction. Finally, financial collateral agreements governed by should always take into consideration/conduct due
Law 3301/2004 are, in principle, not subject to the clawback diligence on?
provisions of the Greek Insolvency Code and generally remain
unaffected by bankruptcy proceedings. Before the completion of the transfer, it is advisable for the
buyer to be informed of the amount of the property tax, which
92 Tax is paid annually for the real estate.
9.1 Are transfers of real estate subject to a transfer 102 Leases of Business Premises
Under Greek law, the transfer of real estate is subject to a transfer leases of business premises.
tax at a rate of 3.09%, calculated based upon the value of land,
taking into consideration the highest value between the fair market The main laws regulating leases of business premises in Greece
value and the objective tax value. However, for certain categories are the Hellenic Civil Code and Presidential Decree 34/1995,
of natural persons, the law provides a tax exemption, under the as amended by Laws 3853/2010 and 4242/2014. Relevant
condition that the property will be strictly used as a first residence. legislation also includes Laws 4013/2011 (article 15), 4373/2016
(article 69) and 4335/2015 on procedural rules.
The transfer tax is paid just before the buyer signing the notarial
title deed, which is then accompanied by the tax declaration. The principal types of business lease include: (1) leases for
commercial use (business activities); (2) leases for professional
9.3 Are transfers of real estate by individuals subject to use (pertaining to liberal professions such as lawyers, language
income tax? schools, doctors, accountants, notaries, engineers, etc. –
explicitly covered by article 2 of Presidential Decree 34/1995);
Transfer of real estate by individuals is not subject to income tax. and (3) state/public leases (intended to accommodate public
authorities and organisations).

much? Who is liable? Are there any exemptions? 10.3 What are the typical provisions for leases of
Transfer of real estate, taking place for the first time after its sell or sub-lease; (d) insurance; (e) (i) change of control
construction, is subject to VAT 24% upon the price of the sale, if the of the tenant; and (ii) transfer of lease as a result of a
building permit has been issued from 2006 onwards. Application corporate restructuring (e.g. merger); and (f) repairs?
of VAT, however, has been suspended until 31.12.2024. As things
stand now, from 2025, the government has the option to reduce (a) Length of term: after the entry into force of Law 4242/2014,
VAT on real estate from 24% to 13%, and even to zero VAT the minimum length of a business lease is three years,
from 2025. Due to the suspension of VAT, the issuance of new even when the lease agreement stipulates a shorter term.
private building permits increased, because the suspension is a The parties may, however, agree on a term exceeding the
very important ally and incentive for each constructor-investor minimum.
wishing to invest in the Greek real estate market. (b) Rent increases: the lease agreement normally sets out the
ratio of annual rent increase, typically inflation-index linked.
Real Estate 2024

In the absence of an explicit agreement, the landlord may 10.6 Does the landlord and/or the tenant of a business
claim adjustments by resorting to the competent Court or, lease cease to be liable for their respective obligations
under certain conditions, to the Regional Committees for under the lease once they have sold their interest? Can
the Settlement & Re-Adjustment of Rent. they be responsible after the sale in respect of pre-sale
(c) Tenant’s right to sell or sub-lease: the tenant may not non-compliance?
under any circumstances sell the leased property. On
the contrary, a sub-lease is allowed, unless explicitly Typically, the lease agreement prohibits the tenant from
prohibited by the lease agreement. transferring the lease to a third party. If no such prohibition is
(d) Insurance: insurance is not compulsory; however, either in place, the tenant may transfer (albeit not sell) an active lease,
party may choose to insure the leased premises on the under the condition that they communicate such transfer to the
basis of an entrepreneurial decision. landlord. The tenant will still be liable for obligations stemming
(e)(i) Change of control of the tenant: the change of control of from the time they were participating in the lease, while new
a corporate entity tenant does not in any way affect the obligations burden the new tenant. The landlord may sell their
lease, nor confer any rights to the landlord. interest, their liability against the tenant ceasing, once they have
(e)(ii) Transfer of lease as a result of corporate restructuring (e.g. been succeeded by the new owner. The landlord may, however,
merger): where the restructured corporate entity continues be held liable to the new owner for culpa in contrahendo.
to exist and operate, corporate restructuring does not affect
the lease. Typically, lease agreements reserve a tenant’s
right to transfer the lease to a restructured corporate entity,
while a restructured corporate entity landlord is deemed a sustainable use of buildings and in the reduction of
successor of the initial landlord by default. However, in the “environmental footprint” of a building. Please
the event of the landlord’s bankruptcy, the new owner may briefly describe any “green obligations” commonly
evict the tenant within two months from the auction of found in leases stating whether these are clearly
the property. defined, enforceable legal obligations or something not
(f) Repairs: the Law stipulates that the repair of damages due amounting to enforceable legal obligations (for example
to typical or agreed usage burdens the tenant. All other aspirational objectives).
damages burden the landlord. The lease agreement may
stipulate otherwise. All leases, whether residential or business, require a Building
Energy Performance Certificate in order to be lawfully
concluded under Law 4122/2013. The serial number of the
landlord or tenant of a business lease? Certificate must be electronically filed with the Tax Office,
along with the other lease details, enabling the tax platform to
automatically verify its authenticity and validity.
Landlords are subject to income tax from leases. The tax
brackets are: 15% for lease income between €0–12,000; 35%
for lease income between €12,001–35,000; and 45% for lease 10.8 Are there any trends in your market towards more
income over €35,000. Where the landlord is a legal person, lease flexible space for occupiers, such as shared short-
income is treated as income from a business operation and the
related expenses are tax deductible, provided they have been residents (co-living)? If so, please provide examples/
included in the company’s commercial books. Unless otherwise details.
agreed, tenants are burdened with stamp duty amounting to
3.6% of the monthly lease.
In the last few years, along with the “sprouting” of Airbnb short-
Regarding the Airbnb taxation, it should be noted that the
term residential leases, there has been an increase in shared
government will proceed with the modification of taxation from
short-term working spaces, mainly office buildings, equipped
the year 2024, with the main provision of the imposition of VAT.
with standard or more advanced amenities.
On the other hand, shared residential spaces with shared
10.5 In what circumstances are business leases facilities, apart from short-term leases, are not widespread or
usually terminated (e.g. at expiry, on default, by either common in Greece.
to be compensated by the other for any reason on 112 Leases of Residential Premises
termination?
Business leases are usually terminated either at expiry, by a leases of residential premises.
new agreement of the parties, or by either party terminating
the agreement before expiry of the lease term. Termination is The main laws governing residential leases are the Hellenic Civil
allowed for any of the reasons stipulated in law or in the lease Code and Law 1703/1987, as amended.
agreement (e.g. continued failure to pay the lease on time).
Where the lease is unduly terminated by a party, the other party 11.2 Do the laws differ if the premises are intended for
may claim compensation. In the event of term expiry, if the multiple different residential occupiers?
tenant remains in the premises, continues to pay the lease and
the landlord accepts such payment, the lease is deemed implicitly
renewed for an indefinite length of time and can be terminated There is no difference in the law applicable to cases of multiple
only by a mutual agreement or termination by either party, occupiers under the same lease agreement.
without compensation for early termination.
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74 Greece
11.3 What would typical provisions for a lease of (8) Law 4759/2020 – Modernisation of Land Use and Planning
residential premises be in your jurisdiction regarding: Legislation.
(a) length of term; (b) rent increases/controls; (c) the (9) Law 4685/2020 – Modernisation of Environmental
tenant’s rights to remain in the premises at the end of Legislation.
the term; and (d) the tenant’s contribution/obligation to (10) Law 4447/2016 – Spatial Planning – Sustainable
Development.
(11) Law 4014/2011 – Environmental Licensing of Projects.
(a) Length of term: residential leases have a three-year
minimum term, even when the lease agreement stipulates
a shorter term. The parties may, however, agree on a term
exceeding the minimum.
mechanism.
(b) Rent increases/controls: the lease agreement normally sets
out the ratio of annual rent increase, typically inflation-index
linked. In the absence of an explicit agreement, the landlord According to article 17 paragraph 2 of the Constitution, the
may claim adjustments by resorting to the competent Court State can expropriate real estate for public service after fully
or, under certain conditions, to the Regional Committees compensating the owner of the land. The expropriation is
for the Settlement & Re-Adjustment of Rent. officially declared by publishing the decision in the Government
(c) Tenant’s rights to remain in the premises at the end of term: Gazette. The State assesses the value of the land that is subject
the tenant is obliged to give up the leased property at the end to judicial review by the Court of First Instance that may accept
of the term, without further notice. If the tenant remains the value or assess differently. The owner may appeal, objecting
in the premises after expiry, continuing to pay the lease this assessment.
and the landlord accepts such payment, the lease is deemed
implicitly renewed for an indefinite length of time and can
be terminated by either party or by mutual agreement. or occupation and environmental regulation? How do
(d) Tenant’s contributions to property costs: the tenant is buyers obtain reliable information on these matters?
burdened with utility costs (electricity, water supply, etc.).
Insurance is not compulsory for either landlord or tenant.
Repair of damages due to typical or agreed usage burdens The control bodies are: the City Planning Service of each
the tenant. All other damages burden the landlord. The Municipality; the Forest Registries; several Departments of the
lease agreement may stipulate otherwise. Ministry of Environment and Energy; and the Decentralized
Administrations.
Buyers are advised to consult a civil engineer on matters
11.4 Would there be rights for a landlord to terminate concerning the use of real estate and environmental issues.
for the right to be exercised? 12.4 What main permits or licences are required for
The landlord may terminate a residential lease due to
non-compliance to the terms of the tenancy agreement on the Law 4067/2012 and Law 4495/2017 provide for three types of
part of the tenant (e.g. non-payment). There are two main options building permits:
for termination: (i) by lawsuit terminating the lease and seeking (1) Common building permit.
eviction; and (ii) by extrajudicial notice demanding compliance. (2) Small-scale permit for construction works worth of no
In the event of no compliance, after a 30-day lapse period a request more than €25,000.
for eviction order may be filed. In both cases, the execution of the (3) Pre-authorisation of building permit, for buildings of
decision or order requires execution by bailiff. more than 3,000 sqm or in the case of the building permit
being officially issued by another authority other than the
122 Public Law Permits and Obligations competent City Planning Service.
(4) A written contract for the management and disposal of
12.1 What are the main laws which govern zoning/ waste created from demolition and/or construction.
The main laws governing zoning/permitting and related matters
are: Building permits are mainly obtained by the competent City
(1) Law 4067/2012 – New Construction Law. Planning Service. An implied permission cannot be obtained
(2) Law 1337/1983 – Expansion of Urban Development Plans,
in any way.
Residential Development and Other Provisions.
(3) Law 4495/2017 – Audit and Protection of Built
Environment and Other Provisions. 12.6 What is the typical cost of building/use permits and
(4) Law 2508/1997 – Sustainable Urban Development. the time involved in obtaining them?
(5) Law 2742/1999 – Spatial Planning, Sustainable
Development and Other Provisions. The procedure for issuing a building permit is exclusively conducted
(6) Law 2971/2001 – Shoreline and Coastline Protection and electronically. Provided that all necessary documentation has been
Other Provisions. filed correctly and fully, the permit is issued within 45 days. The
(7) Law 4819/2021 – Integrated Framework for Managing cost depends on several factors, such as the documents needed, the
Waste (including from construction). area, the use of the building and the engineer’s fee.
Real Estate 2024

12.7 Are there any regulations on the protection of covers all countries participating in the EU ETS. The Union
historic monuments in your jurisdiction? If any, when Registry is an online database that holds accounts for stationary
and how are they likely to affect the transfer of rights in installations (transferred from the National Registries used
real estate or development/change of use? before 2012) and for aircraft operators (included in the EU ETS
since January 2012). The Greek Greenhouse Gas Registry is
Law 3028/2002 provides for the protection of antiquities part of the Union Registry and is managed by the Ministry of
and cultural heritage in general. Protection is focused on the Environment and Energy.
preservation of historical memory for the sake of current and future
generations, and on the improvement of the cultural environment. 13.2 Are there any national greenhouse gas emissions
In such cases, several limitations regarding the change of use, reduction targets?
renovation and development of a building may be imposed.
The Effort Sharing Regulation establishes for each EU Member
12.8 How can, e.g. a potential buyer obtain reliable State a national target for the reduction of greenhouse gas emissions
information on contamination and pollution of real by 2030 in the following sectors: domestic transport (excluding
estate? Is there a public register of contaminated land in aviation); buildings; agriculture; small industry; and waste. In
your jurisdiction? total, the emissions covered by the Effort Sharing Regulation
account for almost 60% of total domestic EU emissions.
There is no public register of contaminated land; therefore, Initially adopted in 2018, the Regulation was amended in 2023.
potential buyers should conduct their own due diligence. With their new national targets, Member States will collectively
contribute to an emission reduction at EU level, in the Effort
Sharing sectors, of 40% compared with 2005 levels. The revision
clean-up ever mandatory? was adopted as part of a package of proposals aimed at reducing
the EU’s emissions by 55% by 2030.
Greece shall, by 2030, limit its greenhouse gas emissions by at
Although environmental clean-up is not mandatory under least 22.7% in relation to its emissions in 2005.
Greek law, those in violation of the environmental protection
law are subject to criminal, civil and administrative sanctions.
12.10 Please briefly outline any regulatory sustainability of both newly constructed and existing
requirements for the assessment and management of buildings?
The Ministry of Environment and Energy has been running

For any new construction, there are specifications ensuring the since 2018 the project Εξοικονομώ Κατ’ Οίκον (Saving At Home),
energy performance of the building. Furthermore, as mentioned which aims to motivate individuals to renovate their homes,
above, in real estate transactions the seller must provide an in order to become more sustainable. The process of the
energy performance certificate of the property. renovation is co-funded by the EU. An extension of the project
In June 2023, the new Greek Building Regulation was to include businesses has been announced and is expected to
published in the Government Gazette, which dictates ways for the enter into force soon.
protection of the environment and the conservation of energy.
142 COVID-19
132 Climate Change
13.1 Please briefly explain the nature and extent of your jurisdiction which were introduced in response to
any regulatory measures for reducing carbon dioxide the effect of the Coronavirus (COVID-19) pandemic and
emissions (including any mandatory emissions trading which remain in place.
scheme).
Αs far as the transfer property tax is concerned, the application

Following a revision of the ETS Directive in 2009, EU ETS for the declaration of transfer property can be made by post or via
operations were in 2012 centralised in a single EU Registry email. This means that citizens are no longer represented in person
operated by the European Commission. The Union Registry at Tax Offices, which has significantly simplified this process.
Real Estate 2024

76 Greece
Alexandra Petsa is a Supreme Court lawyer and an expert practitioner with long-term experience, regularly advising numerous domestic and
international clients in various fields (including non-performing exposures (NPEs), Restructuring and Insolvency, Judicial Enforcement, Real
Estate and Tax, Capital Markets & Securities Regulation, Banking and Finance and Banking Regulation). Alexandra has acted as in-house legal
adviser to the Agricultural Bank of Greece’s investment firm (ATE Securities) and as in-house legal adviser in TT Hellenic Postbank S.A. From
2013, she is the Managing Partner of Sardelas Petsa Law Firm, in charge of the firm’s Real Estate, NPEs, Restructuring and Insolvency, Tax and
Employment & Social Security Law practice, overseeing the relevant divisions of the firm. Alexandra holds a law degree and a postgraduate
degree in Commercial Law from the University of Athens. She is the author of The Law of Stock Exchange Transactions (in Greek), 2005 and has
numerous contributions in academic and practitioners’ Greek and international legal journals.
Sardelas Petsa Law Firm Tel: +30 210 7296550

8 Papadiamantopoulou str. Email: apetsa@sardelaslaw.gr
Athens URL: www.sardelaslaw.gr
Greece
Fay Vetouli is a qualified Court of Appeals lawyer, was admitted to the Athens Bar Association in 2006, and joined Sardelas Petsa Law Firm in
2019. She is an experienced Civil Law and Litigation lawyer, with main areas of practice that include Real Estate, Litigation and Enforcement.
Fay regularly advises and represents banks in litigation for NPE recovery and enforcement of the relevant claims, while she has extensive
experience in Real Estate law. She holds a law degree from the University of Athens, Faculty of Law (LL.B.). Fay speaks English, German,
French and Italian, as well as her native Greek.

8 Papadiamantopoulou str. Email: fvetouli@sardelaslaw.gr
Greece
Nicolas Tarantilis is a qualified Court of Appeals lawyer, admitted to the Athens Bar Association since 2002, and joined Sardelas Petsa Law Firm
in 2021. He is an experienced Civil Law and Litigation lawyer, with main areas of practice that include Real Estate, Intellectual and Industrial
Property rights, Litigation and Enforcement. Nicolas regularly advises and represents banks in litigation for NPE recovery and enforcement of
the relevant claims, and has extensive experience in Real Estate law. He holds a law degree from Democritus University of Thrace, Faculty of Law
(LL.B.), 1999 and a postgraduate degree in Civil Law from the Kapodistrian University of Athens (LL.M.), 2002. He participated in the literary work
Civil Law Objections and publication Nomiki Bibliothiki (in Greek), 2011, authoring the section concerning: (a) the interpretation of a declaration
of intent (173 – 200 CC); (b) conditions and time limits (201 – 210 CC); and (c) limitation (247 – 280 CC). He also participated in the literary
work Code of Civil Procedure, interpretation by article, and publication “Nomiki Bibliothiki” (in Greek), 2010 and 2013, authoring the section on the
interpretation of articles 432–465 of the Code of Civil Procedure. He has also made numerous contributions to Greek legal journals. Nicolas
speaks English, German and French, as well as his native Greek.

8 Papadiamantopoulou str. Email: ntarantilis@sardelaslaw.gr
Greece
Sardelas Petsa law firm is one of the leading Greek business law firms with and traders, real estate developers and managers, pharmaceutical and
a strong international dimension, well known for its top-drawer specialised health sector companies, IT and telecommunications providers, food &
professional service in high-profile cross-border and domestic transactions beverage and retail goods and services companies, as well as public sector
and commercial disputes. We are recognised by clients and peers alike, enterprises and entities.
as a legal practice with high expertise and experience, which comes up www.sardelaslaw.gr
with business-oriented, practical and legally robust solutions in complex
transactions. The firm has one of the broadest range of practices among
Greek firms, providing comprehensive advice and support to domestic and
international businesses in a variety of legal disciplines, including Banking,
Finance, Capital Markets, Energy, M&As, Real Estate, privatisations and
development of public assets, Public Procurement and Litigation. Sardelas
Petsa represents and supports a diverse variety of clients from all key
sectors, including international and domestic financial institutions and
international financial institutions, funds, energy developers, producers
Real Estate 2024

Chapter 9 77
Ireland
Ireland
Shane Fahy
McCann FitzGerald LLP Denise Dockery
12 Real Estate Law 1.3 Are international laws relevant to real estate in your
in EU countries.
to leases of business premises should be listed in There are no international laws of direct relevance to real estate
response to question 10.1. Those relating to zoning and in Ireland, though anti-money laundering legislation will apply
environmental should be listed in response to question to particular transactions as will EU sanctions. However,
12.1. Those relating to tax should be listed in response to decisions made in other common law jurisdictions would have
questions in Section 9. persuasive authority in our judicial system.
The principal legislation governing Irish real estate is as follows: 22 Ownership

■ Land and Conveyancing Law Reform Act 2009.
■ Land and Conveyancing Law Reform Act 2021. 2.1 Are there legal restrictions on ownership of real
■ Land and Conveyancing Law Reform Act 2013 (as amended estate by particular classes of persons (e.g. non-resident
by Land and Conveyancing Law Reform (Amendment) persons)?
Act 2019).
■ Registration of Deeds and Title Acts 1964 and 2006 (as There are no direct legal restrictions on ownership of real estate
amended by Land and Conveyancing Law Reform Act 2009). for non-resident persons in Ireland. However, on commencement
■ Landlord and Tenant (Ground Rents) Act 1978. of the Screening of Third Country Transactions Act 2023,
■ Landlord and Tenant (Ground Rents) (No. 2) Act 1978. investment in certain Irish undertakings or assets (including real
■ Housing Acts 1996 to 2021. estate assets) by persons or entities from “third countries” (being
■ Land Development Agency Act 2021. countries other than Ireland, the EU, the EEA or Switzerland)
■ Planning and Development Acts 2000 to 2023. will be subject to a screening regime under that Act to ensure that
■ Building Control Acts 1990 to 2020. the investment does not present risks to the security or public
■ Succession Act 1965. order of the State.
■ Multi-Unit Developments Act 2011.
■ Residential Tenancies Acts 2004 to 2022.
■ Local Government Reform Act 2014.
■ National Asset Management Agency Act 2009.
■ The Property Services (Regulation) Act 2011. 3.1 What are the types of rights over land recognised
■ Conveyancing Acts 1881 to 1911 (as amended,
supplemented or replaced by Land and Conveyancing Law
Reform Act 2009).
■ Statute of Frauds (Ireland) Act 1695. Legal estates and interests in land
■ Settled Land Acts 1882 to 1890 (as amended, supplemented The only legal estates in land that may be created or disposed of
or replaced by the Land and Conveyancing Law Reform are freehold and leasehold estates. A freehold estate is closest
Act 2009). to absolute ownership and has the potential to last forever.
■ Vendor and Purchaser Act 1874. Leasehold estates are lesser estates than freehold estates and
■ Partition Acts 1868 and 1876 (as amended, supplemented they occur where a tenant holds the property for a term of years,
or replaced by the Land and Conveyancing Law Reform subject to rent and other covenants. Leasehold interests in
Act 2009). Ireland are based in contract rather than in tenure.
Legal interests that may be created or disposed of are similarly
limited in law and include easements, wayleaves, incumbrances
1.2 What is the impact (if any) on real estate of local (including mortgages and charges), profits á prendre (including
common law in your jurisdiction? mining rights), freehold covenants, and certain public and
statutory rights.
Irish property law is based on both common law and statute law. The strict legal position on the acquisition of estates and
As UK law is also based on common law, judgments made in the interests in land is, however, tempered by the law of equity, so
UK courts have persuasive authority in the Irish courts but are that equitable rights and interests based on justice, including the
not binding. beneficial ownership of land, arise and are recognised and upheld.
Real Estate 2024

78 Ireland
Contractual rights 4.2 Is there a state guarantee of title? What does it

In addition to legal estates and interests, rights over and in respect guarantee?
of land can be created and enjoyed by contract between the parties.
The most commonly enjoyed contractual rights would be licences Titles registered in the Land Registry are guaranteed by the
to use or occupy and options to buy. Rights of this nature are State. The register in the Land Registry is conclusive as to title
enjoyed on the terms of the contract themselves and do not create and buyers or chargees for value are protected against errors or
rights in the land, but courts will give effect to the substance of a mistakes made by authority officials.
contract over its form, so that, for example, a contract purporting There is no State guarantee in respect of any deed registered
to be a licence, which has all the characteristics of a lease, may be in the Registry of Deeds.
upheld by a court as a lease, if challenged.

3.2 Are there any scenarios where the right to land What (if any) is the consequence of non-registration?
thereon?
For titles registered in the Land Registry, all registrable burdens
(including rights of residence, restrictive covenants and leases
Under section 3 of the Land and Conveyancing Law Reform Act exceeding 21 years) must be registered in the Land Registry to
2009, “land” is defined as including “buildings and other structures gain protection, otherwise these rights will not be protected
of any kind on land and any part of them”, but the freehold owner against a bona fide buyer for value without notice.
of land may dispose of the valuable interest in the land and/or Registration in the Registry of Deeds, whether for deeds
any buildings on it by granting a long lease of the land and/or transferring title or granting rights, is not compulsory but
buildings. In this way, the owner of the land may be different to where the title is not already registered in the Land Registry, it is
the owner of the buildings on it. An owner may also enter into necessary to both preserve priority and ensure that third parties
development agreements, building licences and other contractual are on notice of ownership and other rights. Registration is,
arrangements for the construction of buildings on land, which will therefore, always carried out in practice.
govern the rights of the parties to the buildings once constructed.
3.3 Is there a split between legal title and beneficial registered?
consequences of any split? Are there any proposals to While, in principle, for titles registered in the Land Registry, the
change this?
folio provides conclusive evidence as to the title registered, there
are also certain rights (referred to as section 72 burdens), which
Yes, both legal and beneficial title is recognised in Ireland. For affect the title without registration (including certain public rights,
titles registered in the Land Registry, the legal owner is the tenancies of 21 years or less where the tenant is in occupation and
person registered as owner on the Land Registry folio. Where easements and profits á prendre unless created by express grant since
the title is not registered in the Land Registry, the legal owner is the title was registered in the Land Registry). See the answer to
the person to whom the legal title is conveyed by deed, registered question 4.3 above for titles registered in the Registry of Deeds.
in the Registry of Deeds. A beneficial interest typically arises
where the legal owner is holding the asset in whole or in part in 4.5 Where there are both unregistered and registered
trust for the beneficial owner. If both interests subsist then it is land or rights is there a probationary period following
the beneficial interest that is deemed the significant interest in first registration or are there perhaps different classes
the real estate asset. If there is a split, the practice is to register or qualities of title on first registration? Please give
the legal owner who holds the title as nominee in trust for details. First registration means the occasion upon
the beneficial owner. There are no proposals to change this which unregistered land or rights are first registered in
the registries.
at present. See question 4.6 below concerning the passing of
beneficial interest on signing of an enforceable contract.
There is no probationary period following first registration. An
applicant may be registered in the Land Registry with one of the
following classes of title:
■ Absolute title: this is the best type of title and is the most
4.1 Is all land in your jurisdiction required to be common.
registered? What land (or rights) are unregistered? ■ Qualified title: where the applicant can only establish title
for a limited period or where the title is subject to particular
There are two registration systems for property ownership in reservations, then the Registrar may register a qualified title.
Ireland overseen by Tailte Éireann: one administered by the ■ Possessory title: where an applicant is in occupation of the
Land Registry; and one by the Registry of Deeds. Registration land or in receipt of the rents and profits issuing out of the
in the Land Registry is intended to provide conclusive evidence land, then they may be registered with possessory title.
as to the ownership of and title to the property registered there, ■ Good leasehold title: this would apply where the Land
whereas registration at the Registry of Deeds records relevant Registry has not investigated the title of the landlord. Where
deeds and determines their priority (both as against other the landlord’s title is registered then the tenant will be
registered and unregistered deeds). registered with absolute leasehold title.
If it has not already been done, all sales of land are now
subject to an obligation for the title to be registered in the Land 4.6 On a land sale, when is title (or ownership)
Registry. For land, the title to which is registered or compulsorily transferred to the buyer?
registered in the Land Registry, title does not technically pass
until registration is complete. Where title is registered or compulsorily registrable in the
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McCann FitzGerald LLP 79
Land Registry, title does not technically pass until registration less than 15 years old or not otherwise a “good root” of title, a
is complete. In the limited circumstances where this does not further deed for value of 15 years or more, is required to prove
apply, legal title passes when the purchase money is paid to the the owner’s title. For leasehold titles, the lease itself is always
seller and the buyer takes delivery of the deed. the root of a leasehold title, together with any assignment to the
Unless disapplied in the contract for sale, the application of owner and, ideally, but not necessarily, supported by evidence
section 52 of the Land and Conveyancing Law Reform Act 2009 of the freehold owner’s title to grant the lease. Where a title is
means that the entire beneficial interest in the real property that subject to or has the benefit of rights and interests, these will
is the subject of the contract passes to the buyer on the making of also need to be shown.
an enforceable contract for the sale or other disposition of land.
4.7 Please briefly describe how some rights obtain estate be completed electronically? What documents
priority over other rights. Do earlier rights defeat later need to be provided to the land registry for the
rights? registration of ownership right? Can information
electronically?
The general law relating to priorities as between successive
estates or interests in land is based on the equitable doctrine of
notice, but this has a more limited role in Irish conveyancing While applications for registration with the Land Registry may
practice since the introduction of specific legislation governing initially be made electronically so as to result in a corresponding
the priority of rights where the title is registered in the Land dealing number, subject to very limited exception only, the
Registry and also where it is not. It is not necessarily the case actual documents that are the subject of any application to either
that earlier rights will have priority over later rights. the Land Registry or the Registry of Deeds must all be signed
In principle: or executed in “wet-ink” and be physically lodged with the Land
■ where title is registered in the Land Registry, priority is Registry. Limited exceptions to this apply for registration of
governed by the order on which the burden appears on the certain charges (residential only) and discharges (subject to
relevant part of the folio; conditions) in the Land Registry.
■ where the title is not registered in the Land Registry: Applications made to either the Land Registry or the Registry
■ if both deeds are registered in the Registry of Deeds, of Deeds will include an application form in the prescribed form
the timing of registration of the deed creating the right, as for the Registry and the application made (in the Land Registry
opposed to the date of the deed itself, is determinative; this will always include a Form 17), the relevant deed or deeds,
the rights in the first registered deed will have priority; and the appropriate fees.
■ if only one of the deeds is registered, the rights in the The Land Registry and the Registry of Deeds are public
registered deed will have priority; and registries so that searches can be conducted by anyone who
■ if neither of the deeds is registered, the rights created pays a prescribed fee. Land Direct, the official Tailte Éireann
first will have priority. Registration Division online service, allows users to search the
Importantly, further statutory provisions mean that: Land Registry map and view and order title documents online at
■ these general principles do not apply to determine the https://www.landdirect.ie .
priority of judgment mortgages: a judgment mortgage is
subject to any right or incumbrance affecting the judgment 5.4 Can compensation be claimed from the registry/
debtor’s land, whether registered or not; registries if it/they make a mistake?
■ a legal chargeholder may enforce its security and transfer title
to a buyer free of rights that rank in priority below the charge; Compensation can be claimed from the Land Registry but not
■ a bona fide purchaser for value without notice of rights will from the Registry of Deeds (see question 4.2 above).
take the land free of those rights if all reasonable enquiries
have been made by the buyer and their lawyer as part of the
due diligence process; and 5.5 Are there restrictions on public access to the
■ in certain circumstances, a buyer of a legal estate in land will register? Can a buyer obtain all the information he
take title free of equitable interests in the land whether they
are on notice of those rights or not. by a search of the register? If not, what additional
Any member of the public is entitled to search the Registry of
5.1 How many land registries operate in your Deeds records on payment of the prescribed fee.
jurisdiction? If more than one please specify their In the Land Registry, members of the public can inspect
differing rules and requirements. search and view folios and filed plans, again on payment of the
prescribed fee, but applications pending registration may only be
Please see questions 4.1 to 4.7 above. inspected by the applicant or registered owner or other prescribed
category of persons or a person authorised by those persons.
Neither the Land Registry nor the Registry of Deed will
their title? disclose unregistered rights. As the potential for unregistered
rights exists in both systems, in addition to public registry
searches, anyone acquiring an estate, right or interest in land
For titles registered in the Land Registry, a certified copy folio including buyers, lenders and tenants, must engage in a
and filed plan showing the owner as the registered owner due-diligence process involving inspection and legal enquiry to
is proof of their title. Where the title is not registered in the be fully satisfied regarding encumbrances and rights affecting it.
Land Registry, a deed for value to the owner and, where this is
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80 Ireland
62 Real Estate Market 6.3 Is there any change in the sources or the
6.1 Which parties (in addition to the buyer and seller main sources of capital you see active in your market?
Please briefly describe their roles and/or duties. Debt is the predominant source of capital for real estate in
Ireland, particularly for established participants. New entrants
are likely to obtain funding through equity financing. The cost
a) Estate agents
of borrowing and investors’ ability to use debt and compete
An estate agent advises on the market or rental value of the
competitively in a bidding process are likely to result in a higher
property and advertises the property for sale and/or letting.
number of deals completing on an all-equity basis.
Estate agents will also act for both landlords and tenants to
negotiate and agree heads of terms for commercial lettings. Sources of capital to finance real estate transactions have
broadened, with the traditional or “pillar” banks including
b) Lawyers Bank of Ireland and Allied Irish Banks, p.l.c., being joined by a
A seller’s lawyer is responsible for drafting contracts, dealing number of alternative and non-bank lenders.
with pre-contract enquiries raised by the buyer’s lawyers, Development finance for residential projects specifically is
replying to requisitions on title, redeeming mortgages/charges also available through Home Building Finance Ireland (“HBFI”)
and distributing the balance of sale proceeds to the seller. and the Housing Finance Agency (“HFA”). HBFI was set up
A buyer’s lawyer investigates the title, explains the title and by the Government in 2018 to provide funding at market rates
loan offer to the buyer, completes the mortgage documentation, for commercially viable residential developments in the State,
raises requisitions on the title, drafts the purchase deed, which meet HBFI’s funding criteria. The HFA provides loan
requisitions the loan amount, conducts closing searches, attends finance to local authorities, voluntary housing bodies and higher
the closing appointment and stamps and registers the title. education institutions for housing and related purposes. The
State also supports development and investment in social and
c) Notaries affordable housing, in particular through State equity schemes
Our common law system enables documentation to be sworn/ administered by the Housing Agency.
affirmed in the presence of an independent practising solicitor,
commissioner for oaths or peace commissioner. The assistance 6.4 What is the appetite for investors and/or
of a notary public to attest or certify documents may be required developers to invest in your region compared to last year
for documents to be accepted for use in another jurisdiction, but and what are the sectors/areas of most interest? Please
not otherwise. give examples.
d) Others Mirroring the experience across Europe, 2023 has been a

Buyers will engage surveyors/architects before signing contracts challenging year for the Irish commercial real estate market.
to carry out a structural survey of the property to ascertain its Rising interest rates have increased the cost of borrowing, which,
state and condition, conduct a boundary survey and/or verify coupled with inflationary pressures and rising costs generally,
compliance with planning and building regulations and title have caused developers and investors to pause. The office sector
plans produced by the seller. has been particularly impacted, also due to a changed post-
A seller/landlord will engage an architect or mapping expert pandemic hybrid work environment, causing occupiers to reassess
to produce a title plan for title registration purposes, where this and streamline their commercial office space requirements.
is required and will engage a building energy rating (“BER”) However, residential development continues strongly and the
assessor to prepare a BER certificate and advisory report in retail, industrial and hospitality sectors are all performing well.
relation to a building being sold or let (see question 10.7 below).
A requirement for other experts, including environmental
experts, will depend on the nature of the transaction. 6.5 Have you observed any trends in particular market
6.2 How and on what basis are these persons examples.
remunerated?
Please see the response to question 6.4 above.
■ Estate agents – usually charge a percentage of the sale
price/annual rent, agreed in advance in accordance with 72 Liabilities of Buyers and Sellers in Real
their obligations under the Property Services (Regulation)
Act 2011. Estate Transactions
■ Lawyers – usually charge either a percentage of the sale
price/annual rent or a fixed fee, agreed in advance in 7.1 What (if any) are the minimum formalities for the
accordance with their obligations under section 150 of the sale and purchase of real estate?
Legal Services Regulation Act 2015.
■ Commissioner for Oaths/Practising Solicitor – €10 per A buyer/seller must have the legal capacity to execute a contract
affidavit, affirmation, declaration and €2 per exhibit not for the sale/purchase of real estate, i.e. they must be over 18 and
exceeding €30 for all exhibits and €10 on execution of a of sound disposing mind. Otherwise, a contract for the sale of
bond. land or grant of a lease in Ireland must be evidenced in writing
■ Surveyors – usually charge commensurate with the value and signed by or on behalf of the party against whom it is to be
of the property/work involved. enforced (except where the justice of the case, on the basis of
■ Environmental expert – usually charge commensurate established equitable principles, demands otherwise). While the
with the value of the property/work involved. latest edition of the conditions of sale issued by the Law Society
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of Ireland are almost universally adopted for sales (subject to

amendment and negotiation), by-law contracts do not have to be
82 Finance and Banking
a single document or take a particular form, so that care must be
taken to avoid unwittingly creating a binding obligation (for sale, 8.1 Please briefly describe any regulations concerning
purchase or lease) by exchange of correspondence, whether by
letter, fax, email or other written communication or document. and/or between individual persons and corporate
entities?
matters must be disclosed? Irish law does not specifically distinguish between the lending
of money to finance real estate and the lending of money to
The principle of “buyer beware” generally applies, so that buyers finance other assets. The principal dividing line with regard
and tenants take property “as is” and in its actual condition. to the application of financial services regulatory requirements
While under the Law Society general conditions of sale, a seller is whether the money is being lent to an individual person or a
has a duty to disclose notices received prior to the sale and any corporate entity.
rights or restrictions affecting the property not apparent from Lending to corporate entities, which is the typical fact pattern
inspection, in general law there is no requirement on the owner in the context of commercial real estate, does not in itself
to ensure that it is free from defects or to disclose anything that require the lender to hold a regulatory authorisation. The lender
is apparent from inspection. may, however, be subject to a number of generally applicable
regulatory obligations under Irish law (e.g. in relation to Anti-
Money Laundering/Know Your Client compliance and credit
reporting). In the case of a purchase of an existing loan to a
misrepresentation?
corporate entity, it is possible that a regulatory authorisation as
a “credit servicing firm” would be required. That requirement
Yes, a seller can be liable for misrepresentation. General condition would only arise where certain criteria are met, including that
29 of the Law Society general conditions of sale makes specific the original lender held an authorisation to provide credit in
provision for this but whether and how this applies will depend on Ireland (e.g. a bank) and the borrower was categorised as a small
whether and how this condition is agreed to apply to a transaction. and medium-sized enterprise (“SME”).
Lending to individuals will almost always require the lender
7.4 Do sellers usually give any form of title “guarantee” to hold an authorisation from the Central Bank of Ireland (e.g.
or contractual warranties to the buyer? What would be as a credit institution or a retail credit firm) or to passport a valid
the scope of these? What is the function of any such authorisation from an equivalent EEA regulatory authority into
guarantee or warranties (e.g. to apportion risk, to give Ireland. Authorised lenders are subject to an extensive range of
information)? Would any such guarantee or warranties supervisory and regulatory requirements that govern prudential
act as a substitute for the buyer carrying out his own and conduct of business matters. Some noteworthy examples
diligence?
relevant to real estate financing include the:
■ Central Bank (Supervision and Enforcement) Act 2013
As above, the principle of “buyer beware” applies so that sellers (Section 48) (Lending to Small and Medium-sized
do not give any title guarantee and give very limited warranties. Enterprises) Regulations 2015;
General condition 32 of the Law Society general conditions ■ Consumer Protection Code 2012;
of sale makes specific provision for a seller warranty as to ■ Code of Conduct on Mortgage Arrears;
compliance with planning and building regulations, but this ■ Consumer Credit Act 1995; and
is often limited or disapplied altogether for transactions other ■ Central Bank (Supervision and Enforcement) Act 2013
than for residential sales to consumers. (Section 48(1)) (Housing Loan Requirements) Regulations
2022,
7.5 Does the seller retain any liabilities in respect of each as amended and supplemented from time to time.
the property post sale? Please give details. Whether the borrower is resident in Ireland or not is of limited
relevance in the context of a commercial real estate loan to a
corporate entity. It would not affect the question of whether the
While any liabilities retained will depend on what is agreed
lender required a regulatory authorisation to provide the loan but
for the transaction itself, a seller does not generally retain any
could have an impact on the scope of compliance requirements
liabilities for a property post-sale, other than an obligation to
(particularly in relation to credit reporting).
address mapping queries on the buyer’s title registration.
For real estate loans to a natural person, the residence question
would require closer analysis on a transaction-by-transaction
7.6 What (if any) are the liabilities of the buyer (in basis and may give rise to complex questions regarding conflict
addition to paying the sale price)? of laws and the appropriate financial services regulatory regime
to be applied.
The buyer will be responsible for discharging the stamp duty on The taking of security over real estate is unlikely, as a matter
the purchase deed, their title registration fees and the fees and of Irish law, to be affected by the residence of the security-
outlay of the professionals engaged by them for the transaction. provider. The question of whether the security-provider is a
body corporate or an individual would, however, impact on
the statutory treatment of the security (including the taking,
registration and enforcement of the security).
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82 Ireland
8.2 What are the main methods by which a real who advance funds in good faith and are not on notice of the
estate lender seeks to protect itself from default by the fraud, having carried out the appropriate due diligence.
borrower?
A real estate lender protects itself by taking security in the form frustrate enforcement action by a lender?
of a first-ranking charge against the property in the Registry of
Deeds or Land Registry, as applicable (see section 4 above). Examinership is a rescue procedure for a company, which is, or
is likely to become, unable to pay its debts as they fall due. The
8.3 What are the common proceedings for realisation process comprises three main components: new investment into
of mortgaged properties? Are there any options for a the company; a forced write down of the company’s liabilities;
mortgagee to realise a mortgaged property without and a comprehensive legal stay that prevents any enforcement
involving court proceedings or the contribution of the action being taken against the company for the duration of the
mortgagor? process. The examiner has a maximum period of up to 100
days to lodge their proposals for a scheme of arrangement in
The most common method of realising security against Court. During this “protection period”, no proceedings may be
commercial real estate is the appointment of a receiver, which, commenced in relation to the company and a secured creditor
except for “housing loan mortgages”, is typically done without cannot take any action to enforce its security. A court also has
the requirement for court proceedings. In the case of a “housing the power to remove any receiver (which is the main method
loan mortgage”, the appointment of a receiver may only be done by which a secured creditor enforces their security in this
following a court order. In addition, there are further specific jurisdiction) who has stood appointed for less than three days as
statutory and regulatory requirements to be complied with when at the date of the petition for examinership.
enforcing security against a family home. The Small Company Administrative Rescue Process
(“SCARP”) is similar to examinership but exclusively available to
small and micro companies.
8.4 What minimum formalities are required for real
estate lending? For individuals, a protective certificate issued by the Court
under the Personal Insolvency Act 2012 offers protection to
the applicant’s assets from legal proceedings by creditors while
Lenders will only typically lend in return for security over the the applicant is applying for a personal insolvency Arrangement
property in the form of a charge by deed. Where title to the (“PIA”) or Debt Settlement Arrangement (“DSA”) under that Act.
property being charged is registered in the Land Registry, a
specific form of charge must also be executed in accordance with
Land Registration Rules in either Form 51 or 52. Where a foreign 8.8 What is the impact of an insolvency process or a
entity is granting the security, execution of both the charge and corporate rehabilitation process on the position of a real
estate lender?
the relevant Land Registry form should be in compliance with
the law governing execution by the foreign entity, supported by
a legal opinion in a prescribed form from a lawyer authorised An insolvency event suffered by a debtor is very likely to trigger
to practice in the relevant jurisdiction, confirming that the a right on the part of a lender to take enforcement action but
documents have been duly executed by the foreign entity. the actions and/or timing of the actions taken by the lender will
depend on any insolvency process commenced by the debtor.
See question 8.7 above for the impact of examinership, SCARP
and personal insolvency arrangements on the position of the
creditors? real estate lender. In addition, preferential creditors (comprising
mainly employee and tax claims) will rank ahead of any floating
charge granted by a company.
The real estate lender will require that their charge takes
priority over any other creditors, with the exception of statutory
creditors, and to achieve that will ensure that the charge be 8.9 What is the process for enforcing security over
registered when the borrower is registering its title to the asset. shares? Does a lender have a right to appropriate shares
8.6 Under what circumstances can security taken by a entered another insolvency or reorganisation procedure?
Determining the value of the shares is important to any
Charges over the assets of a company must be registered in the enforcement strategy, including appropriation, which is not a
Irish Companies Office. Failure to register the charge within 21 common feature in the Irish market.
days will render the charge void. A lender can seek to take control of a borrower by appointing
The insolvency of any person or company within a certain a receiver to the member’s shares. The usual sequence of events
period of security being granted to a lender, may also result in the will be to:
security being avoided. In particular, and except where new funds (a) serve a written demand on the borrower (the facilities
are advanced at the time, a floating charge created by a company should be on demand or there should be an existing event
within the 12 months before the commencement of the winding of default);
up of the company will be invalid unless it is proven that the (b) afford the borrower a reasonable opportunity to satisfy the
company was solvent immediately after the creation of the charge. demand following receipt (usually 24 hours); and
If a charge was granted with the intention to defraud another (c) execute a deed of appointment of receiver.
or to fraudulently prefer the lender, this would also be at risk of A receiver appointed to the shares would be able to appoint
being avoided; however, this should not be an issue for lenders new directors to the board and remove existing directors by
Real Estate 2024

passing various resolutions. The appointment of a receiver to 9.5 What other tax or taxes (if any) are payable by the
shares does not involve a transfer of the shares. Instead, the seller on the disposal of a property?
receiver simply steps into the shoes of the member and can exercise
all shareholder voting rights as receiver and agent of the member.
CGT, as defined in question 9.3 above, charged in accordance
The shares can, in certain circumstances, be transferred to the
with the Taxes Consolidation Act 1997 (as amended), arises on
lender or to its nominee. However, the receiver is obliged to take
the disposal of a wide range of assets, including real estate. The
all reasonable care to obtain the best price reasonably obtainable
gain is calculated by deducting from the consideration received
for the property the subject of the security at the time of its sale.
for the asset, the cost of acquisition and any expenditure incurred
The lender as mortgagee will also typically have a power of sale
on its enhancement or disposal. In 2023, the rate of CGT is 33%
under the security document or statute and can sell the shares and
for gains on disposals.
use the proceeds to fulfil the security.
If the seller is a company carrying on a trade in real estate,
As set out above, during the course of an examinership, no
the gain can be subject to Corporation Tax instead of CGT.
enforcement action can be taken by a lender. However, in the case
There is an obligation on a buyer to withhold tax at 15% from
of liquidation, a lender can typically enforce its security at any stage
the consideration paid for Irish land or shares deriving their
before, during or following the appointment of a liquidator.
value or the greater part of their value from Irish land where
the consideration exceeds €500,000, unless the seller produces a
92 Tax CGT clearance certificate.

Stamp duty is payable by the buyer on instruments transferring

Yes; for example, the rate of stamp duty on an instrument
ownership of property. The current standard rates of stamp duty
transferring shares is 1%.
applying on the acquisition of residential property are 1% on
values up to €1 million and 2% on values exceeding €1 million.
A higher rate of 10% applies where a person acquires 10 or more 9.7 Are there any tax issues that a buyer of real estate
residential properties (other than apartments) in any 12-month should always take into consideration/conduct due
period. For non-residential property, a rate of 7.5% applies. diligence on?
Stamp duty is chargeable in accordance with the Stamp Duties
Consolidation Act 1999 (as amended). The Revenue website ■ Stamp duty payable.
https://www.revenue.ie contains more detailed and helpful ■ VAT chargeable and agreement to pay or self-account.
information on stamp duty and other relevant taxes and duties. ■ Requirement for CGT clearance certificate.
■ Application of vacant site levy/residential zoned land tax.
■ Application of Local Property Tax (“LPT”) and/or Vacant
Homes Tax (“VHT”) if the property is residential.
■ Not technically a tax, but commercial rates are also an
Stamp duty is due and payable within 30 days after the instrument important consideration.
is executed, after which penalties and interest apply.
income tax? 10.1 Please briefly describe the main laws that regulate
Where the disposal of a particular property by an individual is
not done as part of a trade, then that disposal will not be liable The main laws that regulate leases of business premises are as
to income tax, but Capital Gains Tax (“CGT”) may be payable follows:
on any gain element. ■ Landlord & Tenant Law Amendment Act 1860 (“Deasy’s”
Act).
9.4 Are transfers of real estate subject to VAT? How ■ Landlord and Tenant Acts 1967 to 2019.
much? Who is liable? Are there any exemptions? ■ Land and Conveyancing Law Reform Act 2009.
■ Property Services (Regulation) Act 2011.
VAT is chargeable on real estate and other supplies and services
in accordance with the Value-Added Tax Consolidation Act 2010 10.2 What types of business lease exist?
(as amended). Where real estate is regarded as “new”, VAT will
generally arise on the sale at a rate of 13.5% on the purchase price. There is no standard form of business lease in Ireland, but leases
Where properties are not “new”, they are typically exempt from will generally range between the following two types:
VAT but with an option in favour of the seller to charge VAT on ■ Short-term temporary convenience letting for a term of up
the sale. Where VAT applies on the transfer, VAT must be charged to four years and nine months (see question 10.3 below)
by the seller and furnished to the Revenue or self-accounted for with limited repair obligations for the tenant and in respect
by the buyer. There are many variations and exemptions under of which no rights of renewal accrue to the tenant.
the VAT system, including the Capital Goods Scheme by which ■ Full repairing and insuring (“FRI”) leases for terms of
a trader’s VAT deduction in respect of a property is tied into the 10–20 years, where the tenant takes on full responsibility
use to which that property is put over its VAT-able life. If a buyer for the costs of the building or their portion of it including
is registered for VAT, the VAT may, in most circumstances, be repair/costs of repair.
reclaimed so that it is not a transaction cost.
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84 Ireland
The Property Services (Regulation) Act 2011 requires proportionate part of the cost of repairing the building through
commercial tenants to provide the Property Services Regulatory the building service charge.
Authority (“PSRA”) with certain details of the letting when Landlords will seek to impose as extensive a repairing
granted and to update the register on the occurrence of certain obligation as possible onto a tenant. Limitations to repair
events, including any review of the rent and on lease termination. obligations (and service charge contributions towards capital
repairs) in particular are increasingly sought by tenants
depending on their long-term interest in the building among
other factors, typically:
(a) the length of the lease term;
sell or sub-lease; (d) insurance; (e) (i) change of control (b) whether the tenant will have any statutory or contractual
of the tenant; and (ii) transfer of lease as a result of a rights to renew;
corporate restructuring (e.g. merger); and (f) repairs? (c) if the property is newly built, the availability (and
acceptability) of collateral warranties; and
(d) if the property is second hand, the length of time left
a) Length of term
to run on any available collateral warranties and/or the
Short-term leases of up to 10 years are increasingly common.
current state of repair and condition of the property.
Where longer leases of between 10 and 20 years are granted, these
will mostly contain a tenant’s option to break after five or 10 years.
b) Rent increases landlord or tenant of a business lease?
Typically, rent reviews are provided for in the lease to take
place every five years. For leases agreed and/or granted since Stamp duty is chargeable on business leases not exceeding 35
1 December 2009, the law requires any contractual provision years at a current rate of 1% of the average annual rent, plus
requiring the review to be upwards only to be interpreted by €12.50 for the rent review clause and €12.50 for the landlord’s
the courts as allowing for upwards and downwards review. counterpart. The tenant is primarily liable for the stamp duty.
Disputes as to rent review are also governed by the lease, which If the landlord opts to tax the rent, VAT will be payable by the
will typically provide for an independent surveyor acting as an tenant at a rate of 23% on all rental payments.
arbitrator or expert to determine the dispute. Income Tax/Corporation Tax will be payable by the landlord
on rental income. Where the rent is payable to a non-resident
c) Tenant’s right to sell or sub-lease landlord, the tenant will have an obligation to withhold tax from
While the lease will typically place restrictions on a tenant’s right the payment unless an Irish resident agent is appointed to collect
to assign or sub-let, the law requires any such restriction on the the rent.
assignment or sub-letting of an entire demised premises to be
interpreted by the courts as being subject to landlord’s consent, 10.5 In what circumstances are business leases
which must not be unreasonably withheld. usually terminated (e.g. at expiry, on default, by either
d) Insurance tenant to extend or renew the lease or for either party
Typically, a landlord insures the property against damage by fire to be compensated by the other for any reason on
and other such risks and also against property owner’s liability and termination?
recoups the cost from the tenant. Insurance against loss of rent
for three or four years is also usually included and the lease will Business leases may be terminated by:
provide for the rent to be suspended for the insured period if the ■ expiry of the term;
property becomes unusable due to an insured risk. The landlord ■ exercise by either party of a break clause;
would usually have an obligation to reinstate unless the cover was ■ agreed surrender; or
invalidated by some act of the tenant, but if reinstatement was ■ forfeiture following breach by the tenant.
not possible within the period of loss of rent cover, either party Business tenants in occupation of a “tenement” may have
would usually have the right to terminate the lease. statutory rights to renewal or compensation if they can claim either:
Tenants procure and pay for their own public liability, ■ a business equity, i.e. where a tenant has been in occupation
employer’s liability and contents insurance. and carried on business continuously for at least five years;
■ a long possession equity; or
e) (i) Change of control of the tenant ■ an improvements equity.
There are not normally any restrictions on the change of control Landlords often require tenants entitled to a business equity
of the tenant. to renounce their statutory renewal rights by a formal Deed of
Renunciation.
e) (ii) Transfer of lease as a result of a corporate restructuring
(e.g. merger) 10.6 Does the landlord and/or the tenant of a business
Leases do not typically specifically address transfers to group lease cease to be liable for their respective obligations
companies, unless a parent company guarantee is provided, or under the lease once they have sold their interest? Can
transfers as a result of a corporate restructuring such as a merger they be responsible after the sale in respect of pre-sale
by absorption. Unless specifically addressed in any given lease, non-compliance?
the general position that any transfer is subject to the landlord’s
consent, and the landlord cannot unreasonably withhold their Technically, the full release of an outgoing tenant’s obligations
consent, will apply. to their landlord can only be achieved in compliance with the
requirements of Deasy’s Act, i.e. the consent of the landlord
f) Repairs must be endorsed on the deed of assignment in accordance with
Tenants who lease an entire building will be directly liable the requirements of that Act. In practice, it is generally accepted
for repairs. Tenants who lease part of a building will pay a that landlord’s consent is provided in the form of a licence to
Real Estate 2024

assign. The Land and Conveyancing Law Reform Act 2009 also to certain specific exemptions, the RT Acts apply to tenancies of
implies a covenant and indemnity by the new tenant in favour dwellings (as defined in the legislation) for rent or other valuable
of the outgoing tenant regarding the future performance of the consideration. Where a residential tenancy does not come under
tenant’s covenants in the lease. the application of the RT Acts, the Landlord and Tenant Acts
Again, under Deasy’s Act, landlords technically remain liable to 1967 to 2019 apply instead. They RT Acts apply in a modified
their original tenants so that, in practice, landlords should obtain a way to cost-rental (“affordable”) tenancies, tenancies granted by
covenant and indemnity from the buyer of their interest regarding approved housing bodies (“AHB”) and licences of purpose-built
the future performance of the landlord’s covenants in the lease. student-specific accommodation.
Both the landlord and tenant can be liable in respect of pre-sale
non-compliance, unless expressly agreed or mitigated otherwise.
sustainable use of buildings and in the reduction of Yes. Subject to certain exemptions (including where the
the “environmental footprint” of a building. Please landlord also resides in the dwelling), the RT Acts generally
briefly describe any “green obligations” commonly only apply to tenancies of dwellings (defined in the legislation
found in leases stating whether these are clearly as a self-contained residential unit) for rent or other valuable
defined, enforceable legal obligations or something not consideration. If rooms are let on a room-by-room basis
amounting to enforceable legal obligations (for example with shared bathroom and cooking facilities then this is
not self-contained and the RT Acts do not apply, unless the
accommodation is student-specific accommodation. In the case
Green/sustainability obligations are evolving in Ireland but of student-specific accommodation, the student resident does
covenants currently appearing in leases include: not obtain security of tenure and, as for AHB tenants and cost-
■ Tenant commitments to data sharing and consumption rental tenants, the general tenant rights to assign and sub-let do
monitoring (coupled with a Landlord commitment also not apply. The actual application of the RT Acts to each specific
in respect of their obligations for a multi-let building). tenancy type is beyond the scope of this note.
This is considered fundamentally important to allow
compliance with wider ESG-reporting obligations and for
EU Taxonomy alignment, where this is important to either 11.3 What would typical provisions for a lease of
party now or in the future. residential premises be in your jurisdiction regarding:
■ Tenant commitment not to do anything to adversely impact
the current BER and any other sustainability accreditations. the term; and (d) the tenant’s contribution/obligation to
■ Tenant commitments for use/operation regarding waste the property “costs”, e.g. insurance and repair?
management, water use, energy use (heating and lighting)
and cleaning.
■ General co-operation on setting sustainability goals. (a) The initial length of term would generally be 12 months;
A breach of a sustainability clause would typically be deemed see further on this at point (c) below.
a breach of a general covenant in the same way as any other. (b) Rents set by private landlords can never exceed the
current “market rent” for the type of tenancy in question.
In designated rent pressure zones (“RPZs”), there is an
10.8 Are there any trends in your market towards more additional restriction that rents cannot be set or increased
flexible space for occupiers, such as shared short- by more than the lower of: 2% per annum on a pro rata basis;
or the rate of inflation as recorded in the harmonised index
residents (co-living)? If so, please provide examples/ of consumer prices unless an exemption under the RT Acts
details. applies.
(c) Unless security of tenure does not apply to it, a tenancy
in place for six months or more becomes a tenancy of
Yes, there has been an increase and there are a number of players
in the Irish market offering flexible/co-working workspaces. unlimited duration and is only terminable by the landlord
In terms of shared residential spaces, co-living as a multifamily on limited grounds, including for breach, or unsuitability
model where residents share the common areas of units such as or where the landlord requires vacant possession for sale,
living rooms and kitchens while retaining their private personal substantial refurbishment, change of use or own or family
spaces is no longer supported by planning regulation. While use. Each ground for termination by the landlord is further
concessions from standard apartment specifications to support subject to specific conditions that must be strictly met.
“build to rent” apartments have recently been withdrawn, the (d) A tenant has no obligation under the RT Acts to contribute
“build to rent” model remains open. Within “build to rent” to the landlord’s property costs in respect of insurance and
developments in particular, there are greater levels of facilities repair, but the tenant would be expected to insure their
and amenities, indoor and outdoor amenity spaces, gyms, own contents. The tenant’s obligations in terms of repair
concierges, lounges, meeting rooms and landscaped courtyards. are to return the property without any deterioration in its
original condition apart from normal wear and tear.
112 Leases of Residential Premises
11.1 Please briefly describe the main laws that regulate a residential lease and what steps would be needed to
leases of residential premises. achieve vacant possession if the circumstances existed
for the right to be exercised?
The Residential Tenancies Acts 2004–2022 (“RT Acts”)

regulate the majority of residential tenancies in Ireland. Subject The rights of a landlord to terminate a residential tenancy of
unlimited duration are briefly set out at question 11.3 above.
Real Estate 2024

86 Ireland
Termination of residential tenancies is highly regulated so that ■ Waste Water Discharge (Authorisation) Regulations 2007.
the specific steps required for the exercise of each of those rights ■ European Union (Energy Efficiency) Regulations 2014.
are beyond the scope of this note, save that each would require ■ Climate Action and Low Carbon Development Acts
written notice of termination served in accordance with all of 2015–2021.
the requirements of the RT Acts, which must provide at least ■ European Union (Disclosure of Non-Financial and
the minimum notice period for termination of that tenancy Diversity Information by certain large undertakings and
as required by the RT Acts and must be accompanied by any groups) Regulations 2017.
supporting declarations required for the valid exercise of the ■ European Union (Water Policy) (Abstractions Registration)
right of termination. A termination notice for non-payment of Regulations 2018.
rent must be preceded by an initial warning letter. All notices
of termination must also be simultaneously served on the
Residential Tenancies Board. so please briefly describe including price/compensation
mechanism.
Local authorities and other State agencies can compulsorily
12.1 What are the main laws which govern zoning/ acquire lands in limited circumstances such as (1) where a site is
permitting and related matters concerning the use, derelict and poses a danger in the community, (2) for the purpose
development and occupation of land? Please briefly of developing infrastructure (such as housing, roads, business
parks, railways, or other infrastructure, including electricity and
gas), and (3) for conservation/preservation purposes.
The Planning and Development Acts 2000–2023 (“Planning Where property is compulsorily acquired, compensation
Acts”) govern planning and zoning matters. The Planning Acts is payable to all persons with an interest in the lands. The
regulate the zoning of areas through development plans, special assessment of compensation generally falls under a number of
amenity area plans, local area plans and other regional plans. headings of claim to include the value of the land acquired, any
More specifically, development is controlled through the planning diminution in value of any retained lands, cost resulting from
application process where licences or permission for development acquisition, disturbance, loss of profits or goodwill, loss or
are either granted/refused by a local authority (of which there are depreciation of stock in trade, and professional fees necessary
31 in Ireland) or on appeal by An Bord Pleanála (“ABP”), i.e. the for acquisition.
Planning Appeals Board.
Following a 15-month review of the planning system, the
Planning and Development Bill 2023 was approved by the Irish
government in October 2023. The Bill aims to bring greater buyers obtain reliable information on these matters?
clarity, certainty, and consistency to how planning decisions
are made, in order to make the planning system more coherent
and user-friendly for the public and planning practitioners. It is Land/building use and/or occupation: The local authority
expected that the Bill will be enacted in 2024. is the responsible body for controlling land/building use and
At present, however, the main laws that govern zoning and occupation. ABP is the responsible body for hearing appeals
related matters are as follows: against decisions of the local authority. ABP is also authorised
■ Planning Acts. under the Planning Acts to use a streamlined procedure for
■ Planning and Development Regulations 2001–2023. certain applications (both State and private) for strategic
■ Housing Acts 1966–2014. infrastructure projects.
■ Maritime Area Planning Act 2021. Environmental regulation: The Environmental Protection
The main laws that govern environmental matters are as follows: Agency (“EPA”), its office of Environmental Enforcement
■ Environmental Protection Agency Acts 1992–2011. and the local authorities are responsible for environmental
■ Protection of the Environment Act 2003. regulation.
■ Environmental (Miscellaneous Provisions) Acts 2011–2015. Buyers may obtain reliable information on these matters
■ Waste Management Acts 1996–2011. by consulting legal, planning and environmental experts,
■ Waste Management (Facility Permit and Registration) legislation, the appropriate local authority, and EPA websites.
Regulations 2007.
■ Waste Management (Collection) Regulations 2007. 12.4 What main permits or licences are required for
■ Waste Management (Shipment of Waste) Regulations 2007. building works and/or the use of real estate?
■ European Communities (Waste Directive) Regulations 2011.
■ European Union (Waste Electrical and Electronic A grant of planning permission is generally required before
Equipment) Regulations 2014. any development can commence unless the development is
■ European Union (Batteries and Accumulators) Regulations specifically exempted. Planning permission is required for any
2014. post-1964 development. “Development” includes carrying out
■ Air Pollution Acts 1987–2011. works (building, demolition, alteration) on, in, over or under
■ European Communities (Environmental Liability) land or buildings and making material (i.e. significant) changes
Regulations 2008. to the use of land or buildings.
■ EC (Access to Information on the Environment) Regulations In addition to planning permission, certain licences may be
2007. required to carry out certain activities. These include licences
■ European Communities (Control of Major Accident Hazards issued under the EPA Acts, the Water Services Acts, the Air
Involving Dangerous Substances) Regulations 2015. Pollution Acts, and the Waste Management Acts.
■ Local Government (Water Pollution) Acts 1977–2007. The Building Control Acts 1990–2020 must be complied with
■ Water Services Acts 2007–2022. for all building works carried out since June 1992. Building
Real Estate 2024

Regulations made under the Building Control Act specify the means that they are legally protected from harm and all future
technical requirements that buildings must meet, while separate changes to the structure are controlled and managed through the
Building Control Regulations set out controls for notification local development control process. Structures that are listed on
and certification of building works. the RPS are subject to more restrictive development conditions;
Health and safety legislation must also be considered where therefore, types of work, which in another building would be
individuals are engaged to carry out works at a property. The considered exempted development, may not be exempted where
Safety Health & Welfare at Work Acts 2005–2014 must be the building is a protected structure.
complied with for all building works. The local authority may issue a declaration under the Planning
Acts determining the proposed works would be considered exempt
from the requirement to obtain planning permission. However, a
declaration cannot exempt any works that would otherwise require
obtained in any way (e.g. by long use)? planning permission. A search of the RPS will reveal if a structure
is protected. If the structure is protected, this will limit or restrict
the development potential of the structure. Owners and/or
Planning permission is generally required before any development occupiers of a protected structure must ensure that the structure
can commence, unless the development is specifically exempted. or any element of it is not endangered. It is an offence to damage a
In addition, where a local authority fails to make a decision protected structure or proposed protected structure.
on a planning application within a specific time limit, default
planning permission is deemed to have been granted.
Where development occurs without planning permission 12.8 How can, e.g. a potential buyer obtain reliable
having been obtained, a party can make an application for information on contamination and pollution of real
retention permission, save for developments within the scope of your jurisdiction?
the environmental impact assessment regime. If unauthorised
development has taken place and the Planning Authority has not
issued enforcement proceedings within seven years, it is prevented Ireland has no statutory regime for dealing with contaminated land
from doing so at a later date; exceptions to this are contained in and has no dedicated register of contaminated land. However, the
respect of developments involving quarries and peat extraction. EPA is obliged to draft a National Hazardous Waste Management
Plan. The current plan covers the period 2021–2027, and aims
to protect the environment and human health in Ireland through
12.6 What is the typical cost of building/use permits and best-practice management of hazardous wastes through the
the time involved in obtaining them? following objectives:
■ reducing the generation of hazardous waste;
Each local authority sets a fee for making an application for planning ■ identifying adequate and appropriate collection infrastructure
permission or making an observation on an application. Fees for for all hazardous wastes;
different classes of development are listed on planning application ■ endorsing the proximity principle such that hazardous wastes
forms, which are available from a local authority’s offices or from are treated as close to the point of production as possible;
its website. In addition to planning application fees, applicants are ■ supporting effective regulation of the movement and
responsible for arranging the preparation of required drawings and management of hazardous wastes; and
particulars from suitably qualified professionals. ■ promotion of safe reuse and recycling pathways in support of
Application fees are also payable under the EPA Acts, the Water the circular economy.
Services Acts, the Air Pollution Acts and the Waste Management Another potential legislative resource a potential buyer could
Acts, and are determined by the relevant body. utilise to obtain information on contamination is the Waste
A planning authority must make a decision within eight weeks Management (Certification of Historic Unlicensed Waste Disposal
of the planning application being received. It may require further and Recovery Activities) Regulations 2008. It required Local
information in which case it must make a decision within four Authorities to identify and register all closed landfills within their
weeks of receipt of the information. The eight-week time limit can functional areas by 30 June 2009.
also be extended in certain circumstances. An 18-week time limit The Water Services Acts also provides for a system of
is applicable for appeals to ABP. However, this is an aspirational, registration and inspection of domestic wastewater treatment
non-binding time limit, and is often extended. systems. Owners of wastewater treatment systems are required to
If the planning authority consents to the application for register their system and re-register every five years.
permission, it will issue a decision to grant planning permission,
which is not a full permission. Once the planning authority 12.9 In what circumstances (if any) is environmental
notifies the relevant parties of its decision, the applicant and any clean-up ever mandatory?
third party who made a submission or observation in relation
to the application have four weeks within which to appeal this
Environmental clean-up is mandatory where a party breaches the
decision or any conditions attached to it. If there is no appeal,
provisions of the Environment (Miscellaneous Provisions) Act
then the planning authority will issue a formal grant of planning
2015 and the EPA Acts, the Waste Management Acts, and the
permission at the end of the appeal period.
Water Services Acts. Sections 55–58 of the Waste Management
Acts are particularly relevant in this regard, which provide that
12.7 Are there any regulations on the protection of a party will be liable for the costs of a clean-up and, in addition,
historic monuments in your jurisdiction? If any, when any costs incurred by the EPA or local authority in investigating
and how are they likely to affect the transfer of rights in an incident. The responsible party will be liable for the costs of
real estate or development/change of use? enforcement proceedings.
Currently, local authorities maintain a Record of Protected

Structures (“RPS”). Inclusion of these structures in the RPS
Real Estate 2024

88 Ireland
12.10 Please briefly outline any regulatory global warming, pursue and achieve, by no later than the end of the year
requirements for the assessment and management of 2050, the transition to a climate resilient, biodiversity rich, environmentally
the energy performance of buildings in your jurisdiction. sustainable and climate neutral economy”.
The Acts also provides for a 51% reduction in greenhouse gases
Since July 2008, and subject to certain exemptions, a BER by 2030 compared to 2018 levels, and puts in place a rigorous
certificate and advisory report must be supplied by all sellers/ governance structure, including a system of carbon budgeting,
landlords to a prospective buyer/tenant when a building is sectoral emissions ceilings, a national adaptation framework,
constructed, sold or rented. A BER certificate is an energy label sectoral adaptation plans, and annually updated Climate Action
for buildings that rates the building from A1 (most efficient) to G Plans, to ensure that Ireland achieves its national, EU and
(least efficient). Since January 2013, BER information must also international climate commitments in the near and long-term.
be provided in advertisements for the sale or rental of property.
132 Climate Change (not already mentioned) which aim to improve the
buildings?
emissions (including any mandatory emissions trading At an EU level, the proposed Recast Energy Performance of
scheme). Buildings Directive sets out how the EU can achieve a zero-
emission and fully decarbonised building stock by 2050, in
Ireland adopted the Climate Action Plan 2023 (“CAP23”) in order particular by increasing the rate of renovation for the worst-
to implement carbon budgets and sectoral emissions ceilings. performing buildings.
CAP23 sets out a roadmap for halving emissions by 2030 and The Directive shall require all buildings to be “Zero-
reaching net zero no later than 2050. In the real estate sector, Emission Buildings” (meaning buildings with a very high energy
CAP23 aims to reduce emissions in commercial/public buildings performance where the very low amount of energy still required is
and residential buildings by 45% and 40%, respectively, by 2030. fully covered by energy from renewable sources) on a phased basis
CAP23 sets out key targets for the built environment, from 1 January 2026 to 2050. The Directive proposes a deadline
including: for all new buildings to be zero-emission by 2028 and shall apply
■ All new dwellings designed and constructed to the this obligation from 2026 to all new buildings occupied, operated,
Nearly Zero Energy Building standard by 2025, and Zero or owned by public authorities. Furthermore, all new buildings
Emission Building standard by 2030. should be equipped with solar technologies by 2028 where feasible
■ The equivalent of 120,000 dwellings retrofitted to BER (2032 for residential buildings undergoing major renovation).
B2 or a cost-optimal equivalent by 2025, and 500,000 The Directive aims to harmonise the assessment of building
dwellings by 2030. energy performance across the EU. Buildings will be assigned a
■ Up to 0.8 TWh of district heating installed capacity by rating between G and A, with G representing the lowest rating
2025, and up to 2.7 TWh by 2030. in terms of energy performance, and A representing “Zero-
■ 70,000 new dwellings using heat pumps by 2025, and Emission Buildings”. Residential buildings would need to reach
280,000 by 2030. class E by 2030, and class D by 2033. Non-residential and public
■ 45,000 existing dwellings using heat pumps by 2025, and buildings would have to achieve the same classes by 2027 and
400,000 by 2030. 2030 respectively. A limited set of exemptions would apply to
■ Up to 0.4 TWh of heating provided by renewable gas by certain categories of building, including public social housing,
2025, and up to 0.7 TWh by 2030. where renovations would lead to rent increases that were not
To achieve its key targets, CAP23 provides for a number of compensated by greater savings on energy bills. Fossil fuels in
measures and actions to be taken, including: new heating systems would be totally phased out by 2035.
■ An ambitious National Residential Retrofit Plan.
■ Strengthening existing Building Regulations. 142 COVID-19
■ Supporting the growth and development of district
heating, electrification of heating and geothermal energy 14.1 Please detail any laws that govern real estate in
■ A roadmap to support the decarbonisation of commercial your jurisdiction which were introduced in response to
buildings. the effect of the Coronavirus (COVID-19) pandemic and
■ Support for the public sector to decarbonise its building which remain in place.
stock.
The only emissions trading scheme is the EU Emissions All COVID-19 restrictions have ended. The World Health
Trading Scheme (“EU ETS”). As in other Member States of Organisation announced that COVID-19 is no longer a global
the EU, the EU ETS covers various types of high-emission public health emergency. The only law relevant to Irish real estate
stationary installations, including power stations, combustion that remains in place is provision for a restriction on termination
plants and oil refineries. In 2012, the EU ETS was extended to of residential tenancies if a five-kilometre movement restriction
include certain aircraft flying from, to or within the EU. The were ever to be re-introduced.
national emissions trading registry is required to be maintained
and this is carried out by the EPA. Acknowledgments
The authors are grateful to our colleagues: Martina Firbank,
Of Counsel, for her support with the chapter; Kieran Mulligan,
reduction targets?
Associate, and Brendan Slattery, Head of Planning and
Environment, for their support with sections 12 and 13; Michael
Ireland’s Climate Action and Low Carbon Development Acts Murphy, Partner Group Leader of the Litigation Department, and
2015–2021 places on a statutory basis “the National Climate Caroline Roche, Associate, for their assistance with section 8; and
Objective” that “the State shall, so as to reduce the extent of further Martin O’Neill, Of Counsel, for his support with question 8.1.
Real Estate 2024

Shane Fahy is a partner in McCann FitzGerald LLP’s Real Estate team, which is one of the largest and most respected practices in Ireland.
He is personally recommended in Chambers and Partners, The Legal 500 and Who’s Who Legal as one of the leading real estate lawyers in the
jurisdiction. He has wide experience covering traditional acquisitions, development, finance, leasing and re-structuring, through to advice
on newer sub-sectors such as health, green energy, primary care and student accommodation. Having trained and qualified with a leading
international firm in London, he returned to Ireland in 2004, becoming a partner in 2007. He has worked extensively with lawyers in other
jurisdictions on property syndication transactions and the real estate elements arising in international M&A transactions. He headed up
the Real Estate practice from 2015 to 2022 and has authored chapters on Irish real estate law for international comparative texts, lectured
extensively on real estate topics and written for various national newspapers and legal journals.
McCann FitzGerald LLP Tel: +353 1607 1469

Riverside One, Sir John Rogerson’s Quay Fax: +353 1829 0010
Dublin 2, D02 X576 Email: shane.fahy@mccannfitzgerald.com
Ireland URL: www.mccannfitzgerald.com
Denise Dockery is a senior associate in McCann FitzGerald LLP’s Real Estate team. Denise has several years of multi-faceted real estate
practice comprising acquisitions, sales and leasing of commercial and residential real estate. Denise has represented foreign multi-nationals,
State bodies, developers, lenders, owner/occupiers, investors, landlords/tenants and religious organisations. Denise has also advised clients
on a number of high-profile transactions, including landlord and tenant break options, the sale of HQ’s, financing of primary healthcare
centres, hotels, public houses, wind farms and various real estate financings. Denise has been a joint contributor to the Ireland chapter of
ICLG – Real Estate for 2008–2015 (Global Legal Group Ltd, London). Denise also authored an article “Caught in the Crosswind: Drones and
the rights of Property Owners”, which featured on the global legal research platform Lexology in 2017.
As part of Denise’s commitment to ESG considerations, Denise has volunteered with the National College of Ireland’s Early Learning Initiative,
volunteered with the Free Legal Advice Centre (“FLAC”), participates annually in Pieta’s Darkness into Light walk, and has raised vital funds for
Focus Ireland’s Shine A Light campaign, a charity seeking to prevent homelessness.
McCann FitzGerald LLP Tel: +353 1607 1306

Riverside One, Sir John Rogerson’s Quay Email: denise.dockery@mccannfitzgerald.com
Dublin 2, D02 X576 URL: www.mccannfitzgerald.com
Ireland
With over 600 people in four countries, including over 380 lawyers and legal
professional staff, McCann FitzGerald LLP is one of Ireland’s premier law
firms and a true leader in innovation in the legal sector.
We offer expert, forward-thinking legal counsel to clients in Ireland and
around the world from our offices in Dublin, London, New York and Brussels.
Our deep knowledge spans a range of industry sectors, so we can see
around corners and tailor solutions to fit your specific needs.
The firm is a full-service firm, divided broadly into four main groupings of
corporate, banking and financial services, disputes and real estate (including
construction). We also operate industry sector and specialist practice
groups, which comprise professionals from the different groupings.
McCann FitzGerald LLP has a well-established reputation for innovation
and is known for the excellence of its legal services delivery, strategic
vision, strong performance and outstanding management of talent.
www.mccannfitzgerald.com
Real Estate 2024

90 Chapter 10
Italy
Italy
Roberto De Simone
Ontier Italy Laura Gentili
Courts may consider judicial precedents but without any

12 Real Estate Law binding force.

govern real estate in your jurisdiction. Laws relating 1.3 Are international laws relevant to real estate in your
to leases of business premises should be listed in jurisdiction? Please ignore EU legislation enacted locally
response to question 10.1. Those relating to zoning and in EU countries.
EU legislation commonly applies to Italy.
Italy has ratified the multilateral treaty “Hague Convention on
the Law Applicable to Trusts and on their Recognition” of 1985.
The Constitution of the Italian Republic guarantees public and
private property, mandating to primary legislation the purpose of 22 Ownership
ruling on the ways of acquiring, enjoying and limiting property.
■ The Civil Code contains the main provisions on:
ownership, destination or use of real estate in the family
context; inheritance; goods, ways to acquire and transfer persons)?
real properties, condominium rights, conflicts between
neighbours and actions to defend property and possession;
contracts aimed at the transfer, lease or other ways of Article 10 of the Constitution, Article 16 of the Preleggi and Law
enjoyment of real property; and publicity regimes, mortgages, no. 218/1995 govern the status of foreigners in Italy.
seizure or foreclosure. A foreigner is admitted to enjoy the civil rights attributed to a
■ The Code of Navigation rules over goods such as the citizen on condition of reciprocity (i.e. to the extent that an Italian
airspace and the territorial sea, gulfs and bays, harbours, citizen would enjoy the same rights in his own State). The following
mouths of rivers, lagoons, basins and channels. individuals are exempt from the verification of reciprocity:
■ The Code of Cultural Heritage governs the regime of the ■ EU or EEA citizens, or citizens of countries whose
preservation of the public and private goods classified as investments in Italy are allowed by Bilateral Investment
cultural heritage. Treaties;
■ Legislative Decree no. 122/2005 sets forth mandatory rules ■ non-EU citizens residing in Italy in possession of a residence
protecting the purchasers of buildings under construction. card or a regular residence permit for subordinate work,
■ The Unified Building Act sets forth the public competences self-employment, the running of a sole proprietorship,
and the rules governing the building activity. family reasons, humanitarian reasons and study; and
■ The Unified Banking Act sets forth special rules for real ■ stateless persons or refugees resident in Italy for at least
estate financing (credito fondiario). three years.
■ The cadastral system includes Royal Decrees no. 1572/1931
and no. 2153/1938 (Catasto Terreni ), Royal Decree no. 32 Real Estate Rights
652/1939, Presidential Decree no. 1142/1949 and Law
no. 427/1989 (Nuovo Catasto Edilizio Urbano), Law Decree 3.1 What are the types of rights over land recognised
no. 557/1993 (Catasto Fabbricati ), Decree no. 28/1998, and in your jurisdiction? Are any of them purely contractual
Presidential Decrees DPR no. 138/1998 and 139/1998. between the parties?
■ The Act on Residential Leases no. 431/1998 and certain
provisions of the Act on Urban Leases no. 392/1978. ■ “Rights in rem” (diritti reali ) give an absolute right
■ Legislation on rural land leases, including Acts no. 567/1962, enforceable against all third parties and comprise a broad
no. 590/1965, no. 606/1966, no. 11/1971 and no. 203/1982. set of prerogatives.
■ “Rights in personam” (diritti personali ) are purely
1.2 What is the impact (if any) on real estate of local contractual between the parties.
common law in your jurisdiction? ■ “Possession” ( possesso) is not a right per se. It may matter as a
factual relation between the possessor and the real property
for certain purposes (e.g. usucapio, acquisition of the property
Italy has a civil law legal system. Common law is irrelevant.
by way of protracted possession for a certain period).
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(A) Rights in rem are numerus clausus and include: However, the holder of a surface right (diritto di superficie) (see
■ Ownership (diritto di proprietà) gives title to full and question 3.1) can be granted the right to (i) construct and own the
exclusive rights to enjoy and dispose in compliance with construction erected over the grantor’s land, or (ii) purchase the
the law. The ownership rights can be acquired by contract ownership of the construction separately from that of the land.
or by operation of law, including by inheritance or usucapio.
■ Joint co-ownership (comunione) is where there is more than 3.3 Is there a split between legal title and beneficial
one individual share, in common between them, of the title in your jurisdiction and what are the registration
ownership of a real property or certain common areas of consequences of any split? Are there any proposals to
the same. change this?
■ The following are also rights in rem but give limited
prerogatives, i.e. diritti parziari, or iura in re aliena. The Italian system does not distinguish between legal and
■ Surface rights (Diritto di superficie) can be granted by the beneficial title. See question 3.1 for the classification of rights in
full owner to the surface beneficiary – for the latter to rem (including iura in re aliena) and rights in personam.
build above or under the owner’s land. These occur where A segregation regime is sometimes provided, such as:
the owner sells a building separately from the ownership ■ A patrimonial fund ( fondo patrimoniale), according to
of its ground sediment. Article 167 of the Civil Code, which allows certain assets
■ Emphyteusis (Enfiteusi ) can granted by the owner over to be specifically earmarked for the needs of the family.
its real property, giving the beneficiary certain rights to ■ Article 2645-ter of the Civil Code, by means of which
use the property, against the obligation to improve the certain immovable property may be allocated, for a period
property and pay the owner monetary compensation. not exceeding 90 years, for the realisation of interests
■ Usufruct (Usufrutto), Use (Uso), Habitation (Abitazione) can worthy of protection.
be granted by the owner (or by operation of law, e.g. the ■ See also question 1.3.
spouse’s right of habitation in case of heritage) to give the
beneficiary a right to the use and benefit of a real property, 42 System of Registration
respecting its economic purpose, for a certain period of time.
■ Easements (Servitù prediale) consist of a burden imposed on
a piece of land (the servant land) for the utility of another registered? What land (or rights) are unregistered?
land (the dominant land) (e.g. right of way, powerline
easement). Easements can be constituted by contract,
by usucapio or by operation of law (e.g. right of water or All rights on immovable properties must be registered:
destination by head of family). ■ with a purpose of inventory of the territory, with the land
■ Mortgage (Ipoteca) which consists of the right given by (or cadaster (Catasto Terreni ) and the building cadaster (Catasto
imposed on) a debtor over immovable property in order to Fabbricati ), together referred to as “Cadaster” (Catasto),
secure a credit right. managed by the tax authority (Agenzia delle Entrate). The
Cadaster outlines the distribution of real estate on the territory
(B) Rights in personam are not numerus clausus and may include: and lays the foundation to calculate their profitability; and
■ Business lease (Locazione ad uso non abitativo). ■ in order to prevent conflicts of title. This purpose is achieved
■ Residential lease (Locazione ad uso abitativo). by means of property registers (registri immobiliari ) managed
■ Rural land lease (Affitto di fondo rustico). by the tax authority (Agenzia delle Entrate – Area registri
■ Bailment (comodato), by which the landlord makes available immobiliari ), hereinafter referred to as “Property Register”.
its premises for a limited period of time, normally without
any compensation. 4.2 Is there a state guarantee of title? What does it
■ Rent to Buy, introduced by Law Decree no. 133/2014, guarantee?
whereby the owner immediately hands over the property
to the tenant, who pays the rent and the tenant can decide No, a state guarantee of title does not exist.
whether to buy the property at a given time, deducting
from the price a part of the rents already paid.
■ Lease of ongoing business (affitto di azienda o ramo di azienda), 4.3 What rights in land are compulsorily registrable?
by which the owner of an ongoing business (defined as What (if any) is the consequence of non-registration?
a “complex of assets organised by an entrepreneur for
the exercise of an enterprise”) temporarily leases it for a Contracts and deeds that create, modify or extinguish rights on
consideration. immovable properties are registrable in the Property Register,
■ Public concessions (concessioni), which may grant the right such as:
to the use and benefit of certain goods, subject to a set of ■ ownership or co-ownership;
public procurement laws and regulations. ■ usufruct, surface rights, emphyteusis, building rights,
easements, right of use or habitation;
■ mortgages;
■ sales in foreclosure;
thereon? ■ leases (if longer than nine years);
■ release or assignment of rents (if longer than three years);
■ settlements/judgments operating the constitution, transfer
The rights vested on land ownership extend to the subsoil and or modification of one of the rights above; and
the space above ground, subject to limitations set forth by law. ■ Rent to Buy agreements (see question 3.1) pursuant to
The ownership of land also includes that of any construction Article 23 of Law Decree no. 133/2014, in order to obtain
erected over the soil and its appurtenances, unless otherwise the reservation effect (effetto prenotativo) on the option
agreed upon by the parties (i.e. pursuant to Article 934 of the right to purchase, for a duration up to 10 years, and the
Civil Code, accessione). protection on the lease.
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Only the party who first recorded their right on the Property
Register prevails over purchasers or transferees who failed (or
delayed) in recording theirs.
The regime of continuity (continuità delle trascrizioni ) set forth 5.1 How many land registries operate in your
by Article 2650 of the Civil Code states that “where a deed of jurisdiction? If more than one please specify their
purchase is subject to transcription in the Real Estate Register,
subsequent registrations against the purchaser shall not take
effect unless the earlier deed of purchase has been registered in Please also refer to question 4.1. The Cadaster has no probative
the Property Register”. value on the owners’ rights. The Property Register (Registri
Immobiliari ) is used to resolve conflicts through the priority and
continuity rules (see question 4.3).
4.4 What rights in land are not required to be A different regime (Sistema Tavolare) is established in Trentino
registered?
Alto-Adige, the Province of Trieste and Gorizia and some
Municipalities of Udine, Vicenza, Brescia and Belluno. It
Registration with the Property Register is not mandatory for implies a different means of registration of ownership rights
contracts not listed in question 4.3. and/or other rights in rem.
Preliminary contracts are not mandatorily registrable, but
parties are able to register according to Article 2643-bis of Civil
Code, thus protecting the buyer against subsequent registrations 5.2 How do the owners of registered real estate prove
their title?
(effetto prenotativo) for a period of one year after the date agreed for
stipulation of the definitive deed of transfer, but a maximum of
three years from the date of the preliminary contract. Evidence of title can be given by means of a valid deed of
Certain limitations affecting or restricting the right of property purchase, duly registered with the Property Register (or Sistema
may not be visible from a consultation of the Property Registers, if Tavolare), unaffected by prior registered third-party rights.
they are not subject to registration or originate from law, including:
■ easements by law; 5.3 Can any transaction relating to registered real
■ tax privileges (see section 9); estate be completed electronically? What documents
■ cultural or landscape restrictions; and need to be provided to the land registry for the
■ other public restrictions (e.g. usi civici ). registration of ownership right? Can information
A full due diligence also examines the real estate with its on ownership of registered real estate be accessed
past operations, location and the administrative, historical and electronically?
landscape context.
All such deeds must be executed in writing with a notary by
4.5 Where there are both unregistered and registered means of a notarial deed (atto notarile) or certifying the parties’
land or rights is there a probationary period following signatures (scrittura privata autenticata). The notary submits to
first registration or are there perhaps different classes the competent authority an electronic version of the deed via
or qualities of title on first registration? Please give unified module (Modello Unico Informatico), paying the registration
details. First registration means the occasion upon taxes, and updating the Cadaster and the Property Register.
which unregistered land or rights are first registered in Relevant information is accessible online.
the registries.

No probationary period applies. registries if it/they make a mistake?
4.6 On a land sale, when is title (or ownership) The liability for damages of the registrar of Property Registers
transferred to the buyer? is governed by the rules relating to civil employees of the State,
and the State may be found responsible for damages.
With the exception of Sistema Tavolare (see question 5.1), title to
real estate property is transferred by means of written consent.
Nonetheless, parties formalise the transfer in a public deed, register? Can a buyer obtain all the information he
with a notary who immediately records the deed in the Property might reasonably need regarding encumbrances and
Register, thus ensuring priority in title. other rights affecting real estate and is this achieved
The delivery of possession over the real estate is often by a search of the register? If not, what additional
simultaneous to the execution of the transfer deed, although the information/process is required?
parties may agree otherwise.
The registrar is obliged to issue copies of the transcriptions, entries
4.7 Please briefly describe how some rights obtain and annotations (or a certificate stating that there are none), permit
priority over other rights. Do earlier rights defeat later inspection of records and issue copies of notarial deeds.
rights?
The prevalence on rights is determined by the date of their
creation. When the registration of rights with the Property 6.1 Which parties (in addition to the buyer and seller
Register (or Sistema Tavolare) is compulsory, registered rights will and the buyer’s finance provider) would normally be
prevail over other rights based on priority of registration (see involved in a real estate transaction in your jurisdiction?
question 4.3). Please briefly describe their roles and/or duties.
The notary is involved in transactions that create, transfer
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or modify a right in rem on immovable goods, as well as for choice. In this sense, “Build to Rent” has started to enter the
leases granted for more than nine years and leases or transfers market and attract increasing interest. Logistics remain solid,
of ongoing businesses. The assistance of the notary aims at even with decreasing yields. The hospitality sector has bounced
executing the public deed (atto pubblico), where the notary also back after the restrictions on tourism due to COVID-19. Italy is
carries out a role of control and legality or of certifying the particularly attractive for its natural and monumental beauties,
parties’ signatures (scrittura privata autenticata). as well as its lifestyle tradition. Hotels are renovating their
More professionals can be involved, e.g. brokers, real estate premises and the attractiveness of the Italian hotel industry has
consultants, technical and legal advisors. With the exception of recently been reaffirmed and boosted by the entry of prestigious
minor transactions where the parties directly interact with the international luxury hotel brands.
notary, technical and legal advisors also carry out due diligence,
and the legal advisors negotiate the contractual documents.
6.2 How and on what basis are these persons their attractiveness to investors/developers? Please give
remunerated? examples.
The notary’s fees are determined by agreement or by reference Due to the prolonged Russia-Ukraine conflict, a great global
to a national tariff and both parties are liable for their payment, challenge comes from the backdrop of rising inflation,
even though the buyer usually appoints and pays the notary. shortages of raw materials and labour, concerns over energy
Brokerage fees are owed by both parties in the agreed sources, a wait-and-see approach to values and increasing
amounts. Absent an agreement, the broker is entitled to claim interest rates. Recently, the tension in the Israel-Palestine area
a fee in a custom range (from 2% to 4% of the price) by each of is causing further concern. The retail sector – except for high
the parties. It is advisable to agree in writing the fee amount and street retail in prime cities like Milan – is most affected by the
the distribution between the parties. current framework.
Other advisors (such as technical and legal advisors) are hired
separately by the parties, each of which bears their own fees and 72 Liabilities of Buyers and Sellers in Real
costs.
Estate Transactions
6.3 Is there any change in the sources or the 7.1 What (if any) are the minimum formalities for the
availability of capital to finance real estate transactions sale and purchase of real estate?
The deed of sale must be executed in writing, in front of a
notary, and recorded on the Property Register. It must contain
Global players appreciate the variety of investment schemes
the following information:
available in Italy, whether local or foreign private equity firms,
■ identification of the parties;
public companies, institutional financial investors, such as
■ description of property (its address, cadastral details and at
branches of insurance or banking companies, pension funds,
least three boundaries) and its permitted use;
family offices, etc. They pursue a variety of equity/debt mix and/
■ declaration by seller (or certified expert) confirming the
or asset diversification strategies in accordance with their mission.
cadastral compliance;
As in all Europe, due to the progressive rise of reference
■ declaration by seller on all the building permits and other
interest by the European Central Bank, banking debt has become
titles for the construction or refurbishment;
more expensive and less accessible. For the same reason, private
■ habitability certification or documentation proving it has
equity has also become more selective in terms of asset classes
been requested (this is not formally mandatory in the deed
and expected returns, with a need to consider the real estate
of sale, but highly recommended);
investment compared with a risk-free alternative.
■ urban planning certification (certificato di destinazione
urbanistica – “CDU”) where the land or pertaining area is
6.4 What is the appetite for investors and/or greater than 5,000 sqm;
developers to invest in your region compared to last year ■ purchase price and mention of the payment means
and what are the sectors/areas of most interest? Please (including down-payments);
give examples.
■ arrangements for the delivery of possession;
■ details on the broker and brokerage fees; and
Milan continues to attract the majority of international ■ Energy Performance Certificate (Attestato di Prestazione
investment to Italy, also thanks to urban regeneration projects. Energetica – “APE”).
Nowadays, Rome and, to a lesser degree, other cities, could A real estate transaction is often prepared by a step-by-step
also become more prominent in investors’ sights. Residential procedure in order to discuss the structure, negotiate the price
housing is an asset class that investors increasingly like, adapting and terms of purchase and establish the process to get to the
the concept to new uses that are becoming more hybrid. In closing. These may include:
particular, there is much interest in senior housing and student (i) a marketing phase, with the possible appointment of a
housing, which is also due to social and economic factors such consultancy firm in order to conduct the sale, organise the
as inflation making homeowning less accessible, and fuelled by marketing materials and take appropriate marketing actions;
some public plans such as the National Recovery and Resilience (ii) commercial negotiations, which may occur at various
Plan (“PNRR”) (i.e. the implementation of the EU Recovery stages of the process, in order to assess the feasibility of
Plan). Some social classes and generations are abandoning the the transaction and the reciprocal strategies;
idea of home ownership as a value that is no longer essential, (iii) pre-contractual arrangements, which may include
and are considering rent and serviced rent, as a preferable non-binding and/or binding offers and due diligence;
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(iv) a preliminary agreement of purchase and sale, which also ■ payment of charges;
usually contains all the terms and conditions of the final ■ validity and effectiveness of leases;
deed of sale, and binds the parties to execute the final deed ■ tax compliance; and
of sale upon the occurrence of the conditions precedent; ■ absence of litigation.
(v) interim obligations, including the seller’s general duties to The duration of the indemnity obligations may vary (e.g.
preserve the real estate and the interest of the purchaser; and between 12 and 24 months), and other limitations are usually
(vi) closing. used to reduce the indemnification obligations (i.e. de minimis,
thresholds, cap). Time limits or other limitations never apply to
claims for lack of title (evizione) and are negotiable on matters
7.2 Is the seller under a duty of disclosure? What such as tax claims or environmental matters.
Please note that the short lapse of time of legal limitation and
forfeiture (i.e. one year; eight days) set forth by Article 1495 of
Good faith (bona fide) is a cardinal principle set forth by law: the Civil Code for the warranty against defects is mandatory and
(i) during the negotiation stage; (ii) over the interpretation of must be upheld. Therefore, it is crucial in real estate contracts
contracts; and (iii) in performing the contracts. that any R&Ws and indemnities clauses are impeccably drafted
During the negotiation, the seller must act in good faith in order not to be in contrast with such provision. Typically, such
without concealing information that, if known by the buyer, R&Ws are agreed with skilled drafting in order to be construed
would prevent the latter from concluding the transaction or as autonomous obligations and not warranties of sales.
would have the buyer conclude it on different conditions. Also, The absence of a purchaser’s due diligence would be partly
during the conclusion and the performance of the contract, the covered, in small transactions, by the bona fide principle and by
seller should always avoid concealing information or updates the checks that the notary carries out by law. Nonetheless, the
that may be relevant in the equilibrium of the transaction. relevance of the purchaser’s knowledge (as an exemption or
Please note that, except for the warranties on the lack of title not of the seller’s R&Ws) is often a negotiation matter in the
(evizione), other legal warranties or seller’s obligations can be contract; this also depends on the quality of the data room
increased or reduced by agreement. information made available, the time constraints under which
the transaction completes, the parties’ negotiating weight, etc.
misrepresentation? 7.5 Does the seller retain any liabilities in respect of
Yes, the seller can be held liable for wilful misrepresentation
that could be relevant for the buyer to his determination to See question 7.4. As a natural effect of the sale agreement, the
purchase or in connection with the price or other conditions of Civil Code provides protection against title eviction, burdens
the transaction. that restrict the right of ownership or the enjoyment of the sold
A misrepresentation on features of the property sold, of real estate, defects or lack of quality. Other seller’s obligations
which the seller is not actually aware, may be the source of legal and liabilities may be agreed upon.
warranties for defects (garanzia per vizi ) or lack of quality (mancanza
di qualità promesse), which are a natural effect of the sale agreement. 7.6 What (if any) are the liabilities of the buyer (in
or contractual warranties to the buyer? What would be The buyer is obliged to pay: the purchase price; all applicable
the scope of these? What is the function of any such transfer taxes and registration duties; the notarial fees and
guarantee or warranties (e.g. to apportion risk, to give expenses; and their part of brokerage fees.
diligence? 82 Finance and Banking
The Civil Code includes, as a natural effect of the sale, legal 8.1 Please briefly describe any regulations concerning
protections that cover:
■ good title to property (evizione); and/or between individual persons and corporate
■ lack of burdens that restrict the right of ownership or the entities?
enjoyment of the sold real estate;
■ lack of defects; and
EU Directives and Regulations and the Italian Constitution
■ lack of quality.
lay down the main principles. The loan agreement and other
In medium to large transactions, parties usually customise their
banking agreements, as a matter of civil law and parties’
set of representations and warranties (“R&Ws”) and indemnities
obligations, are governed by the Civil Code and by the Unified
obligations. This is due to various factors, including: (i) the Banking Act no. 385/1993 (in connection with credito fondiario).
complexity of transactions and/or the underlying portfolios; (ii) Secondary sources of legislation include those issued by the
the short lapse of time of legal limitation and forfeiture (e.g. one Bank of Italy (Istruzioni di Vigilanza).
year; eight days – see Article 1495 of the Civil Code); and (iii) the Professional lending is reserved to banks or other entities
need for certainty of surviving rights and liabilities. specifically authorised by law.
R&W clauses may cover the following: There are no differences between resident and non-resident
■ full and unrestricted ownership; borrowers (except for general principles on the legal status of
■ lack of encumbrances/liens or third-party rights; foreigners – see question 2.1).
■ compliance with laws, including cadastral, zoning, building, Special protections are set forth for loans to consumers, while
environmental, cultural or landscape regulations; only loans extended to corporate entities can be secured by a
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special form of security recently allowed by Article 48-bis of the 8.5 How is a real estate lender protected from claims
Unified Banking Act (see question 8.3). against the borrower or the real estate asset by other
creditors?
estate lender seeks to protect itself from default by the If the loan is secured by a mortgage, the lender enjoys the priority
borrower? benefits discussed above. Please note, however, that some tax
claims may benefit from a special priority by operation of law
For minor loans, lenders seek mortgage and insurance policies ( privilegi fiscali ) that may take priority over other registrations.
(fire or collapse or, in certain cases, life or job policies).
A security package for a large structured transaction would 8.6 Under what circumstances can security taken by a
usually comprise: lender be avoided or rendered unenforceable?
■ mortgage;
■ assignment over rents and receivables;
In the case of insolvency of the borrower, mortgages and other
■ pledge over bank accounts related to the transaction;
securities could be subject to revocation under insolvency
■ assignment of the indemnities payable under insurance;
procedures. However, a mortgage registered as a collateral to a
■ assignment of construction guarantees; and
loan that qualifies as credito fondiario cannot be subject any more
■ pledge over the shares of the special purpose vehicle (in
to any revocation after 10 days from its registration.
case of share deal).
The bank also requires a set of contractual R&Ws concerning
the activities carried out by the borrower, as well as covenants 8.7 What actions, if any, can a borrower take to
including both financial (e.g. loan to value, debt service cover) frustrate enforcement action by a lender?
and non-financial obligations (e.g. maintenance of the asset in
good state of repair, disposal restrictions, periodical reports on In the case of substantial formal defects of the lender’s claim of
the occupation rates) to ensure that the value of the mortgage enforcement, the borrower may challenge such enforcement in
always covers the outstanding loan. court. Otherwise, the debtor might request to substitute for the
The breach of such covenants may result in the termination of attached property a sum of money equal, in addition to the costs
the loan and/or the acceleration of its reimbursement. of enforcement, to the amount due to the attachment creditor
and the intervening creditors.
estate lender?
mortgagor?
Foreclosure ( pignoramento) is governed by the Civil Code, the See question 8.5. In many cases, both lenders and debtors
Civil Procedure Code and, if applicable, the Unified Banking prefer to take advantage of informal workouts, e.g. out-of-
Act. An auction is held in court or at the offices of professionals court instruments that facilitate mediation between them and
delegated by the judge (e.g. a notary). The proceedings of the attempt to avoid entering into bankruptcy proceedings (e.g. debt
sale are used to repay the procedural expenses and the secured restructurings, arrangement with creditors).
lender, followed by other creditors that rank after or unsecured,
after which possible remainders are returned to the debtor. 8.9 What is the process for enforcing security over
Loans qualifying as credito fondiario extended by banks to shares? Does a lender have a right to appropriate shares
corporate entities can be secured by a special form of security in a borrower given as collateral? If so, can shares be
allowed by Article 48-bis of the Unified Banking Act, by which appropriated when a borrower is in administration or has
the debtor transfers the ownership of the secured asset to the entered another insolvency or reorganisation procedure?
lender subject to the condition precedent of the borrower’s
default ( patto marciano) and to a procedure of evaluation of the Pursuant to Article 2796 et seq. of the Civil Code and Article
asset by an expert (see question 8.1). 502 et seq. of the Civil Procedure Code, the creditor notifies the
If the market value of the sale price exceeds the residual debt, debtor of its intention to proceed accordingly.
the lender returns the excess money to the borrower. In order to enforce security, the creditor can either: (i)
procure the sale of the pledged shares through an auction
procedure or at a current market value (if any should exist) under
estate lending? the coordination of the court; or (ii) request the judge to have
the shares assigned to himself for a fair value determined by an
expert, or at the market value (if any should exist).
The bank carries out the risk assessment and the anti-money
laundering checks. With the assistance of the notary, the parties
then execute the loan agreement and the mortgage deed. Some 92 Tax
of the instruments included in the security package (such as the
assignment of rents from leases longer than three years, as well 9.1 Are transfers of real estate subject to a transfer
as the pledge on shares if any) are also notarised for the purposes tax? How much? Who is liable?
of registration with the Property Register.
Sometimes the parties execute a proof of evidence that the Not all the following transfer taxes apply in the same way to
conditions precedent have occurred (atto di verifica condizioni, all transaction structures, and their rates may vary according to
quietanza ed erogazione). many factors:
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■ Value-added tax (IVA o Imposta sul Valore Aggiunto – “VAT”) 9.5 What other tax or taxes (if any) are payable by the
applies to the sale of property carried out in the exercise of seller on the disposal of a property?
a business according to Presidential Decree DPR 633/1972
(see question 9.4).
See question 9.3. Moreover, the seller is jointly liable with the
■ Registration Tax (Imposta di Registro) applies to the
buyer and the notary for the payment of Registration Tax.
transfer of ownership of immovable property for valuable
consideration according to Presidential Decree DPR no.
131/1986. Where applied at variable percentage rates 9.6 Is taxation different if ownership of a company (or
(i.e. where VAT does not apply), the Registration Tax on other entity) owning real estate is transferred?
real estate transactions may amount to 2% (incentive rate
on first residential houses), 9% (ordinary rate) or 15% The taxation of a share deal is different. Provided that the
(agricultural lands). transaction has solid economic grounds, the tax burden of
■ If VAT applies, Registration Tax may be levied depending the transfer may be lower when compared with the asset deal
on the circumstances, usually at a fixed rate of EUR 200. (also depending on the tax burdens applicable to the particular
■ The Mortgage Tax is levied on registration procedures asset deal). However, in share deals, issues like latent taxation
carried out in Property Registers. The Cadastral Tax is should also be considered, and due diligence should also address
due on cadastral changes. Both are usually levied at fixed contingent liabilities on the corporate vehicle.
rates of EUR 50 or EUR 200 each, depending on the cases.
Please note that favourable tax regimes and/or exemptions
apply to investments made by UCITS, alternative investment
funds, or other professional investing vehicles. diligence on?
9.2 When is the transfer tax paid? Applicable property taxes (Imposta Municipale sugli Immobili –
“IMU”) should be considered and factored in the appraisal of
The transfer tax must be paid within 30 days of the transfer, the deal.
with the notary that digitally submits the relevant executed A tax due diligence should cover the compliance of tax
deeds with the Modello Unico Informatico. The notary usually declarations and payments. The risk connected with certain unpaid
receives by the purchaser the necessary funds for such payment taxes is that a special tax lien ( privilegio fiscale) may remain attached
upon execution of the sale. and enforceable against the following owners of the property.
9.3 Are transfers of real estate by individuals subject to 102 Leases of Business Premises
income tax?
Income tax applies to capital gains from the sale of lands or
other real estate. With specific reference to buildings sold by
individuals, the capital gain is not taxable if: (i) the individual ■ The Italian Civil Code (Articles 1571 to 1614).
owned the property for more than five years; or (ii) the unit was ■ Law no. 392/1978 (Articles 27 et seq.).
used as the primary house by the seller and his family. ■ The Civil Code (Article 1615 to 1627 and Articles 2555 to
2562).
much? Who is liable? Are there any exemptions? 10.2 What types of business lease exist?
VAT is mandatory where the sale is executed by professional sellers ■ Leases of business property are governed by a legislation
within five years of the construction or refurbishment works on that is more favourable to the tenant as a possible weaker
the asset, otherwise the professional seller may opt to apply VAT. party.
The seller is the taxable person vis-à-vis the authorities, ■ Major leases ( grandi locazioni ), i.e. annual rent exceeding
provided that the economic burden is charged by the seller on EUR 250,000), can be negotiated on a level playing field,
the purchaser in addition to the purchase price. When VAT is with derogations allowed on the assumption that the
applicable to the option of the seller, the reverse charge mechanism tenant has similar negotiating powers to the landlord.
applies with the buyer being directly liable vis-à-vis the tax ■ Leases of ongoing business (affitto di azienda o di ramo di
authority for the payment (or set-off) of the VAT. azienda) are not subject to particular contractual restrictions
The VAT rates vary depending on circumstances such as as per Law no. 392/78 and are governed by the relatively
the type of asset or parties, the timeframe of works carried out more flexible provisions of the Civil Code.
on the asset, and whether or not the VAT option is exercised.
VAT levies at rates that may amount to 4%, 10% or 22%. 10.3 What are the typical provisions for leases of
Depending on the amount of VAT applicable (or not applicable) business premises in your jurisdiction regarding: (a)
to the transaction, the Registration Tax and the Mortgage and length of term; (b) rent increases; (c) tenant’s right to
Cadastral Taxes may vary accordingly (the general principle sell or sub-lease; (d) insurance; (e) (i) change of control
being that – save for exceptional cases – VAT and Registration of the tenant; and (ii) transfer of lease as a result of a
Taxes are levied alternatively). corporate restructuring (e.g. merger); and (f) repairs?
For standard business leases, the following mandatory provisions

apply:
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Ontier Italy 97
■ a minimum duration of six years (nine for hotels), subject (see question 10.3), such party remains liable for any possible
to renewal for a same period; breach of obligations occurred before the assignment/sale.
■ annual indexation up to a maximum of 75% of the annual
consumer’s inflation index (or up to 100% if the initial
term of the lease exceeds six years);
■ a set of rules protecting the value of the tenant’s goodwill sustainable use of buildings and in the reduction of
if the leased premises are open to consumers and users, the “environmental footprint” of a building. Please
including: the tenant’s pre-emption right to renew the briefly describe any “green obligations” commonly
lease upon termination of the lease, or to purchase the found in leases stating whether these are clearly
asset in case of sale; and the right of the tenant to receive defined, enforceable legal obligations or something not
a compensation from 18 to 36 months of rent (21 to 42 amounting to enforceable legal obligations (for example
in the case of hotels) upon termination for reasons not aspirational objectives).
attributable to the tenant;
■ the deposit cannot exceed three months of rent; The tenant must declare that he has received the information and
■ no sublease or assignment without the landlord’s consent, documentation, including the certificate, relating to the energy
which is, however, not required if the tenant subleases or performance certification of buildings (see question 12.10).
assigns the lease together with a transfer or lease of its Furthermore, interest is growing around the environmental,
ongoing business (Article 36); and social and governance (“ESG”) objectives that could come to
■ the lease does not terminate in case of transfer of the asset shape more green lease clauses. Build-to-suit lease agreements,
and continues with the new owner (emptio non tollit locatum). for example, were already including requirements in terms of
Insurance and maintenance can be agreed upon by the
sustainability (e.g. Leadership in Energy and Environmental
parties: in standard minor leases the tenant bears the minor
Design (“LEED”) or Building Research Establishment Envi-
works and insures the commercial risk, while the landlord
ronmental Assessment Method (“BREEAM”) certifications).
undertakes the ordinary and extraordinary maintenance. In
Landlords, investors and financiers are establishing their ESG
more structured or portfolio leases, the tenant bears insurance
policies, to the point that certain financial products shall end
expenses and ordinary and extraordinary maintenance, except
for the extraordinary maintenance on structural parts of the real being only reserved to targets that comply with specific stand-
estate property that remains on the landlord. ards. If not as a matter of law, the use of green clauses may
become more common and certain types of investors or asset
managers now include them in all of their contracts. As an
10.4 What taxes are payable on rent either by the example, such green clauses may include provisions and obli-
landlord or tenant of a business lease? gations of the parties aimed at the: conscious management of
natural sources and waste disposal; enhancement of energy
Income taxes may accrue on the landlord for the rentals and performance; metering of performance data; definition of
depending on the nature of the landlord and of the asset. guidelines and code of conduct; and obtainment and mainte-
Indirect taxes may vary depending on the nature of the parties nance of the sustainability certifications, etc.
and the asset. VAT may be applicable or not, at a rate of 22%,
and the Registration Tax is levied at a rate of 1% or 2%.
10.5 In what circumstances are business leases term working spaces (co-working) or shared residential
usually terminated (e.g. at expiry, on default, by either spaces with greater levels of facilities/activities for
party etc.)? Are there any special provisions allowing a residents (co-living)? If so, please provide examples/
tenant to extend or renew the lease or for either party details.
termination?
Alternative asset classes of co-working and co-living (e.g. student
housing and senior living) are becoming widespread, and not
■ The lease may terminate upon expiry of its initial term, only in Milan and Rome, but also other cities, with specialised
unless automatically renewed (at the first expiry date, the operators providing co-working spaces and co-living serviced
landlord’s withdrawal power is restricted to limited cases). apartments.
■ The tenant can always terminate the lease for serious
The technology wave plays a role in supporting such hybrid
reasons (gravi motivi ), i.e. unforeseeable and supervened
formulas. Proptech startups have entered the market, e.g.
circumstances that make the continuation of the lease
making available digital solutions that integrate the services
seriously burdensome. Additional clauses of early
to the building (e.g. managing amenities, booking swimming
termination can be agreed only in favour of the tenant.
pools, meeting rooms, laundry services) into one application.
■ A lease can be terminated for breach of contract by either
party.
■ The tenant is entitled to goodwill compensation varying 112 Leases of Residential Premises
from 18 to 36 months (21 to 42 in case of hotels) (see
question 10.3). 11.1 Please briefly describe the main laws that regulate
leases of residential premises.

lease cease to be liable for their respective obligations Residential leases are regulated by the Civil Code, Law no.
under the lease once they have sold their interest? Can 431/1998 and Law no. 392/1978.
they be responsible after the sale in respect of pre-sale Law no. 208/2015 rules the rights and obligations of the
non-compliance? tenant under a Rent to Buy.
If the tenant assigns the lease, or the landlord sells the leased unit
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11.2 Do the laws differ if the premises are intended for the Civil Code and regulated in detail by Legislative Decree no.
multiple different residential occupiers? 327/2001 (and subsequent amendments).
The administration calculates the compensation based on
the market value of the property; the provisional determination
No, the laws do not differ in this instance.
is followed by the acceptance and the final determination,
without prejudice to the right of the interested party to submit
11.3 What would typical provisions for a lease of observations and start a dispute.
residential premises be in your jurisdiction regarding:
tenant’s rights to remain in the premises at the end of 12.3 Which bodies control land/building use and/
the term; and (d) the tenant’s contribution/obligation to or occupation and environmental regulation? How do
the property “costs”, e.g. insurance and repair? buyers obtain reliable information on these matters?
■ A term typically has a minimum duration of four years, The control on land/building use is carried out by the municipal
renewable for same periods (an initial period of three police in cooperation with the municipal technical offices. Envi-
years, renewable for two years – or even shorter leases – ronmental inspections are the responsibility of the Regional Envi-
may be also available if the lease agreement complies with ronmental Protection Agencies (“ARPA”), the prevention depart-
local agreements that mitigate the applicable rent); ments of Local Health Authorities (“ASL”) and the Fire Brigade.
■ indexation up to 100% of the CPI in 4+4 leases; Buyers may obtain reliable information on the state of
■ the tenant can renew for a further period, while the the properties by means of requests for access to acts and
landlord’s right to avoid the first renewal is limited; and documents pursuant to Law no. 241/1990, or by means of civic
■ minor repairs are the responsibility of the tenant, while access pursuant to Article 5 of Legislative Decree no. 33/2013
others are on the landlord. (as amended from time to time) at the relevant municipal offices.
11.4 Would there be rights for a landlord to terminate 12.4 What main permits or licences are required for
a residential lease and what steps would be needed to building works and/or the use of real estate?
Article 6.1 of Presidential Decree no. 380/2001 regulates the
exceptional cases of free building activities that private individuals
Failure to pay the rent after 20 days from the due date, or failure can carry out with or without notification of the start of works.
to pay the ancillary charges when the unpaid amount exceeds Normally, for other types of projects, the law provides for two
two months’ rent, constitutes grounds for termination. The instruments: the express permission; and the silent consent.
landlord can commence eviction proceedings (sfratto per morosità), The issuance by the Municipality of the building permit (Permesso
provided, however, that the tenant may avoid such proceeding di Costruire – “PdC”) is required for the largest interventions, such
by paying the amount due during the proceedings. as new construction, building renovation and change of use of
the property. For public buildings and facilities, the issuance of
122 Public Law Permits and Obligations the PdC is allowed in the case of derogation of urban planning
instruments, subject to the resolution of the City Council.
12.1 What are the main laws which govern zoning/ Minor interventions are authorised by means of the Certified
permitting and related matters concerning the use, Declaration of commencement of activity (Segnalazione Certificata
development and occupation of land? Please briefly di Inizio Attività – “SCIA”) by which the individual, using the
describe them and include environmental laws. services of an authorised technician, self-certifies the existence
of all the necessary prerequisites and starts the work when the
Primary legislation is contained in Law no. 1150/1942, documentation is deposited. Pursuant to Article 19 of Law no.
regulating urban planning activities and their purposes, and in 241/1990, after 30 days from the date of submission, the SCIA is
the Presidential Decree no. 380/2001, which groups together consolidated by the effect of silent consent.
the rules on construction. Article 23 regulates the SCIA alternative to the PdC (so-called
At a local level, Municipalities, Provinces and Regions are “Super SCIA”) for heavier interventions: in this case, unlike the
in charge of adopting urban planning instruments; the main classic SCIA, the private individual can begin works only after 30
instruments are the Regional Territorial Plan (Piano Territoriale days from filing the documentation.
Regionale – “PTR”), Provincial Territorial Coordination Plan Article 6-bis provides for the Communication of the start of
(Piano Territoriale di Coordinamento Provinciale – “PTPC”), Landscape works certified by a qualified technician (Comunicazione di Inizio
Territorial Plan (Piano Territoriale Paesaggistico – “PTP”) and Lavori Asseverata – “CILA”) for interventions on non-structural
General land-use Plan (Piano Regolatore Generale – “PRG”), which parts of the building.
is a municipal competence. As for the use of real estate, authorisations vary depending
The main laws on the protection of the cultural heritage and on the nature of the property (e.g. concessions for the use of
the landscape are contained in Legislative Decree no. 42/2004, public buildings).
while environmental protection is governed by Legislative
Decree no. 152/2006.
12.2 Can the state force land owners to sell land to it? If obtained in any way (e.g. by long use)?
mechanism.
Permits are commonly issued when the legal requirements are
met and local regulations are observed. Where no specific
Yes. The procedure of expropriation for public utility is act of consent is required, the silent consent operates; if the
governed by Article 42.3 of the Constitution, Article 834 of
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Ontier Italy 99
Administration does not give its opinion within a certain time the administrative authorities, the person responsible for the
limit, the intervention is considered authorised. pollution is always obliged to carry out the remediation of the
It is not possible to obtain a permit/authorisation only by contaminated site.
effect of the prolonged use of the property. The Municipality or, in case of inaction, the Region, are
obliged to act in place of the defaulting or unknown responsible
12.6 What is the typical cost of building/use permits and party, recognising the relative interventions as a real burden on
the time involved in obtaining them? the polluted areas.
The issuing of the permit entails the payment of Urbanisation 12.10 Please briefly outline any regulatory
Charges and a Building Contribution. requirements for the assessment and management of
Urbanisation Charges are a sort of participation of the the energy performance of buildings in your jurisdiction.
applicant in the urbanisation expenses (sewerage, parking,
lighting, etc.) that the Municipality incurs for the territory, and Legislative Decree no. 192/2005 (and subsequent amendments)
must be paid by the permit holder at the time of issue. The contains the prescriptions and minimum requirements for the
Building Contribution, on the other hand, is determined as a energy performance of buildings.
percentage (from 5% to 20%) of the construction or intervention The APE is a document produced following an inspection by
costs, increased according to the class of building. an accredited professional, which describes the energy class of a
By means of Urban Conventions, the Administration can building determined on the basis of the overall non-renewable
agree to issue a permit in exchange for territorial planning energy performance index.
activities; in this case, the urbanisation works are carried out This index includes winter and summer air conditioning,
“in compensation” (total or partial) of the Building Contribution. hot water production, mechanical ventilation and, in the case
With regard to the time involved, applications are handled in of non-residential buildings only, artificial lighting and the
order of presentation. Within 60 days of filing, the person in
transport of people or things.
charge of the procedure formulates a proposal for a measure and
A low index corresponds to a better energy performance and
asks for any document integrations or modifications. The final
a higher commercial value of the property.
measure is issued and notified to the applicant within 30 days from
The APE is valid for 10 years and is required in many cases
the issue of the proposal, with the exception of the suspension of
(for example, for the sale or lease of existing properties, or new
the time limits necessary for additions. If the intervention area
is subject to local public constraints, the period of 30 days starts constructions).
from the issue of the permit by the competent administration.
132 Climate Change
historic monuments in your jurisdiction? If any, when 13.1 Please briefly explain the nature and extent of
and how are they likely to affect the transfer of rights in any regulatory measures for reducing carbon dioxide
real estate or development/change of use? emissions (including any mandatory emissions trading
scheme).
Regulations on the protection of historic monuments are

contained in Legislative Decree no. 42/2004 (Codice dei beni New public and private buildings must comply with the
culturali e del paesaggio). European obligation called “Nearly Zero Energy Building”
Pursuant to Article 59 et seq., any deed transferring, in whole (“NZEB”), which guarantees certain standards of technology,
or in part, for whatever reason, the ownership or possession energy efficiency and use of renewable energy.
of cultural assets must be notified to the Ministry of Culture. In Italy, there has been significant progress towards the
Within 60 days, the Ministry or, alternatively, the other territorial construction of NZEB buildings but several steps are yet to
bodies concerned, may exercise the right of pre-emption on the be taken. As of 2019, before the onset of the pandemic, more
purchase by paying the same price. Pre-emption operates both than 1,500 NZEB buildings had been constructed, mostly
for inter vivos and mortis causa transfers. for residential use, and most of them had obtained an energy
Furthermore, Article 21 regulates the permits to be requested certification of class A4.
from the Ministry or the Superintendence for the execution of Europe is looking at 2050 as the deadline for when all
works and interventions of any kind on cultural assets, including buildings should no longer be NZEB but “Zero Energy
changes in their use. Buildings” (“ZEB”), for the so-called “decarbonised park”.
The ZEB requirement should apply from 1 January 2030 to
12.8 How can, e.g. a potential buyer obtain reliable all new buildings and from 1 January 2027 to all new buildings
information on contamination and pollution of real occupied or owned by public authorities.
your jurisdiction?
reduction targets?
Each Region is responsible for keeping and updating the databases
of contaminated sites affected by remediation procedures, making
With the National Integrated Energy and Climate Plan
them accessible to the public and other interested administrations.
(“PNIEC”) and the PNRR, Italy has defined its objectives in
terms of energy efficiency, renewables and decarbonisation
12.9 In what circumstances (if any) is environmental and has had access to funds allocated by the “Next Generation
clean-up ever mandatory? EU” in order to contribute to the European target for 2030 of
reducing greenhouse gas emissions to 55% of 1990 levels.
If there are certain indexes of contamination, which are The measures in the PNRR for the containment of natural
ascertained following preliminary investigations carried out by gas consumption are also aimed at saving gas and avoiding, as
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100 Italy
much as is possible, the excessive depletion of national storage, (ii) the “Omnibus Decree” extended the “Superbonus” at the rate
in respect of the 2023–2024 period. of 110% for single-family households until 31 December
2023, provided that at least 30% of the works have been
completed and certificated before 30 September 2022;
(not already mentioned) which aim to improve the (iii) the termination of credit assignments (cessione dei crediti )
sustainability of both newly constructed and existing and invoice discounting starting from 17 February 2023,
buildings? as set forth by Law Decree no. 11 of 16 February 2023;
(iv) the increase of the total number of possible credit
assignments from four to five, which is only possible for
From an Italian perspective, Law Decree no. 1269/2023,
interventions on buildings where construction had already
issued by the Ministry of University and Research (Ministero
started before 17 February 2023;
dell’Università e della Ricerca) aimed at co-financing the
(v) the possibility for companies that carry out works with the
development and construction of certain student housing (alloggi
Superbonus to access SACE guarantees (garanzia SACE)
universitari ), which will be given a premium ( premialità) in the
for so-called “bridge loans ”; and
tender (however, it will be necessary to wait for the publication
(vi) the possibility of apportioning the deduction over 10 years,
of the relevant tender notices – bando di gara).
instead of four, for expenses incurred in 2022, as provided
Moreover, Article 1, Paragraph 76 of the Budget Law 2023
for in Law Decree no. 11/2023.
(Legge di Bilancio) has introduced some tax benefit for those who
purchase the most energy efficient residential properties. Such
facility (agevolazione) applies to natural persons only and provides 142 COVID-19
for an Irpef deduction equal to 50% of the VAT calculated on
the purchase price of residential property in energy classes A 14.1 Please detail any laws that govern real estate in
or B, sold by developers or collective investment undertakings your jurisdiction which were introduced in response to
between 1 January 2023 and 31 December 2023. the effect of the Coronavirus (COVID-19) pandemic and
Finally, the “Omnibus Decree” (converted in Law no. 136/2023) which remain in place.
has remodulated the “Superbonus” measures (i.e. those that in the
previous years granted a benefit of 110 for each 100 euro spent As at the time of writing, essentially all restrictions that existed
on certain kinds of intervention), providing for: in respect COVID-19 have lapsed, with the sole exception of
(i) a reduction of the “Superbonus” incentive from 110% to 90% in certain healthcare spaces. The “Omnibus Decree” (converted
as of 1 January 2023, generally applicable to almost the same in Law no. 136/2023) ended the obligation of self-surveillance
beneficiaries as in the past, but subject to some exceptions; (autoisolamento) in the case of COVID-19, subject, however, to the
use of FFP2 masks.
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Ontier Italy 101
Roberto De Simone joined Ontier Italy in 2021, as a partner, to lead the Global Real Estate department. He is a lawyer qualified to practise
before the higher courts.
With over 20 years of experience within law firms of primary importance, he has consolidated a deep knowledge of the legal issues and
market dynamics related to real estate and construction, providing assistance to major domestic and international operators in major real
estate transactions across all asset classes.
He has also developed a specific interest towards the industry of proptech, looking into the legal and business demands of those operators
– ranging from startups to bigger players – that integrate technology with real estate (smart real estate, contech, sharing economy, real
estate fintech).
Roberto’s action field also encompasses matters of corporate and commercial law, corporate governance, corporate finance, mergers and
acquisitions, co-investment agreements, transactional risk (W&I) insurance and other main business and financial agreements.
His mother tongue is Italian, and he fluently speaks English, Spanish and French.
Ontier Italy Tel: +39 068 397 5380

Piazza Cavour 19 Email: rdesimone@ontier.net
00193 Rome URL: www.ontier.law
Italy
Laura Gentili is the Head of the Department of Administrative Law of Ontier Italy. She is a lawyer qualified to practise before the higher courts,
working mainly in the field of public and administrative law, and has gained significant experience in the field of zoning and building law, public
contracts, competition, energy and environmental law, whilst also developing a significant expertise in public utilities, public companies,
public-private partnerships and project financing.
She has recognised expertise in litigation and arbitration, both domestic and international, and is specialised in drafting opinions and in
assisting Public Administrations.
She is the author of articles and publications on various topics of administrative law, both substantive and procedural.
Her mother tongue is Italian, and she also speaks English and French.
Ontier Italy Tel: +39 068 397 5380

Piazza Cavour 19 Email: lgentili@ontier.net
00193 Rome URL: www.ontier.law
Italy
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Real Estate 2024

102 Chapter 11
Japan
Japan
Kenichi Yamamoto
Anderson Mōri & Tomotsune Miho Ouchi
12.1. Those relating to tax should be listed in response to There are no legal restrictions for non-resident persons and
questions in Section 9. foreigners to obtain and own real estate in Japan. However, in
certain cases, non-resident persons are required to make a report
regarding real estate transactions to the relevant governmental
The Civil Code, which governs real estate in Japan, regulates
authority in accordance with the Foreign Exchange and Foreign
ownership, assignment, mortgages, and other relevant matters,
Trade Law or other laws.
including contracts such as sale and purchase agreements and
lease agreements. Other major laws relevant to real estate are
as follows: 32 Real Estate Rights
Real estate registration 3.1 What are the types of rights over land recognised
The Law of Real Estate Registration governs the registration in your jurisdiction? Are any of them purely contractual
process for the transfer of real estate ownership and the between the parties?
establishment of mortgages. Registration is necessary to perfect
a transfer or a mortgage. Ownership
In general, a person who has ownership in real estate has a right
Brokerage to use, profit from, and dispose of that real estate in accordance
The Real Estate Transactions Business Law governs the with the Civil Code. Ownership is not purely contractual.
brokerage aspect of the real estate business. For example, under Joint ownership of real estate (kyoyu), which is governed
this Law, it is necessary to obtain a licence from the relevant by the Civil Code, is a form of ownership that can be held by
authority in order to engage in real estate brokerage. multiple persons. Unit ownership (kubunshoyu) of a building
under condominium ownership, which is subject to the Law for
Construction Condominiums as well as the Civil Code, is a form of ownership
The Building Standard Law provides standards relating to the that may be held by a single person separately from other
construction of buildings. condominium owners in the same building.
Others
1) Superficies (Chijoken)
Superficies is typically a right to use land in order to enjoy
ownership of structures, such as buildings, located on the
In principle, no property rights may be established other than land. While a superficies may be established based on an
those prescribed by statutory laws, including the Civil Code. agreement between the owner of the land and a user, a
In terms of a contractual relationship, there may be some local registered superficies may be claimed against a third party.
customary laws that may be relevant. Thus, a superficies is not purely contractual.
2) Servitude (Chiekiken)
1.3 Are international laws relevant to real estate in your Servitude is a right to use land for the enjoyment of other
jurisdiction? Please ignore EU legislation enacted locally land (e.g. right of way). While servitude may be established
in EU countries. based on an agreement between an owner of the land and a
user, a registered servitude may be claimed against a third
There are no international laws that are materially relevant to party. Thus, servitude is not purely contractual.
real estate in Japan. 3) Leases
A lease is a contractual right and obligation under the
Civil Code. However, a lease can be perfected through
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Anderson Mōri & Tomotsune 103
registration, or otherwise recognised under the Act on Land ownership is not registered, the purchaser will be unable to
and Building Lease. A tenant who obtains such perfection assert its ownership against third parties.
can assert his right against a new owner of the leased
property. In this sense, a lease is not purely contractual.
registered?
diverges from the right to a building constructed See the answer to question 4.3 above.
thereon?

Under Japanese law, a building is recognised as independent
land or rights is there a probationary period following
real property. Thus, ownership of land and the building that first registration or are there perhaps different classes
stands on the land may be separate and may belong to different or qualities of title on first registration? Please give
persons. When a person intends to construct a building on details. First registration means the occasion upon
another person’s land, he or she has the option of obtaining which unregistered land or rights are first registered in
either: (i) the title to the land; or (ii) a right to use the land, such the registries.
as a superficies or a lease as described in question 3.1 above.
There is no probationary period or different class of title in
3.3 Is there a split between legal title and beneficial relation to a first registration.
change this?
In principle, there is no split between legal title and beneficial

Ownership is transferred to the buyer in accordance with the
title of real estate. However, it is possible to create a trust over
agreement between the seller and the buyer. No formality is
an estate. If a trust over an estate is granted to a third party, the
required to transfer ownership. The transfer and payment are
legal title of the estate is recorded in the name of the third party
usually expected to be carried out at the same time.
as “a trustee”.
42 System of Registration 4.7 Please briefly describe how some rights obtain
rights?
registered? What land (or rights) are unregistered?
Basically, unless perfected through registration, no right in
real estate obtains priority over other rights. The priority of a
In general, all land is registered. However, there are some perfected right in real estate is determined by the chronological
exceptions, such as government land, that are not registered. order in which perfection is obtained. Thus, an earlier registered
Buildings are required to be registered under the Law of Real right has priority over subsequently registered rights.
Estate Registration. Although it is possible that some buildings
remain unregistered, in reality, those buildings usually become
registered when they are subsequently sold so that the new buyer 52 The Registry / Registries
can perfect ownership against a third party.
4.2 Is there a state guarantee of title? What does it differing rules and requirements.
guarantee?
One nationwide real estate registration system operates in Japan.

There is no state guarantee of title, as the real estate registry does
not necessarily reflect the true holder of the title or right. In
practice, parties who plan to enter into a real estate transaction 5.2 How do the owners of registered real estate prove
their title?
usually rely on the registry because it is generally the best indication
of the true owner of the real estate-related title or right. However,
a buyer has no recourse against anyone but the seller if, relying on In practice, the registry is generally the best indication of the
the registry, the buyer purchases real estate or a related right from a true owner of the real estate-related title or right. Anyone can
seller and the information contained in the registry was incorrect. obtain a certified copy of a registration from the land registry.
Under those circumstances, the buyer may seek reimbursement
from the seller pursuant to statutory warranties or contractual 5.3 Can any transaction relating to registered real
warranties; however, generally speaking, the buyer would not be estate be completed electronically? What documents
able to acquire the ownership of, or title to, the real estate. need to be provided to the land registry for the
4.3 What rights in land are compulsorily registrable? electronically?
Real estate transactions may be registered electronically.

No rights in land are compulsorily registrable. Even if there
In the case of an ownership transfer resulting from a sale and
is a transfer of ownership in land under a sale and purchase
purchase transaction, the following documents are required for
agreement, registration is not mandatory. However, if the
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104 Japan
registration: (i) information certifying the cause of registration transaction depends on the terms of the agreement. However,
(touki genin shomei joho), such as the sale and purchase agreement or a there are upper limits on the amount of compensation that a
document summarising the necessary information; (ii) information real estate broker may receive under the Real Estate Transaction
for registration identification (touki shikibetsu joho) or a title Business Law: (i) if the broker acts as an intermediary for both
document of the seller; (iii) a certificate with the seal impression the seller and buyer, the broker can receive compensation from
of the seller; (iv) property valuation certificate (koteishisan hyouka each person of up to (a) 5.5% if the transaction amount is
shomei ); (v) a certificate of the address of the buyer (certificate of JPY 2 million or less, (b) 4.4% + JPY 22,000 if the transaction
residence ( jyuminhyo) of an individual or commercial registration amount exceeds JPY 2 million and is JPY 4 million or less,
of a company); (vi) if applicants are corporations, their corporation or (c) 3.3% + JPY 66,000 if the transaction amount exceeds
number (kaisyahoujintoubangou) or commercial registration; or (vii) JPY 4 million; and (ii) if the broker acts as an agent for either the
when delegating a procedure, a power of attorney from both the seller or buyer, the broker can receive compensation not more
seller and purchaser. When the application for registration is made than twice the amount calculated under (i) above.
electronically (i.e. online application), the electronic certificates
may be used in place of the certificate with the seal impression.
Information on the ownership of registered real estate may be 6.3 Is there any change in the sources or the
accessed electronically. availability of capital to finance real estate transactions
Regarding debt, the main banks remain very interested in lending
due to a steady level of financing needs in the real estate industry
Under the State Redress Law, if the relevant public officer has, in and low domestic long-term interest rates. While spreads are at
the course of registration, intentionally or negligently inflicted a very low level, senior loan market actors of mainly large-scale
damage in an unlawful way on another person, the State shall loans, oligopolistic tendencies are becoming evident, with major
assume the responsibility to compensate for that damage. financial institutions taking the lead. On the other hand, these
days, regional banks are also taking part in small- and medium-
5.5 Are there restrictions on public access to the sized loans and loans made outside of urban areas, and this
register? Can a buyer obtain all the information he trend is expected to continue. However, at the end of July 2023,
might reasonably need regarding encumbrances and the Bank of Japan made a partial change in monetary policy
other rights affecting real estate and is this achieved and indicated its intention to flexibly operate a floating range
by a search of the register? If not, what additional that allows long-term interest rates to exceed 0.5%. Therefore,
information/process is required? attention should be paid to future trends.
As for equity, although the amount of real estate investment
Anyone may obtain a certified copy of a registration from the in Japan as a whole has remained stable as of last year, foreign
land registry. Thus, a buyer may obtain a copy of a registration investors are likely to continue to maintain a selective investment
with almost all of the information that he might reasonably need attitude due to continuing uncertainty as regards their own
regarding encumbrances and other rights affecting real estate. economic and financial conditions, particularly in Europe, the
However, there are some rights that are not necessarily registered. United States and China. Although long-term interest rates are
For example, a certain land lease right may be perfected by an expected to rise as the Bank of Japan flexibly allows JGB yields
ownership registration on the building registry, which means to rise, the benefits of investing in Japan from the perspective of
that the land lease can be perfected without registration on the the yield gap are expected to be maintained and the investment
land registry. It is recommended to check both the building attitude toward Japan is expected to remain firm.
registry and the land registry.

62 Real Estate Market developers to invest in your region compared to last year
6.1 Which parties (in addition to the buyer and seller give examples.
Please briefly describe their roles and/or duties. Compared to 2022, the market conditions of rental housing and
hotels improved in the first half of 2023. With regard to rental
housing, rent offered for apartments in Tokyo has maintained
In general, real estate brokers are a feature of real estate a positive trend from the previous year, and demand has been
transactions in Japan. Governmental approval is required to
strong, especially for family properties. In addition, rents of less
engage in the business of real estate brokerage.
than 30 square metres in the central Tokyo are showing signs
In addition, a judicial scrivener is involved in almost all real
of recovery, possibly due to the influx of young people. In this
estate transactions. As the registration process is very technical,
area, demand for properties near stations is recovering, due to an
a judicial scrivener’s involvement is crucial to ensure that the
increase in office returns. Hotel demand has been sluggish since
process is completed smoothly.
2019, when Japan was hit by COVID-19, but has remained stable
Depending on the size and complexity of a transaction, legal,
at levels close to 2019, thanks to the continuation of nationwide
tax, and technical advisors are sometimes engaged for due
travel support for domestic passengers. In addition, the ratio
diligence work.
of foreign guests has gradually recovered to nearly 20%. The
occupancy rate has not recovered to the level of the same month in
6.2 How and on what basis are these persons 2019, but it is on a recovery trend; in particular, in Tokyo – where
remunerated? the number of foreign visitors to Japan has exceeded the 2019
level – the demand for business hotels has recovered significantly.
The basis for, and process of, remuneration in any given
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6.5 Have you observed any trends in particular market 7.5 Does the seller retain any liabilities in respect of
sub sectors slowing down in your jurisdiction in terms of the property post sale? Please give details.
examples.
In principle, the seller is liable for any defects or encumbrances.
The buyer may seek damages for any defects or encumbrances, or
Rents of office spaces are currently flat or on a moderate upward may even terminate the agreement if the purpose of the agreement
trend in urban areas other than Tokyo, but the downward trend cannot be achieved due to the defects or encumbrances, unless
continues in Tokyo. In the central part of Tokyo, the vacancy rate otherwise expressly carved out in the agreement.
has increased due to the supply of large-scale buildings, and this
trend is expected to continue for couple of years. Furthermore,
in Osaka, a large supply is scheduled in 2024, so the vacancy rate 7.6 What (if any) are the liabilities of the buyer (in
is expected to increase temporarily. However, teleworking is not addition to paying the sale price)?
as popular in Japan as it is in other countries, so office demand,
which has fallen due to the COVID-19, has started to increase In general, the buyer has no liabilities beyond paying the sale price.
since 2022. Although the office vacancy rate has continued to
rise since 2019, it has stopped rising in recent years; however, the 82 Finance and Banking
market is expected to recover in the near future.
72 Liabilities of Buyers and Sellers in Real the lending of money to finance real estate. Are the rules
Estate Transactions different as between resident and non-resident persons
entities?
As a general rule, registration as a money lender under the
Money Lending Business Law (kashiking yoho) is required in order
Ownership is transferred to the buyer in accordance with the
to engage in the money lending business. This rule does not
agreement between the seller and the buyer. No formality is
vary between residents and non-residents, or between individual
required to transfer ownership.
persons and corporate entities. Apart from this, there are no
regulations regarding the lending of money specifically for
7.2 Is the seller under a duty of disclosure? What financing real estate transactions.

In general, the seller is not under a duty of disclosure. While the estate lender seeks to protect itself from default by the
seller is not obligated to make disclosures, a real estate broker borrower?
involved in a transaction has an obligation to provide certain
material information concerning the real estate in writing or by
A mortgage is the main method for a real estate lender to secure
electromagnetic means to the buyer pursuant to the Real Estate
its loan. Another method is a revolving mortgage (neteito), which
Transactions Business Law.
secures unspecified loans up to a specified amount agreed in the
mortgage agreement.
misrepresentation?
The seller may be held liable to the buyer for fraudulent mortgagee to realise a mortgaged property without
misrepresentation. If the buyer is induced to enter into a real involving court proceedings or the contribution of the
estate transaction through fraudulent misrepresentation by the mortgagor?
seller, the buyer may cancel the transaction and/or seek damages
under the Civil Code. There are specific proceedings for the realisation of mortgaged
properties.
7.4 Do sellers usually give any form of title “guarantee” Foreclosure is one such legal process involving court
or contractual warranties to the buyer? What would be proceedings. This is a fair and transparent process; however, it
the scope of these? What is the function of any such can take a considerable length of time to accomplish. Moreover,
guarantee or warranties (e.g. to apportion risk, to give the sale price through foreclosure tends to be lower than the
information)? Would any such guarantee or warranties actual market price because potential buyers are typically not
given the opportunity to conduct their own investigations of
diligence?
the property. Additionally, a report of a property prepared by a
court execution officer is not sufficient for the purposes of due
Traditionally, contractual warranties in favour of the buyer have diligence. As such, foreclosure is not the preferred process for
not been popular in Japan because the seller is already liable for realisation of mortgaged properties.
defects under the Civil Code, without any explicit warranties One common process for the realisation of mortgaged
provided pursuant to contract. However, we have seen quite a few properties is a voluntary sale (nin-i baikyaku), through which
contractual warranties recently in large real estate transactions. the property can be sold at a price close to the market value
In practice, warranties could cover any matters relating to real in a timely manner. Therefore, voluntary sales are much more
estate. Normally, warranties would mainly function to apportion beneficial for the mortgagee and even the mortgagor (in certain
risk, but depending on the case, could also function as substitutes cases) than the foreclosure route.
for due diligence.
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106 Japan
8.4 What minimum formalities are required for real 8.9 What is the process for enforcing security over
estate lending? shares? Does a lender have a right to appropriate shares
No formalities are specifically required for real estate lending. entered another insolvency or reorganisation procedure?
However, if a mortgage is established as a security, the registration
process will be necessary for the perfection of that security.
A share pledge is the most common way to establish a security
over shares. As a general rule, a lender may not have a right
8.5 How is a real estate lender protected from claims to appropriate pledged properties. However, if the lender is a
corporation incorporated under the Corporate Law, the lender
creditors?
may have a right to appropriate the pledged properties if the
right is provided in the share pledge agreement. Shares may
A mortgagee or a revolving mortgagee can perfect its rights by be appropriated outside of bankruptcy proceedings. As for
registration. If the mortgage or revolving mortgage is previously the cases in Civil Rehabilitation proceedings or corporate
registered in the registry, a mortgagee may assert its preference reorganisation proceedings, please see question 8.8 above.
against other creditors who subsequently register (or have not
yet registered) a mortgage or other rights.
92 Tax
8.6 Under what circumstances can security taken by a 9.1 Are transfers of real estate subject to a transfer
lender be avoided or rendered unenforceable? tax? How much? Who is liable?
The following acts may be avoided if they create a security interest Real property acquisition tax
against an existing claim, or extinguish any existing claim: A person acquiring real property is subject to a real property
a) an act conducted by the debtor after the debtor becomes acquisition tax. This tax is calculated based on the value of the
continuously unable to pay its debts as they become due property as assessed by the tax authority (approximately 70% of
(shiharai funo), if the creditor knew that the debtor was
the market value if the property is land and approximately 60%
unable to pay its debts or the debtor had suspended its
of the market value if the property is a building). Until March
payment at the time of the act;
31, 2024, the tax rate has been fixed at 3% in the case of the
b) an act conducted by the debtor after the filing of a petition
acquisition of land (if the land is residential land, the tax rate is
for insolvency proceedings, if the creditor knew at the
1.5%) or a residential house.
time of the act that the act was conducted after the petition
was filed; and
Registration tax
c) an act that the debtor is not obligated to do, either with
A person applying for registration is subject to a registration tax.
respect to the act itself or with respect to the timing of the
act, if the act was conducted within 30 days prior to the This tax is calculated based on the amount of the property value
debtor becoming unable to pay its debts and the creditor assessed by the tax authority. Until March 31, 2026, the tax rate in
knew the fact that such act would prejudice other creditors. the case of the sale and purchase of land, it has been fixed at 1.5%.
In addition, in accordance with the Civil Code, security
taken by a lender can be rescinded as a fraudulent action if the Stamp tax
property owner establishes the security knowing that it will A contract regarding the transfer of real property is subject to
prejudice other creditors, and the lender knows at the time of stamp duty. Until March 31, 2024, tax can be levied up to JPY
that establishment that other creditors would be prejudiced. 480,000.
8.7 What actions, if any, can a borrower take to 9.2 When is the transfer tax paid?
The real property tax is payable post-transaction. The amount
One who obstructs enforcement action can be punished in of the payment and the deadline for the payment are set by the
accordance with the Criminal Code. A borrower would not be tax authority several months after the transaction.
able to lawfully and effectively obstruct enforcement action by ■ Real property acquisition tax is payable within 30 days
a lender. from the date of acquisition.
■ Registration tax is payable at the time of application.
■ Stamp duty is payable upon the execution of the contract.
estate lender? 9.3 Are transfers of real estate by individuals subject to
income tax?
In Bankruptcy proceedings, a secured creditor can generally
enforce its security interest through a foreclosure outside of Capital gain from the sale of real estate is taxable. The tax rate
bankruptcy proceedings. is dependent on the period of time for which the real estate was
In Civil Rehabilitation proceedings, secured creditors are held. If the real estate to be sold has been held by the seller for
not stayed from exercising their security interests, but they may less than five years, the tax rate is relatively high at 39.63% (30%
become subject to a suspension order by the court, which has the income tax, 0.63% special income tax for reconstruction and
effect of a temporary stay. 9% individual inhabitant tax). However, if the holding period is
In Corporate Reorganisation proceedings, secured creditors more than five years, a lower tax rate is applied at 20.315% (15%
are stayed from exercising their rights (security interests) outside income tax, 0.315% special income tax for reconstruction and
of the proceedings.
Real Estate 2024

5% individual inhabitant tax). If the transferred property is an and an ordinary building lease can be renewed even if the agreed
owner’s home, a reduced tax rate is applied. lease period has already expired. The lessor cannot reject the
renewal of the lease agreement without justifiable reasons,
which, generally speaking, are not easily found.
Fixed-term lease
A fixed-term lease is not renewable under the ALBL. The most
A consumption tax is payable in the case of a transfer of commonly used fixed-term leases for land are: (i) the general
ownership of a building. The tax rate is 10%. The seller is liable fixed-term land lease available for both residential purposes and
for the payment of consumption tax, except in the case where businesses; and (ii) the business purpose fixed-term land lease.
the seller is an individual and the property is his/her residence.
9.5 What other tax or taxes (if any) are payable by the business premises in your jurisdiction regarding: (a)
seller on the disposal of a property? length of term; (b) rent increases; (c) tenant’s right to
If the seller is a corporation, the net income is subject to corporate restructuring (e.g. merger); and (f) repairs?
corporation tax, corporate inhabitant tax, corporate enterprise
tax, and local corporation tax.
a) Length of term
1) Ordinary land lease
9.6 Is taxation different if ownership of a company (or A minimum 30-year term is statutorily required for an
other entity) owning real estate is transferred? ordinary land lease for the purpose of owning buildings
(shakuchiken); however, the parties may agree to a longer
The transfer of ownership of a company that owns real estate period in their contract. Thus, the duration of the term of
does not trigger real estate acquisition tax, registration tax or an ordinary building lease is contingent on the term that is
stamp tax, which are normally imposed in transfers of real estate. specified in the agreement.
2) Fixed-term land lease
In relation to corporation tax, there would be no difference in
Under the ALBL, the term of a general fixed-term land
the respective rates applied to a parent company and a subsidiary
lease for owning a building must be 50 years or more. The
for such transfers, assuming that capital gains resulting from
term of a business purpose fixed-term lease must be 10
the transfer of ownership by a parent company are equal to the
years or more but less than 50 years. The duration of the
capital gains that result from the transfer of real estate by its
term of a fixed-term building lease is contingent on the
subsidiary, and provided that the subsidiary has no other assets terms of the lease agreement.
other than the real estate.
b) Rent increases
9.7 Are there any tax issues that a buyer of real estate Under the ALBL, when the rate of rent becomes unreasonable
should always take into consideration/conduct due as a result of: an increase or decrease in taxes and other burdens
diligence on? relating either to the land or to the buildings; the rise or fall of the
value of the land or building prices or fluctuations in the broader
Real estate acquisition tax is not imposed on either the economy; or in comparison to the rates of rent for other similar
entrustment of real estate from the seller to the trust or the buildings in the vicinity, the lessor and lessee may, notwithstanding
transfer of the beneficial interest from the seller to the buyer. the conditions set out in the contract, request future increases or
decreases in the rate of rent. However, if there are special provisions
This can be a useful cost-saving method in the context of real
set out in the contract to the effect that the building rent may not
estate investment.
be increased for a fixed period, those special provisions will apply.
The right to request an increase can be modified in the lease
102 Leases of Business Premises agreement, but the right to request a decrease generally cannot be
excluded from the agreement, except in a fixed-term building lease
10.1 Please briefly describe the main laws that regulate if certain requirements are met.
c) The tenant’s right to sell or sub-lease
The Civil Code regulates matters concerning the lease of real It is standard practice to prohibit a lessee from assigning its lease
estate as part of the general law. The Act on Land and Building or sub-leasing its lease without the consent of the lessor.
Lease (the “ALBL”) is a special law that regulates land leases
that facilitate the ownership of buildings as well as building d) Insurance
In general, there is no provision in relation to insurance in a
leases (including office buildings and residential buildings).
lease agreement.
10.2 What types of business lease exist? e) i) Change of control of the tenant
In general, there is no prohibition on the change of control of
There are two types of real estate leases in Japan: ordinary the lease in a lease agreement.
renewable leases; and fixed-term leases.
e) ii) Transfer of lease as a result of a corporate restructuring
(e.g. merger)
Ordinary lease
It is standard practice to prohibit the transfer of the lease resulting
In principle, an ordinary lease is used for the lease of real estate.
from a corporate restructuring, such as a business transfer.
An ordinary land lease to facilitate the ownership of a building
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108 Japan
f) Repairs obligations arising out of the lease prior to the transfer may
It is common that the lessor is obligated, under the lease not be assigned without execution of a specific agreement, and
agreement, to carry out repairs to the property. It is also accordingly, the former lessor would be responsible for any
common that the lessee is obligated to restore the property to its liability arising during the pre-sale period of the lease.
original state when vacating the property at the end of the lease If a lessee seeks to transfer its status as a tenant under the lease
or upon termination. In practice, the lessee pays a deposit to the agreement, the tenant would first need to seek consent from the
lessor at the time of moving in, and in many cases the restoration lessor because a lease agreement usually prohibits a lessee from
costs, if any, are allocated from the deposit. assigning the lease without the consent of the lessor. If consent is
obtained, the status as a lessee under the lease agreement may be
transferred to a new tenant and the former tenant would cease to
landlord or tenant of a business lease? be liable for any obligations as a lessee under the lease agreement.
Any obligations arising out of the lease period prior to the transfer
may not be assigned without a specific agreement, and accordingly,
A consumption tax is imposed on the rent for business building the former lessee would be held responsible for those obligations.
leases.

10.5 In what circumstances are business leases landlords and tenants designed to promote greater
usually terminated (e.g. at expiry, on default, by either sustainable use of buildings and in the reduction of
party etc.)? Are there any special provisions allowing a the “environmental footprint” of a building. Please
tenant to extend or renew the lease or for either party briefly describe any “green obligations” commonly
to be compensated by the other for any reason on found in leases stating whether these are clearly
termination? defined, enforceable legal obligations or something not
Termination aspirational objectives).
Under the Civil Code, a lease agreement can be terminated by one
of the parties if the other party fails to perform its obligations Although it is not yet standard practice to include green lease
thereunder. However, under case law, a lease agreement may not clauses in a lease agreement, templates of green lease clauses
be terminated if a tenant can prove that there is still a relationship have been publicly announced by the Ministry of Land,
of mutual trust between the parties of the lease agreement, Infrastructure, Transport and Tourism. One example of a green
even after the occurrence of a breach. Non-payment of rent in lease clause stipulates that the lessor and lessee shall establish
one instance does not usually entitle a lessor to terminate the reduction targets regarding the consumption of electricity, gas
lease, because the non-payment would not suffice to destroy a and other fuels, as well as CO2 emissions, the consumption of
relationship of mutual trust between the parties. water and the generation of waste. The expressed overarching
goal of this template clause is for the lessor and lessee to work
Renewal together to achieve the aforementioned targets. Most green
As mentioned in question 10.2 above, an ordinary land lease lease clauses seem to come in the form of obligations to make
for owning a building and an ordinary building lease may be efforts towards the realisation of aspirational objectives.
renewed even if the agreed lease period has already expired. In
the context of lease renewals, the lessor may not terminate the
lease agreement or refuse to renew the lease without justifiable flexible space for occupiers, such as shared short-
reasons. The courts will consider various factors in determining term working spaces (co-working) or shared residential
whether a justifiable reason exists, and, generally speaking, it is spaces with greater levels of facilities/activities for
often difficult for a lessor to establish a justifiable reason for residents (co-living)? If so, please provide examples/
lease termination. The following are some of the factors that details.
are considered by the courts: (i) necessity of use by landlord
and tenant; (ii) past history relating to the lease; (iii) current use After the COVID-19 pandemic, teleworking has become
and condition of the leased premises; and (iv) offer of certain popular and new styles of offices with shared phone booths
benefits to the tenant in exchange for the tenant vacating the suitable for online meetings and shared business lounges like
property. An offer of compensation by the lessor, provided it is a hotels have recently been built.
sufficient amount with regard to the situation, can be considered
a justifiable reason. In practice, a lessor intending to reject the
renewal of a lease often makes an offer of compensation.
By contrast, a fixed-term lease terminates upon the expiration
of the lease term. 11.1 Please briefly describe the main laws that regulate

Please see the answer to question 10.1 above.
they be responsible after the sale in respect of pre-sale 11.2 Do the laws differ if the premises are intended for
non-compliance? multiple different residential occupiers?
If a lessor has transferred the ownership of the subject property, There is no difference based on whether the premises are
its status as a lessor under the lease agreement is transferred intended for multiple residential occupiers.
to the new owner and the former lessor ceases to be liable for
the obligations as a lessor under the lease agreement. Any
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11.3 What would typical provisions for a lease of or occupier of the land will be subject to various regulations
residential premises be in your jurisdiction regarding: applicable to each category, including orders rendered by an
(a) length of term; (b) rent increases/controls; (c) the authority. One of the most important of these regulations is the
tenant’s rights to remain in the premises at the end of removal of contamination, which is applicable only to the DAA.
a) Length of term: mechanism.
b) Rent increases/controls:
In general, the state cannot compel landowners to sell land to
the state. However, under the Land Expropriation Law, the
c) The tenant’s rights to remain in the premises at the end of
state can exercise the right of eminent domain in specific cases
the term:
where it is necessary to the public interest to exercise this right
(e.g. land is located in an area designated for planned public
d) The tenant’s contribution/obligation to the property
facilities, such as roads). The price is determined in accordance
“costs” e.g. insurance and repair:
with the Land Expropriation Law, with regard to the market
Please see the answer to question 10.3 (f).
prices of neighbouring areas, etc.

a residential lease and what steps would be needed to 12.3 Which bodies control land/building use and/
achieve vacant possession if the circumstances existed or occupation and environmental regulation? How do
for the right to be exercised? buyers obtain reliable information on these matters?
A lessor’s right to terminate a lease agreement is restricted. The laws listed in question 12.1 above apply nationally, but they
Even if a lessee breaches the agreement, a lease agreement are mainly administrated at the local level by city, town, and
may not be terminated if a lessee can prove that there is still village authorities. Buyers may obtain information concerning
a relationship of mutual trust between the parties to the lease these matters by making inquiries to the relevant city, town, and
agreement. Moreover, the lessor cannot reject the renewal of village authorities.
the lease agreement without justifiable reasons. If a lessee does
not vacate the building, it would be necessary for a lessor to file 12.4 What main permits or licences are required for
a lawsuit against the lessee for termination of the lease. The building works and/or the use of real estate?
lessor would then have to file an application with the court for a
compulsory execution. In general, confirmation from the authorised bodies under the
Building Standards Law is required before building works may
122 Public Law Permits and Obligations commence. If land development is involved, permits under
the City Planning Law and other relevant laws are required.
12.1 What are the main laws which govern zoning/ A permit may be necessary for the use of land for agricultural
permitting and related matters concerning the use, purposes, depending on the case.
Zoning obtained in any way (e.g. by long use)?
The City Planning Law is the main law that governs zoning in
Japan. This law sets restrictions on land developments depending
A building/use confirmation is commonly obtained in Japan.
on the classification of the area. For example, if the land is
The application for the confirmation will not be rejected if the
located in an urbanisation control area (shigaikachouseikuiki ), land
building/use satisfies the requirements under the relevant law.
developments would be under strict control.
Implied permission cannot be obtained.
Other key laws that apply to land use are as follows:
■ Agricultural Land Act.
■ Act on Establishment of Agricultural Promotion Regions. 12.6 What is the typical cost of building/use permits and
■ Building Standards Act. the time involved in obtaining them?
■ Forest Act.
■ Natural Parks Act. The cost and time involved depends on the facts of each case.
■ Cultural Assets Preservation Act. As an example, for building confirmation of a residential house,
■ National Land Use Planning Act. the fees to apply for the confirmation would be less than JPY 1
■ Urban Renewal Act. million, and the confirmation would take a few weeks to process.
■ Land Readjustment Act.
■ Landscape Act.
Environmental law and how are they likely to affect the transfer of rights in
The Soil Contamination Countermeasures Law is the main real estate or development/change of use?
environmental law relating to land. If land is categorised either
as a Designated Area Requiring Action (hereinafter “DAA”)
or a Designated Area Requiring Notification upon Change of There are regulations on the protection of historic monuments
the Land Character (hereinafter “DAN”), the owner, manager, in Japan, such as the Cultural Assets Preservation Act. If
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110 Japan
the land is located within a Well-known Place Containing a

Buried Cultural Property (as defined under the Cultural Assets
132 Climate Change
Preservation Act), a prior notification is required to excavate the
land for civil construction work and/or other purposes. If the 13.1 Please briefly explain the nature and extent of
development of the land has the potential to change the status
or influence the preservation of historic, scenic, and natural scheme).
monuments, a permit would be required.
Under the Act on Promotion of Global Warming Counter-

12.8 How can, e.g. a potential buyer obtain reliable measures and the Energy Saving Law, a company that produces
information on contamination and pollution of real considerable amounts of greenhouse gas emissions (the threshold
for which is provided in the relevant ministerial order) is obligated
your jurisdiction?
to submit reports regarding the company’s greenhouse gas
emission levels. There is no nationwide mandatory emissions
Information on areas that are already designated as contaminated trading scheme in Japan.
areas under the Soil Contamination Countermeasures Law is An owner of a building in Tokyo may, depending on the
publicly available at the offices of prefectural governments. That amount of energy the building uses, be required to submit
information is not absolute or exhaustive, and it is possible that regular reports on greenhouse gas emission amounts to the
land could be contaminated or polluted even if the land is not in Tokyo Metropolitan Governor.
an area designated as contaminated under the Soil Contamination
Countermeasures Law. Buyers should consider conducting
surveys before purchasing land suspected of being contaminated. 13.2 Are there any national greenhouse gas emissions
reduction targets?

The Government of Japan has set its level of reduction of
clean-up ever mandatory?
greenhouse gas emissions at 46% and 100% by the fiscal years
2030 and 2050, respectively, from the emission levels recorded
Under the Soil Contamination Countermeasures Law, a soil in 2013. In the real estate field in particular, the Government
contamination investigation is required in certain instances. For aims to ensure energy conservation performance is achieved
example, when a prefectural governor finds soil contamination as per the ZEH standard (which means houses where energy
that poses a risk to human health, the prefectural governor is produced by solar power, etc. should exceed the day-to-day
may order an investigation. Even if the land does not satisfy energy consumption of that household) for new houses built
the relevant criteria upon the results of the investigation, the after 2030, and to have 60% of newly built houses equipped with
prefectural governor can designate the area covering the land a photovoltaic system in 2030.
as contaminated. When that designation has been made, the
prefectural governor can instruct the owner, manager, or occupier
of the area to clean up the land, but only to the extent necessary 13.3 Are there any other regulatory measures
to prevent harm to human health due to contamination.
buildings?
requirements for the assessment and management of The revision of the Building Standards Act, which came into effect
in April 2023, eased the height restrictions of existing buildings
that hinder the construction of energy-saving renovations
Under the Act on the Improvement of Energy Consumption and the installation of renewable energy facilities. From the
Performance of Buildings, when a new construction/extension/ viewpoint of promoting the use of wood in construction, the
renovation over a certain size (at least 300 square metres of revision of the Building Standards Act to relax fire prevention
floor space) is to be conducted, a certificate of conformity with regulations is scheduled to come into effect in April 2024, and
energy efficiency standards must be obtained. Large-scale, the revision to relax the standards for structural calculations for
non-residential buildings that are not compliant with energy wooden buildings is scheduled to come into effect in April 2025.
efficiency standards are ineligible for certification pursuant
to the Building Standards Law. The regulation above does 142 COVID-19
not apply to buildings below a certain size; nevertheless, very
soon, all buildings will be subject to the procurement of the
certificate of conformity with energy efficiency standards due
to the amendment to the Act on the Improvement of Energy the effect of the Coronavirus (COVID-19) pandemic and
Consumption Performance of Buildings, which is scheduled to which remain in place.
come in to force by 2025.
There are no laws that govern real estate in Japan that were
introduced in response to the effects of COVID-19.
Real Estate 2024

Kenichi Yamamoto is a partner at Anderson Mōri & Tomotsune in Tokyo, Japan. He has held important legal advisory roles in several landmark
real estate investment transactions in Japan. He has extensive experience advising real estate investors and lenders on transactions covering
a diverse range of real estate assets, including the financing and development of office buildings, residential buildings, commercial facilities,
warehouses, hotels, senior living facilities and hospitals. He also has considerable expertise in other aspects of the investment cycle, advising
on real estate matters in the context of corporate workouts, restructurings, bankruptcies and “fire sales” of distressed real estate assets.
Anderson Mōri & Tomotsune Tel: +81 3 6775 1075

Otemachi Park Building 1-1-1 Otemachi Email: kenichi.yamamoto@amt-law.com
Chiyoda-ku URL: www.amt-law.com
Tokyo 100-8136
Japan
Miho Ouchi is an associate at Anderson Mōri & Tomotsune, where she works in the real estate sector and provides highly valued assistance
with land acquisition, development, and leasing transactions. She has also assisted in multiple finance transactions, including construction
finance and project finance transactions. Miho has also gained valuable experience working at a government-affiliated financial institution
as a legal advisor specialising in real estate finance.
Anderson Mōri & Tomotsune Tel: +81 3 6775 1783

Otemachi Park Building 1-1-1 Otemachi Email: miho.ouchi@amt-law.com
Chiyoda-ku URL: www.amt-law.com
Tokyo 100-8136
Japan
Anderson Mōri & Tomotsune is among the largest and most diversified
law firms in Japan, offering full corporate services. Our flexible operational
structure enables us to provide our corporate clients with effective and
time-sensitive solutions to legal issues of any kind. We are pleased to serve
Japanese companies as well as foreign companies doing business in Japan.
In response to the increasingly complex and varied legal needs of our clients,
we have grown significantly, augmenting both the breadth and depth of
expertise of our practice. Our principal areas of practice consist of Corporate,
M&A, Capital Market, Finance and Financial Institutions, Real Estate, Labour
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Resolution, Bankruptcy and Insolvency/Restructuring, International Trade
and International Practice (China, India, Asia, US, EU and others).
www.amt-law.com
Real Estate 2024

112 Chapter 12
Mexico
Mexico
María Teresa Andrés Pizarro

Paillés Suárez
María Esther Andrea Holtzman

SMPS Legal Rey Cesarman
rural communities, which hold and own such land as a whole and
12 Real Estate Law under limited use. Ejido land is transferable only to individuals
that live in the ejido or whose families are part of the ejido. The
1.1 Please briefly describe the main laws that ejido regime was created back in 1917, and the land under ejido was
govern real estate in your jurisdiction. Laws relating subject to limitations for use and exploitation as agrarian land.
In 1992, the ejido law was amended to provide for a process that,
environmental should be listed in response to question once carried out, allows to remove land from an ejido regime,
12.1. Those relating to tax should be listed in response to making it subject to transfer to certain individuals, provided that
questions in Section 9. rights of first refusal were waived by all ejido members. It is very
important for any purchaser of agrarian land (land that is not
located in urban centres) to carry out due diligence to confirm
All matters relating to the creation, modification, transfer and
that any such land is no longer subject to an ejido regime.
extinction of ownership, possession, and use of real estate are
regulated by State law, in particular by each of the Civil Codes
applicable to the 32 Mexican States. There are also special State 32 Real Estate Rights
laws that regulate condominiums and homeowners’ associations.
1.2 What is the impact (if any) on real estate of local between the parties?
There are several types of rights, the most relevant of which is the
Mexico is not a common law country. In Mexico, real estate right of ownership, since it allows an individual or legal entity to
matters are governed by State laws, which means that the be considered the owner of the property. However, there are other
applicable rules to real estate are based on the location of the real rights that are also considered “property rights” and not personal
estate. It is very important to always review and analyse the local property: (1) usufruct, which allows a third party distinct from the
legislation to identify any and all special rules that may apply to owner to use the property for his/her/its benefit; and (2) easement
the real estate properties and any transaction relating thereto. rights, which allow the owner of a property to benefit from another
property out of necessity, as provided by law or by agreement with
1.3 Are international laws relevant to real estate in your the owner of the other real estate property. As a general rule, all
jurisdiction? Please ignore EU legislation enacted locally other rights over real estate are contractual and personal.
in EU countries.

Not directly; however, international tax and dispute resolution diverges from the right to a building constructed
laws could be applicable, depending on each transaction and the thereon?
nationality and/or tax residence of the parties involved.
Yes, it is possible for the owner of a building, or any construction
22 Ownership built in a certain real estate to be different from the owner of the
underlying real estate/land. There is a legal assumption that
2.1 Are there legal restrictions on ownership of real the owner of the land is the owner of the construction located
estate by particular classes of persons (e.g. non-resident therein, and therefore a third-party owner of the construction
persons)? should enter into an agreement with the owner of the land to
have the property rights to the construction recognised as such
Yes, foreigners may not directly own real estate that is located and registered before the public registry of property.
within 100km along the frontiers or within 50km from the
beach, and any such rights must be held through a Mexican real 3.3 Is there a split between legal title and beneficial
estate trust, the trustee of which must be a Mexican banking title in your jurisdiction and what are the registration
institution or a non-bank bank, authorised to act as the trustee consequences of any split? Are there any proposals to
and subject to certain regulations and supervision. Likewise, change this?
rural land that is under the “ejido” regime may not be owned by
individuals that are not part of an ejido. Ejido land is assigned to In general terms, whoever holds legal title to a real estate is
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SMPS Legal 113
considered the beneficial title, but there are few exceptions. One 4.4 What rights in land are not required to be
of the most common exceptions is a real estate trust, where the registered?
trustee is the legal title holder of the land that was contributed
to a trust, but the beneficial title is recognised indirectly to the Certain legal acts entail rights that are not expressly required
beneficiaries of the trust, which may be the settlor or a third party to be registered under Mexican civil and registry law, including
appointed by the settlor as the beneficiary. The other exception personal rights to real estate, such as the rights of a lessee,
occurs when the purchaser of a real estate purchases such land provided that the underlying lease is for a term that is not
for the benefit of a grantor of a power of attorney with no rights required to be registered.
of representation. In this case, the purchaser as attorney-in-fact
acquires the real estate to comply with the instructions of the
grantor, but without the knowledge of the transferor. 4.5 Where there are both unregistered and registered
Another significant legal concept is “usufructo vitalicio”
(lifetime beneficial ownership), which allows a person to enjoy or qualities of title on first registration? Please give
the benefits of a property for their entire life, even though details. First registration means the occasion upon
they are not the legal owner. Upon the passing of the lifetime which unregistered land or rights are first registered in
beneficiary, the property’s legal ownership reverts to the the registries.
designated owner. This must be formalised through a public
deed before a notary public and subsequently registered on the No, there is no probationary period for the first registration.
public registry of property. Nevertheless, the law assumes that the first registration grants
all title or rights as to the underlying real estate, unless such title
42 System of Registration or rights are challenged through a judicial proceeding. In such
case, the owner, or title or right holder will be the individual or
entity determined in a final judicial sentence.
Yes, under Mexican law it is necessary that all legal acts related transferred to the buyer?
to the transfer of real estate or regarding rights to real estate are
registered in the public registry of property. Public registries of Title to land is deemed to have been transferred between a
property are local administrative offices, regulated by local laws. transferor and a transferee upon them agreeing to a price and
It is important to mention that although it is a requirement under identifying the underlying real estate. Nevertheless, for any third
Mexican law, the purpose of the registration is for declaratory party, such transfer is not deemed to have occurred, until the new
and publicity purposes, that is, that the registration of a real title has been registered in the public registry. In addition to the
estate right does not itself grant any rights. This rule is not first assumption, the law established that if physical possession to
applicable in the case of the States of Puebla and Quintana Roo, the real estate is transferred to the transferee, then the transferee,
where the mere registration of a legal title or right, constitutes as holder of such real estate, is considered the title holder.
a real estate right in favour of the registered owner, even if the
underlying title is not legal. 4.7 Please briefly describe how some rights obtain
rights?
guarantee?
There is a general rule that states “first in time, first in right”.
The law assumes that whoever enters first into a transfer of title
No, there are no guarantee titles issued by the States nor by any
right is the rightful owner or title holder, and any subsequent
other authority. Public registries have ledgers for each of the
owner or title holder is deemed a successor of the previous one.
properties ( folios reales) that contain the relevant information of
However, it is necessary that the first or prior transfer complies
such real estate and any third party has the right to access such with the necessary requirements to be deemed legal, to keep the
public records. However, they are issued by the Public Registry tract title in order. If a transfer is not legal, any future transfer
and are for information purposes only. of the same title or right is considered illegal.
4.3 What rights in land are compulsorily registrable? 52 The Registry / Registries
All rights in rem constituted on real estate are registrable. jurisdiction? If more than one please specify their
Likewise, civil and registry Mexican legislation establishes differing rules and requirements.
which acts must be registered. The registration of any such in
rem rights provides publicity as to the title thereto, except for the Public Registries of Property are regulated by State laws.
case in which the Public Registries are constitutive of said in rem Each State determines the extension of each public registry
rights, regardless of whether there is an underlying title or right. office, which may coincide with Municipalities (counties). A
If a title or right in rem is not registered, the owner or title holder Municipality may also be divided in sectors, each of which may
may evidence such rights with a title or agreement that was not have a specific public registry office, or a public registry office
duly registered, even against third-party acquirers, if said owner may group more than one Municipality. Most regulations as to
or title holder is able to evidence in a court of law that such third the effects of registration of real estate titles and rights are very
party was not a good faith acquiror. similar. The most relevant difference lies in the public registries
of Puebla and Quintana Roo, in which the registration of legal
acts is not declarative but constitutive. Some public registries
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114 Mexico
have digitalised the information of all registered real estate, third party can search for all the existing annotations on a
others have only digitalised information of real estate that has certain real estate.
been transferred in recent years, and some have not started the
digitalisation process, which affects the efficiency in which the 62 Real Estate Market
public can access information and the accuracy of such records.
In general, all public registries operate in a similar manner,
although each one of them has specific internal rules.
5.2 How do the owners of registered real estate prove Please briefly describe their roles and/or duties.
their title?
A real estate transaction regarding real estate located in Mexico
Owners of registered real estate prove their title by means of the requires a notary public that evidences such transaction and
public deed evidencing the legal transfer of title or rights, which formalises the transaction in an escritura pública (public deed).
has been registered before the public registry of the location If the real estate is contributed to a trust, a trustee is required,
of such real estate. Public deeds are drafted and prepared by which under Mexican law can only be an authorised entity to act
local notaries public who are lawyers with an authorisation to as a trustee.
act as such by each state before whom the parties to a real estate
transaction carry out a transfer or creation of title and rights. In
addition, an owner may obtain a copy of the ledger or book that 6.2 How and on what basis are these persons
remunerated?
contains the registration of the title or right in order to evidence
that such title or right has not been transferred to a subsequent
owner or title holder. The notary public fees are established by the State government
in annually authorised amounts or thresholds based on the type
of transaction and/or value of the transaction. In addition to the
estate be completed electronically? What documents fees, notaries public may all collect expenses, governmental fees
need to be provided to the land registry for the and withhold taxes payable in connection with the transactions
registration of ownership right? Can information evidenced by them, and therefore notaries public are considered
on ownership of registered real estate be accessed jointly liable for any taxes due and not calculated and withheld
electronically? correctly. Trustee fees are fixed and determined freely by the
trustees and are negotiable with clients. Trustee fees include a fee
No, real estate transactions cannot be done electronically. All for the incorporation of the trust, a fee for signing any amendments
transfer of title and rights required to be completed before and thereto and a fee for the dissolution or winding-up of the trust and
evidenced before a notary public, after said notary public complies transferring the assets to a beneficiary or a third party.
with certain requirements to make sure that the transferor is the
owner and title holder of the real estate and other requirements
regarding payment of land tax, utilities, and contributions. availability of capital to finance real estate transactions
However, it is noteworthy that private or preparatory documents in your jurisdiction, whether equity or debt? What are the
executed prior to the public deed may be electronically signed, main sources of capital you see active in your market?
provided the transaction pertains to commercial real estate rather
than residential property. Additionally, such electronic signatures
must be affixed using an authorised platform that fully adheres Most sources of capital to finance real estate transactions are
to the legal prerequisites for rendering such services, including banks, equity funds and non-bank banks and have been financing
the certificate chain. These aforementioned pre-execution or these transactions for many years. In addition, Mexico has an
preparatory documents encompass an offer letter, a term sheet, Employees Housing Fund that provides funding to all formal
or a promise of a purchase and sale agreement. employees, whose employers contribute a bi-monthly amount
for the benefit of each employee, up to a capped amount. Upon
meeting certain requirements, all employees may ask for a
5.4 Can compensation be claimed from the registry/ loan from the Employees Housing Fund to purchase a house
and may use such loan together with traditional finance. With
the surge in nearshoring activities to Mexico, there has been a
Yes, it is possible to initiate a judicial proceeding against the notable uptick in demand for industrial parks, particularly in the
director of the public registry and the registry in charge of the northern regions of the country. Mexico’s real estate market has
procedure in respect of which a mistake occurred. However, witnessed a rise in foreign direct investment, reflecting a growing
for the compensation to operate, it is necessary that the judicial confidence in the sector’s potential. Overall, the availability of
proceeding is concluded in its entirety and that there is a capital for real estate transactions has seen positive momentum
favourable sentence mentioning that there is indeed a mistake in response to the expanding nearshoring trend.
that generates damage.

5.5 Are there restrictions on public access to the developers to invest in your region compared to last year
register? Can a buyer obtain all the information he and what are the sectors/areas of most interest? Please
might reasonably need regarding encumbrances and give examples.
information/process is required? Investors and developers are currently showing a strong appetite
for industrial projects, especially those near the US-Mexico
Yes, the registry is public, which means that the buyer or any border. This heightened interest is a direct response to the
significant increase in nearshoring activities to Mexico. The
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SMPS Legal 115
industrial sector has become a focal point for investment, with damages that may be caused to a transferee for not having good
companies strategically positioning their operations near the and marketable title. This liability has a statute of limitations
United States. This trend is indicative of the growing importance of five years if the seller acted in good faith and 10 years if the
of proximity to the US market in investment decisions. seller acted in bad faith. In addition, sellers are required by law
to respond in respect of any hidden defects that the construction
may have for a one-year period.
their attractiveness to investors/developers? Please give 7.5 Does the seller retain any liabilities in respect of
examples. the property post sale? Please give details.
Given the regulatory environment in Mexico, it is not uncommon As stated above, a seller is liable for any damages caused to
to see certain market subsectors facing challenges, particularly for a purchaser for a defect in the title or for not having good and
large-scale projects. This has led to a trend where certain market marketable title. In addition, a seller is liable for any hidden defects.
subsectors, particularly those involving extensive developments,
have experienced a slowdown in attractiveness to investors and
developers. The process of obtaining permits, particularly for 7.6 What (if any) are the liabilities of the buyer (in
substantial projects, can present significant challenges.
72 Liabilities of Buyers and Sellers in Real The buyer is liable as to the lawful origin of the funds used to
pay the price as per federal anti-money laundering provisions
Estate Transactions and, therefore, prior to the execution of the public deed, the
buyer must provide all necessary information to the notary
7.1 What (if any) are the minimum formalities for the public evidencing the source of the funds.

Private purchase agreements do not require any formalities,
which are the common form to offer to purchase or sell real
estate in Mexico. To legally transfer title to real estate, a public the lending of money to finance real estate. Are the rules
deed of purchase and sale must be executed by the parties different as between resident and non-resident persons
thereto before a notary public and then registered in the public and/or between individual persons and corporate
registry; however, in absence of said title, the purchaser of real entities?
estate may evidence its ownership with other documents, and
file before a competent judge the issuance of the title, even if the Banking institutions and other regulated financing entities (such
transferor is unwilling to execute such public deed. as non-bank banks) need to comply with certain internal lending
policies that each entity has and that must comply with certain
7.2 Is the seller under a duty of disclosure? What mandatory provisions such as the debtor’s capacity to pay back
matters must be disclosed? a loan. For real estate development loans, the most relevant
aspect is the collateral, which will be the property where the
Yes, a seller is obliged to disclose any possible contingencies real estate project will be developed and constructed, and which
that the property may have with respect to environmental, tax, must be free and clear of any lien and in compliance with all
licences and permits, lawsuits or judicial proceedings and with State law regarding the use of real estate, construction permits,
respect to the existence of any lien or limitation on the property. taxes and environmental provisions. Most development loans
require for the developer’s controlling shareholders to act as
obligors to the debtor.
misrepresentation?
Yes, the seller can be liable for misrepresentation and shall be borrower?
obliged to indemnify the buyer for any loss or damage caused by
such misrepresentation, provided that such misrepresentation is
Lenders always appoint an engineer as supervisor of the
considered a breach of the agreement that transfers title to real
construction to verify the use of proceeds. Most construction
estate. Otherwise, a misrepresentation grants the transferee the
loans, other than the first disbursement, do not make any
right to rescind the agreement.
advances or disbursements unless the debtor can provide
evidence that the previous disbursements have been put into
7.4 Do sellers usually give any form of title “guarantee” hard costs of the project. Lenders do not usually lend to purchase
or contractual warranties to the buyer? What would be land nor to finance soft costs. These conditions allow banks to
the scope of these? What is the function of any such control the allocation of loan disbursements and grant the bank
to stop any additional disbursements if there is any breach in
act as a substitute for the buyer carrying out his own the use of proceeds. In addition, lenders may request that all
diligence? revenues from a real estate project (pre-sales) be deposited in a
lender-controlled bank account, to be able to control such funds
in the event of a breach by debtor.
No, it is not usual for the seller to provide guaranties or warranties.
However, as mentioned above, the seller is responsible for
good and marketable title and in addition may be liable for any
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116 Mexico
8.3 What are the common proceedings for realisation proceeding, which may result in very long and costly trials. In
of mortgaged properties? Are there any options for a most cases, an appellate trial is required to confirm or challenge
mortgagee to realise a mortgaged property without a non-satisfactory sentence.
mortgagor?
Foreclosure of mortgaged real estate must be done by a judicial estate lender?
proceeding, which may be a lengthy process in Mexico, due to the
backlog of Mexican local courts. Lenders, in many cases, elect to
A debtor that becomes insolvent may file for insolvency or
have a security trust, in which the relevant real estate is contributed
bankruptcy proceedings, although it is not very common to
by the developer or owner. The security trust provides for a
do so in Mexico. Debtors would much rather renegotiate with
foreclosure procedure that does not involve a judicial proceeding
lenders than go through a bankruptcy proceeding, because of
and allows the lender to notify the trustee of any loan default, the
the underlying cost and final results.
notice of which is made to debtor. The debtor must evidence that
it has cured the default by payment of the claimed amounts or by
evidencing that the lender granted a payment grace period. If the 8.9 What is the process for enforcing security over
debtor is not able to pay or evidence a grace period, then the trustee shares? Does a lender have a right to appropriate shares
may start with the sale of the real estate property pursuant to the in a borrower given as collateral? If so, can shares be
lender’s instructions. Once the real estate is sold to a third party,
the funds from the sale are allocated towards any outstanding fees
or expenses of the trust related to the sale of the real estate, and, if
paid to the debtor, are also used to pay the outstanding loan plus To have a security interest on shares of a company, lenders
accrued ordinary and late interest, legal fees and the balance, if any. require the execution of a pledge agreement. Foreclosing on
Another alternative to a judicial foreclosing is to execute an secured shares requires a judicial proceeding. It is possible for
extrajudicial mediation agreement (before a mediator certified a lender to foreclose a pledge if the debtor authorises a lender in
by the Mexican local authorities). A mediation agreement must a separate agreement to foreclose in a non-judicial proceeding
comply with all the requirements established by the legislation. through the sale of the shares to a third party, through a private
It is important to mention that the mediation agreements bid process or by keeping the shares in payment of the debt.
registered before the corresponding Mediation Centre are
deemed and considered res judicata, which implies that only the 92 Tax
authority will be required to issue a sentence for the fulfilment
of the mediation agreement. 9.1 Are transfers of real estate subject to a transfer
estate lending? Yes, transfers of real estate are subject to local acquisition taxes
to be paid by the buyer of the property; the tax rates vary in each
This must be evidenced by a written agreement and the collateral State of the country and the tax shall be calculated either on
granted needs to be formalised by a public deed, which needs to the cadastral value, the appraisal value or the price paid for the
be registered in the relevant Public Registry. property, depending on each local law.
8.5 How is a real estate lender protected from claims 9.2 When is the transfer tax paid?
creditors? Local acquisition taxes are generally due within 15 business days
following the formalisation of the acquisition of the real property
Once a real estate lien or collateral is registered in the public before a notary public and are paid by the notary public, who
registry of property, the lender has a first priority interest to the withholds the amount of the transfer tax from the purchaser.
real estate and any other lender or creditor will be second in line
in case of foreclosure by lender or any other creditor.
income tax?
lender be avoided or rendered unenforceable? Yes, income tax is calculated on the gain obtained by the individual
and is subject to a progressive tax being the rate of the highest
If a security interest is not executed in compliance with all legal bracket 35%. Income on the transfer of real estate destined to
and mandatory formalities established by Mexican law, then any housing is tax-exempt on an approximate amount of US$307,000
such interest may be unenforceable or void as a result. Any such and any remaining income is subject to tax on the gain obtained.
situation is subject to a judicial final sentence. Income tax (federal tax) is payable by the seller of the real estate
property; the same shall be calculated on the gain obtained at a
30% tax rate where the seller is a company, or at a maximum 35%
rate if the seller is an individual. The transfer of real estate located
within Mexico by non-tax residents is also taxed in Mexico, at
a 25% rate on the gross income, or at a 35% rate on the gain, if
Mexican courts are very slow in their process and formalistic certain formal mandatory requirements are complied with.
as to all requirements to carry out a judicial process. Many
litigators use delay tactics to slow down a foreclosure
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SMPS Legal 117
9.4 Are transfers of real estate subject to VAT? How sell or sub-lease; (d) insurance; (e) (i) change of control
much? Who is liable? Are there any exemptions? of the tenant; and (ii) transfer of lease as a result of a
Under the VAT Law, the transfer of land is exempt from VAT.
The transfer of constructions that are destined for housing is As mentioned above, lease regulations change depending on the
tax-exempt; all other constructions are subject to VAT at a rate State in which the leased property is located; therefore, a specific
of 16% . VAT is added to the purchase price and is charged by analysis should be made depending on the State where the leased
the seller to the purchaser. property is located. However, the typical provisions are usually
as follows:
a) Term: The term for commercial and industrial leases
cannot exceed 20 years, although sometimes this provision
can be avoided by including automatic renewals within the
lease agreement, upon expiration of each term.
Only income tax and VAT (as applicable) are payable. b) Rent increases: Civil Codes in Mexico do not include
any specific provision on how rent should be increased;
9.6 Is taxation different if ownership of a company (or however, it is common practice in Mexico for rents to
other entity) owning real estate is transferred? increase yearly in the same proportion as the increase of
the National Consumer Price Index (INPC as its Spanish
acronym). This provision must be included within the lease
For VAT purposes, taxation does not vary if the real estate is
agreement for it to be mandatory.
owned by a company or an individual. For income tax purposes,
c) Right to sell and sub-lease: The landlord has the right to sell
companies are subject to a 30% tax rate on all taxable income,
the leased property during the term of the agreement, in the
including for the transfer of real estate, and are entitled to deduct
understanding that the new owner shall be bound by the
all expenses strictly connected to their corporate purpose and
provisions of the lease agreement until its conclusion. In
main activities, whereas individuals are taxed at a maximum rate
addition, tenants who are compliant with their obligations
of 35% and the authorised deductions regarding the transfer of
and have leased the property for a certain time (that varies
real property are limited to those provided by law.
in each State) have a right of first refusal to purchase the
leased property on the same terms and conditions as the
9.7 Are there any tax issues that a buyer of real estate ones provided in the bona fide offer at which landlord intents
should always take into consideration/conduct due to sell the property to any third-party. In some States, this
diligence on? right can be waived but in other States it is not waivable.
Unless both parties have expressly agreed otherwise,
It shall be verified that taxes connected to the real property have tenants may transfer their rights to a lease (notifying such
been paid. The above includes the property tax (local tax) due transfer to the landlord) but cannot sub-lease the property
during the five previous years (which is the statute of limitations without the prior written consent of the landlord.
of the tax authority to determine and collect unpaid taxes), as d) Insurance: No mandatory insurance is required by law, but
well as the local acquisition tax that was due by the seller at the it is common practice that landlords require tenants to have
time he purchased the property. civil liability insurance and insurance for damages to the
property. This provision must be included within the lease
102 Leases of Business Premises agreement for it to be mandatory.
e) Change of control or transfer as a result of corporate
restructuring: The laws of Mexican states do not provide
leases of business premises. specific regulations regarding the change of control or
transfer due to the corporate restructuring of a tenant. It
is common practice to include any change of control of
Leases of real estate properties in Mexico are considered a civil tenant as an event of default (unless prior written consent
transaction and, as such, real estate leases are regulated by each from landlord is obtained) when dealing with long-term
State in their respective Civil Codes. All State Civil Codes commercial, industrial or retail leases.
provide that real estate leases are regulated by the Civil Code of f) Repairs: Major repairs (those necessary for the conservation,
the State where such real estate is located. operation and safety of the property) must be carried out by
the landlord, unless the damage is caused as a result of the
10.2 What types of business lease exist? tenant’s negligence or to the ordinary use of the property.
All other day-to-day repairs and maintenance must be
The State Civil Codes include provisions applicable to all leases performed and/or paid by tenant.
without distinction; however, the majority of the Civil Codes in
Mexico include special provisions for leases relating to housing 10.4 What taxes are payable on rent either by the
and rural properties, with such provisions tending to tenants of landlord or tenant of a business lease?
said kind of leases. All other types of leases, including office,
retail and industrial leases, are regulated under the general rules There are no special “lease” taxes. The landlord must pay the
in each applicable Civil Code. applicable Federal income tax as a result of the income obtained
from rents, in accordance with Federal tax provisions.
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118 Mexico
10.5 In what circumstances are business leases of the pandemic, the lease provisions for co-working spaces
usually terminated (e.g. at expiry, on default, by either have become more flexible; for example, allowing employees
party etc.)? Are there any special provisions allowing a of tenants to reserve space in locations that are located closer
tenant to extend or renew the lease or for either party to their homes, in order to allow employees to have a place to
to be compensated by the other for any reason on work, without the need to commute. Nonetheless, Mexico is
termination? one of the countries that has gone back to full-time office work
– compared with other Latin American countries, hybrid work
Business leases usually terminate either by the natural expiry of has not been accepted by employers.
their term or due to a default by either party, the lack of payment of As to shared residential spaces, only the biggest cities in
the rent by tenant being a common example. The parties have the Mexico (Mexico City, Monterrey and Guadalajara) have seen
flexibility to define specific events of default in their agreement. multi-family rental projects, for high-income tenants. Many
Regarding lease extension, the parties have the liberty to of these multi-family real estate projects have small units and
establish their own rules. However, in the absence of explicit have shared common areas and amenities that allow for social
provisions, Civil Codes provide that the lease can be automatically activities for tenants or residents. Other cities will soon follow
extended for an undetermined time as long as both of the parties’ this trend, but these projects rely on young tenants moving from
intention is to continue with the lease (tácita reconducción). In that their parents’ homes and being economically independent.
case, the lease will be governed by the provisions set forth in the
applicable lease agreement and can be terminated by any of the 112 Leases of Residential Premises
parties at any time, upon a termination notice.
10.6 Does the landlord and/or the tenant of a business leases of residential premises.
As mentioned above, leases of real estate properties in Mexico
non-compliance?
are considered a civil matter and, as such, are regulated by each
State through their Civil Codes.
Unless expressly provided for in the agreement in which the

property was sold, the previous owner and landlord is not liable 11.2 Do the laws differ if the premises are intended for
for any obligation under the lease after title to the property has multiple different residential occupiers?
been transferred. All landlord’s obligations shall fall under the
new owner. Civil Codes do not include specific provisions intended for
multiple different residential occupiers; all leases are regulated
in the same manner, regardless of the economic level of tenants.
sustainable use of buildings and in the reduction of 11.3 What would typical provisions for a lease of
the “environmental footprint” of a building. Please residential premises be in your jurisdiction regarding:
briefly describe any “green obligations” commonly (a) length of term; (b) rent increases/controls; (c) the
found in leases stating whether these are clearly tenant’s rights to remain in the premises at the end of
defined, enforceable legal obligations or something not the term; and (d) the tenant’s contribution/obligation to
amounting to enforceable legal obligations (for example the property “costs”, e.g. insurance and repair?
a) Term: The term for leases of properties destined for

The term “green lease” is fairly new in Mexico and, as such, residential purposes must be of at least one year and cannot
rather than green leases, some lease agreements include “green exceed 10 years. It is common practice in Mexico for
clauses”. Such clauses usually require the tenant to comply with residential leases to have a one-year period with subsequent
a certain set of rules or regulations established by the landlord. renewals for the same term. These renewals can be
Most recently, some lease agreements include a “Green Lease” automatic or must be agreed by the parties at the end of
clause, which states an obligation for the lessee to share detailed each term.
data on energy, water, and waste consumption with the lessor. b) Rent increases: Civil Codes in Mexico do not include any
In certain cases, particularly with larger lessors, they may specific provision on how the rent should be increased;
also furnish sustainability recommendations to lessees, aimed however, it is common practice in Mexico for rents to be
at reducing operational costs and the carbon footprint of the increased each year in proportion to the increase of the
property. These clauses foster a collaborative approach to INPC. This provision must be included within the lease
resource efficiency and sustainability in the leased property. agreement for it to be mandatory.
c) Right to sell and sub-lease: The landlord has the right to sell
10.8 Are there any trends in your market towards more the leased property during the term of the agreement, in the
flexible space for occupiers, such as shared short- understanding that the new owner shall be bound by the
term working spaces (co-working) or shared residential provisions of the lease agreement until its conclusion. In
spaces with greater levels of facilities/activities for addition, tenants who are compliant with their obligations
residents (co-living)? If so, please provide examples/ and have leased the property for a certain time (that varies in
details.
each State) have a right of first refusal to purchase the leased
property on the same terms and conditions as the ones
The lease market has been changing since the last 10 years in provided in the bona fide offer in which the landlord intends
major cities in Mexico. Co-working spaces have now been in the to sell the property to any third party. In some States, this
market for some years, with very successful results. As a result right can be waived but in others it is not waivable.
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SMPS Legal 119
Unless both parties have expressly agreed otherwise, Environmental requirements are regulated both at the Federal
tenants may transfer their rights to a lease (notifying such and the State level in the General Law of Ecological Equilibrium
transfer to the landlord) but cannot sub-lease the property and Environmental Protection (Ley General de Equilibrio Ecológico
without the prior written consent of the landlord. y Protección al Ambiente) and the environmental laws of each State.
d) The tenant’s right to remain in the property: In the event Depending on the line of business and trade, some environmental
that the parties do not include any provisions related to permits and licences shall be obtained, such as: (i) Environmental
such extension, Civil Codes provide that the lease can be Impact Statement; (ii) hazardous waste management permit; and
automatically extended for an undetermined amount of (iii) wastewater management permit, among others, as well as
time as long as both of the parties’ intention is to continue compliance with provisions related to contamination generated
with the lease (tácita reconducción). In that case, the lease will by the emission of noise, vibrations, thermal energy, intrusive
be governed by the provisions set forth in the applicable light, electromagnetic radiation and harmful odours, and
lease agreement and can be terminated by any of the contamination generated by the emission of pollutants released
parties at any time. into the atmosphere, among others.
e) Insurance: No mandatory insurance is required by law.
Unlike business leases, most landlords of residential
properties do not require their tenants to have insurance. so please briefly describe including price/compensation
f) Repairs and costs: Major repairs (those necessary for the mechanism.
conservation, operation and safety of the property) must
be carried out by landlord, unless the damage is caused
The State can force individuals and companies to forfeit their
as a result of tenant’s negligence or to the ordinary use of
property in favour of the States through the expropriation of
the property. All other repairs and maintenance must be
property, regulated in the Expropriation Law (Ley de Expropiación),
performed and/or paid by tenant.
and through the seizing of assets (extinción de dominio), regulated in
Unless for other major repairs, all other maintenance costs must
the Assets Seizure Law (Ley de Extinción de Dominio).
be covered by the tenant, although in case the property is in a
a) Expropriation of property: The State can expropriate
condominium, maintenance fees are included within the rent, or
property of any individual or company based on a cause
in addition to the rent. It is common practice that all utilities (such
of public interest (e.g. the construction of any public
as electricity, water and gas) are contracted and paid by the tenant.
infrastructure projects, national defence, etc.). For the
expropriation to be carried out, the President of the
11.4 Would there be rights for a landlord to terminate Mexican United States must publish a declaration of public
a residential lease and what steps would be needed to utility in the Mexican Official Gazette (Diario Oficial de
achieve vacant possession if the circumstances existed la Federación) that includes the amount to be paid by the
Mexican government as compensation. This declaration
must be personally notified to all involved parties for them
Lease agreements must include all provisions related to the to contest the compensation amount within the next 10
vacancy procedure of the property. Usually, lease agreements days. Any contest on the compensation amount will be
provide for a more expensive rent for all of the time that the resolved before a federal court.
tenant holds over and remains in possession of the property b) Seizing of assets: The State can seize any asset, prior to a
after the date of termination of the lease. However, when the definitive resolution issued by a court, in accordance with
tenant does not vacate possession, landlord can initiate a judicial the United Nations Convention against Transnational
procedure to vacate the premises. However, it is important to Organised Crime, the United Nations Convention against
note that a tenant cannot be forcibly removed from the premises Corruption, the United Nations Convention Against Illicit
without a favourable judicial resolution. Traffic in Narcotic Drugs and Psychotropic Substances and
other international instruments, in the event that a felony
122 Public Law Permits and Obligations is committed in the property (e.g. crimes against health,
kidnapping, corruption, etc.). In this case, the owner of the
12.1 What are the main laws which govern zoning/ property shall not be entitled to any kind of compensation.
Zoning/permitting is regulated by each State and each Munici-
pality. Although specifics may change depending on where the As mentioned above, regulation on permits and licences related
property is located, properties must have a land permit (uso de suelo) to real estate are regulated by each State and Municipality. There
that determines the activities that may be performed or carried is no public registry on permits/licences and, as such, buyers
out in the property (e.g. residential, commercial, etc.), which is usually rely on the due-diligence process to make sure the
issued in accordance with the State and the Municipality Urban property is compliant with all required permits/licences.
Development Plan. To develop any property, a construction
licence, which also depends on the State and the Municipality in
which the property is located, must also be obtained. 12.4 What main permits or licences are required for
In addition, for all uses other than housing, owners or
lessors must obtain an operating licence, which is issued by the
Municipality. The licence requirements are different depending Construction permits are required for construction works. These
on the line of business or trade that will be exploited in the permits are issued by the State and Municipality authorities. In
property and the location of the property, as each Municipality some cases, additional permits/licences, such as environmental
has its specific requirements. permits/authorisations are needed.
Real Estate 2024

120 Mexico
As mentioned above, properties must have the correct land other applicable penalty or sanctions in accordance with such
permit (uso de suelo) and operating licence (residential properties laws. In addition, clean-up obligations can be agreed between
do not require operating licences). the parties and included in any agreement.
12.5 Are building/use permits and licences commonly 12.10 Please briefly outline any regulatory
obtained in your jurisdiction? Can implied permission be requirements for the assessment and management of
obtained in any way (e.g. by long use)? the energy performance of buildings in your jurisdiction.
Building/use permits are commonly obtained, although the There is no mandatory regulation related to energy performance
time for obtaining them is usually long (from weeks to months in Mexico.
in some cases). These permits must be issued by the authorities
and cannot be obtained in any other way. 132 Climate Change
12.6 What is the typical cost of building/use permits and 13.1 Please briefly explain the nature and extent of
the time involved in obtaining them? any regulatory measures for reducing carbon dioxide
scheme).
The costs vary depending on the State in which the property is
located. For instance, in Mexico City, a land permit cost (as of
2023) is approximately US$155, while the land alignment cost is Environmental laws establish certain thresholds for the
of US$2.90 per square metre. emission of any kind of contamination released into the
atmosphere. These emissions, within the authorised limits, can
only be performed with the prior written authorisation of the
12.7 Are there any regulations on the protection of Environmental Ministry or State Environmental Authority (at a
Federal and/or State level).
Yes, the Federal Law on Archaeological, Artistic and Historical reduction targets?
Monuments and Sites (Ley Federal sobre Monumentos y Zonas
Arqueológicos, Artísticos e Históricos) and the National Assets Law Mexico is part of the Paris Agreement, in which Mexico agreed
(Ley de Bienes Nacionales). to reduce its greenhouse gas emissions by 25% by the year 2030.
Real estate that is considered a national asset cannot However, no national regulation has been issued as to this date
be transferred to a private individual or entity, as they are and, therefore, there is no regulation aimed at the reduction
considered property of the State. On the other hand, real estate of greenhouse gas emissions applicable to individuals and
that is considered a historical monument and is owned by a companies in Mexico.
private individual or entity may be transferred to a third party
but cannot be altered and must be preserved by its owner.
12.8 How can, e.g. a potential buyer obtain reliable sustainability of both newly constructed and existing
information on contamination and pollution of real buildings?
your jurisdiction? No. Mexico environmental legislation has no additional require-
ments or provisions aimed at improving the sustainability of both
There is no public registry of contaminated land. Buyers newly constructed and existing buildings.
usually rely on the due-diligence process before the purchase
of the property in order to verify compliance on this matter. 142 COVID-19
Indemnities are usually included in the purchase agreements
to obtain compensation in the event that the property is not in 14.1 Please detail any laws that govern real estate in
compliance with the environmental laws. your jurisdiction which were introduced in response to
No specific provisions were issued as a result of the COVID-19
In some cases, the granting of some environmental permits/ pandemic in Mexico. However, several tenants terminated their
authorisations (e.g. environmental impact assessments) requires leases early, with no liability whatsoever, based on the provisions
the owner of a property to carry out certain clean-up actions of each State’s Civil Code, which establish the tenant’s right to
over the property in order for such permits/authorisations to terminate the lease if the use of the leased property is interrupted
be granted. due to an act of God or force majeure (caso fortuito o fuerza mayor).
Additionally, if any company or individual does not comply The specific requirements for the tenants to exercise this right
with the environmental laws, the Environmental Authority differ depending on the location of the leased property; however,
can condemn the responsible party to carry out all necessary the tenant must in all cases be in compliance with all his/her
clean-up actions in order to correct any deficiencies, violations obligations prior to the exercise of such termination right.
or irregularities on such environmental laws, in addition to any
Real Estate 2024

SMPS Legal 121
María Teresa Paillés has over 30 years’ experience advising national and international clients on high-level real estate projects, corporate,
M&A, financial and credit operations, public tenders and AAP projects. She advises real estate developers on the implementation, design and
documentation of housing projects (of social, medium and residential interest) throughout Mexico, including the audit and regularisation of
Federal and ejido land, permits, licences, authorisations, manifestations of environmental impact, concessions and restrictions. María Teresa has
extensive experience in the development and implementation of M&A operations, investment schemes, and in the establishment of alliances in
real estate, the hotel industry, manufacturing, delivery companies and infrastructure operators. In the financial area, she advises both creditors
and debtors in the structure, negotiation and formalisation of loans with and without guarantees, syndicated loans, and financing of infrastructure
projects. Also, she represents both public and private entities on public tenders, called by Federal and State authorities in construction projects.
SMPS Legal Tel: +52 55 5282 9063

Av. Paseo de la Reforma 509 Email: tpailles@smps.com.mx
Piso 18, Cuauhtémoc, 06500, CDMX URL: www.smpslegal.com
Mexico
Andrés Pizarro Suárez has extensive experience in M&A, joint ventures, real estate, restructurings, investments, and corporate and regulatory
matters. His practice includes active representation of clients involved in corporate, civil, finance and commercial projects in diverse areas and
industries. He has represented several multi-national companies in setting up operations in Mexico and has been involved in big-ticket real
estate transactions.
SMPS Legal Tel: +52 55 5282 9063

Av. Paseo de la Reforma 509 Email: apizarro@smps.com.mx
Mexico
María Esther Rey has over 20 years of experience as a corporate transactional attorney, advising clients on corporate and real estate operations
and transactions in Mexico and abroad. She actively participates in M&A, credit negotiations, project financings, and structuring guarantees for
different industries, and has extensive experience in investment funds in addition to her very solid legal bases in labour and industrial property
matters. María Esther’s professional development includes extensive experience as a corporate lawyer, having worked as a legal manager at
Grupo Cinemex, and as a lawyer at Unilever de México attending the ice cream and personal care divisions. She also served as legal director
of Senda Direccion Tecnologica, a leading LATAM company in software for cinemas and remote sales through electronic means, and was legal
director of Central de Arquitectura, a company dedicated to real estate development in residential, hotels and shopping centres.
SMPS Legal Tel: +52 55 5282 9063

Av. Paseo de la Reforma 509 Email: erey@smps.com.mx
Mexico
Andrea Holtzman Cesarman has experience advising clients across diverse industries on corporate matters, M&A transactions, personal
data protection, trusts and corporate governance. Prior to joining SMPS Legal, Andrea gained experience as an in-house lawyer for an
investment fund, as well as in private practice at various law firms. She also gained experience working in Mexico City’s Notary Public Office
95 under the guidance of Olga Mercedes García Villegas Sánchez Cordero. Additionally, Andrea has experience in real estate law, including
contract negotiation for real estate projects, as well as construction, leasing, sales and purchases.
SMPS Legal Tel: +52 55 5282 9063

Av. Paseo de la Reforma 509 Email: aholtzman@smps.com.mx
Mexico
SMPS Legal’s attorneys have extensive experience in representing Fideicomisos Inmobiliarios de Bienes Raíces). Our experts are recognised as
developers, creditors and investors in all types of real estate and key players in real estate law and for helping our clients in Mexico and the rest
asset transactions, including purchases, leasing agreements, funding, of Latin America to carry out complex operations.
development, construction, and liens on real estate assets, such as offices, www.smpslegal.com
retail outlets, malls, manufacturing industries, mines, residential and multi-
purpose properties, and hospitality establishments. Our team members are
key players in the hospitality sector, providing legal assistance for well-known
hospitality projects in Mexico. The services offered by SMPS Legal include
carrying out audits and providing support in regulatory, tax and environmental
matters, as well as structuring real estate projects based on all types of
modalities, including Real Estate Investment Trusts (in Spanish: “FIBRAs” or
Real Estate 2024

122 Chapter 13
Nigeria
Nigeria
Ayobami Tunde
Gbemisola Mosuro
Tunde & Adisa Legal Practitioners Opeyemi Adekanye
h. Customary Law, which consists of rules governing

12 Real Estate Law ownership of real estate within a group or people within a
community or tribe.
to leases of business premises should be listed in 1.2 What is the impact (if any) on real estate of local
response to question 10.1. Those relating to zoning and common law in your jurisdiction?
The real estate industry has benefitted immensely from local
common law as it is one of the most litigated and disputed areas
of law. The decision of the courts has, by and large, settled and
Section 43 of the 1999 Constitution of Nigeria serves as the reinforced legal principles on real estate.
fundamental law that guarantees the right of every citizen in
Nigeria to own and acquire immovable property anywhere in
Nigeria. Other main laws include: 1.3 Are international laws relevant to real estate in your
a. The Land Use Act, 2004, an act that vests all real estate
in EU countries.
in all Nigerian states in the governor of the state, who
shall hold such land in trust for the people and would
be responsible for the allocation of real estate in urban International laws do not have a direct impact on real estate in
areas, while real estate in non-urban areas is controlled Nigeria; however, the courts will apply received English law
and managed by the local government. It is important to in the rare instance of an absence of local laws to govern the
note that real estate vested in the federal government or specific subjects.
its agencies in any state of Nigeria is under the control and
management of the federal government. 22 Ownership
b. State Title Registration Laws, enacted by states to govern
registration of real estate ownership and other proprietary 2.1 Are there legal restrictions on ownership of real
rights and interests within the state. estate by particular classes of persons (e.g. non-resident
c. State Land Instruments Registration Laws, enacted by persons)?
states to govern registration of real estate instruments
within the state. Yes, Section 43 of the 1999 Constitution provides that every
d. Property and Conveyancing Law, 1958, enacted to cover citizen of Nigeria shall have the right to acquire and own
the western region of Nigeria; however, most states have immovable property anywhere in Nigeria. Section 1 of the Land
enacted state-wide laws in place. The PCL, however, still Use Act, 2004 vests all real estate in the territory of each state
governs ownership of real estate in Ogun, Oyo, Ondo, in Nigeria in the governor with a mandate to act as trustee of
Osun, Ekiti, and some parts of Lagos. the real estate and administer the same for the use and common
e. Received English Law, which consists of common law benefit of all Nigerians. Both seek to grant real estate rights to
doctrines, principles of English land law and doctrines of citizens while excluding foreigners. Non-Nigerians/Foreigners
equity. registered entities may, however, own real estate through
f. Nigerian Common Law, which consists of case law and corporate entities registered in Nigeria. The National Council
judicial precedents set by the Nigerian Courts. of States by Section 46(a) of the Land Use Act also regulates the
g. Islamic Law, which consists of rules governing ownership transfer of any interest in land to non-Nigerians. Section 7 of
of real estate between Muslims, particularly as it relates to the Land Use Act, 2004 restricts the ownership of real estate to
the inheritance of real estate. persons under the age of 21 years, except where a guardian or
trustee has been appointed for that purpose.
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Tunde & Adisa Legal Practitioners 123
32 Real Estate Rights 4.3 What rights in land are compulsorily registrable?

in your jurisdiction? Are any of them purely contractual The compulsorily registrable rights in land in Nigeria are: 1) a
between the parties? titleholder of registered documents in land must register the
same within 60 days of obtaining the state governor’s consent;
Rights recognised in Nigeria are: 1) Statutory Rights of 2) a power of attorney dealing with the alienation of an interest
Occupancy (Proprietary rights); 2) Customary Rights of in land; 3) a person with the power to assign an interest in
Occupancy; 3) Possessory Rights; 4) Easements; 5) Tenancies; land; 4) all acquisitions, revocation, and excision carried out
6) Leases; 7) Licences; 8) Mortgages; 9) Liens; and 10) Pledges. in accordance with the Land Use Act, 2004; 5) any succession
Some rights, such as Tenancies, Leases, Licences, Mortgages, to land under a will or intestacy after production of a certified
Liens and Pledges, are purely contractual between the parties. true copy of the grant or letter of administration; and 6) any
instrument purporting to transfer interests in land.
Any person with unregistered land rights holds an equitable
3.2 Are there any scenarios where the right to land interest and runs the risk of being challenged successfully by a
diverges from the right to a building constructed registered titleholder; the first in time to register a title has the
thereon?
stronger right.
No, Nigerian case law reiterates that ownership rights to land

extend to the buildings constructed on the land; this is reiterated
registered?
by the Latin maxim “quicquid plantatur solo, solo cedit”.
Leasehold rights of no more than three years are not required

3.3 Is there a split between legal title and beneficial to be registered.
change this? 4.5 Where there are both unregistered and registered
Yes; where the official recognition of ownership in land title
documents issued by the government is vested in a person details. First registration means the occasion upon
while another is vested with the right to enjoy and use the which unregistered land or rights are first registered in
land alongside any income or profit generated from the land, the registries.
there is a split. In these circumstances, the legal owner holds
the property in trust for another person or entity who is the
There are neither probationary periods following first registration
beneficial owner, for example, in a family setting where family
nor classes or qualities of title on first registration; once a title
land is held in trust for the benefit of specific members of the
is registered for the first time at the registry, the titleholder is
family. The legal title holder is the registered title holder with
recognised as such immediately.
the land registry; the beneficiary is not reflected in any of the title
documents, the consequence being that there is no public notice
of ownership by the person holding beneficial title besides the 4.6 On a land sale, when is title (or ownership)
relevant trust document between the legal title holder (trustee) and transferred to the buyer?
the beneficiary. There are currently no proposals to change this.
Usually, this is influenced by the terms of the sale and purchase
42 System of Registration contract between the buyer and seller. Title in the land will
transfer to the buyer upon complete payment of the purchase
4.1 Is all land in your jurisdiction required to be price and any other condition for completion of the sale.
registered? What land (or rights) are unregistered? However, only equitable title is passed to the buyer until the
title is registered at the land registry and only then will the buyer
become the legal titleholder of the land.
By virtue of Section 2 of the Lagos State Land Registration Law,
2015, which is similar to the land registration laws of other states
in Nigeria, all lands are required to be registered. However, 4.7 Please briefly describe how some rights obtain
land rights in leases not exceeding three years do not require priority over other rights. Do earlier rights defeat later
registration. rights?
A registered title holder obtains priority over other unregistered

guarantee? rights in a land. The titleholder who registers first has the
stronger claim to the land as the benefit of an earlier registration
must be preserved. This is even the case where there are
No, there is no state guarantee of title in Nigeria. The registered competing registered interests in land; the earlier in registration
titleholder of real estate will be regarded as the legal owner of takes precedence over the later, except where proof of fraud or
the land. However, this is not absolute. If there is a dispute over impropriety is successfully made.
the title, the records at the state lands register will serve as proof
of ownership but the same can be upturned by an appropriate
judicial process.
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124 Nigeria
52 The Registry / Registries 5.4 Can compensation be claimed from the registry/

jurisdiction? If more than one please specify their While there is no legal provision for compensation in the case of
differing rules and requirements. a mistake made by the registry, it is possible to file a civil suit to
claim damages if there is enough evidence to prove negligence
The federal land registry covers registration of all lands in the on the part of the registry that caused damage or loss.
Federal Capital Territory, Abuja, and all federal lands owned by
the federal government or its agencies, within any state in Nigeria. 5.5 Are there restrictions on public access to the
Each state in Nigeria is empowered to establish a land registry register? Can a buyer obtain all the information he
to cover the registration of lands within the state allowing State might reasonably need regarding encumbrances and
registries in each state. other rights affecting real estate and is this achieved
In addition to the above, there are also other registries that by a search of the register? If not, what additional
cover the registration of land within specific private or public information/process is required?
sector development areas in addition to any statutorily required
registrations (i.e. federal and/or state registration). An example There are no statutory restrictions on public access to the
is the Federal Housing Authority (FHA), which administers register.
registrations within national housing programmes. Another Yes, a buyer can obtain the information needed regarding the
example is the Lagos State Development and Property Corpora- rights and encumbrances affecting real estate by conducting a
tion (LSDPC) Registry, which records registration information search at the land registry.
of ownership and transfer of real estate within any LSDPC area. However, an investigative survey by a registered surveyor may
be required in certain cases to confirm that the information on
5.2 How do the owners of registered real estate prove the survey plan is accurate and matches the actual location of the
their title? real estate. The investigation will also reveal if the real estate is
subject to government acquisition.
Information regarding the physical occupation of the land is
Titles are proven with the presentation of a registered title
not provided at the registry, so a potential buyer will usually visit
document, which may include a certificate of occupancy issued
by the federal and/or state land registry or a deed bearing the the land as well.
consent of the governor or minister to the transfer of title to
land to the title holder. The registered title document will 62 Real Estate Market
usually bear the registration reference, which can be used to
conduct a search at the relevant land registry. 6.1 Which parties (in addition to the buyer and seller
5.3 Can any transaction relating to registered real Please briefly describe their roles and/or duties.
registration of ownership right? Can information Solicitors: they represent the buyer or seller and in some cases
on ownership of registered real estate be accessed both. The buyer’s solicitor conducts the due diligence on the real
electronically? estate and will usually prepare the transfer of title documents,
which is shared with the seller’s solicitor. The seller’s solicitor
Currently, transactions relating to registered real estate cannot be responds to any queries from the due diligence and reviews the
completed electronically in Nigeria. However, the Lagos State transfer of title documents.
land registry is currently running a pilot electronic registration Real Estate Agents: agents represent the buyer or seller or
system, which may become open to the public. both and broker the real estate transaction between the buyer
The requirements to register ownership rights in Nigeria and seller for an agreed commission.
will depend on the type of right being registered and the land Surveyors: a surveyor may be engaged to provide verification
registry involved; however, the same will mainly include: a of the coordinates of the real estate and to confirm if the real
deed; an application form for the consent of the governor or estate is subject to government acquisition. This is usually
minister; a survey plan, locational sketch of the real estate, and required when dealing with real estate in certain locations or
coloured photo of the real estate showing adjoining properties based on the information obtained from the land registry.
with a time and date stamp; evidence of lodgement of the record Architects: where the land has a building, an architect may also
copy of the survey plan with the surveyor general of the state be engaged to review the building plan to confirm it has been
or federation; a certified true copy of the seller’s title, letter of approved by the physical planning and development authority
consent from the seller, proof of identity of the purchaser and and that the building is a parallel of the approved building plan.
payer tax identification number; and evidence of payment of Deviation from the approved plan may attract fines, penalties
the requisite statutory fees. If the registration is over a land and, in extreme cases, demolition of the building.
owned under customary law, the applicant’s family/community Engineers: it may be prudent to engage a Council for the
will be required to provide any documents that prove traditional Regulation of Engineering in Nigeria (COREN) certified engineer
history, acts of ownership over the land, acts of long possession to assess the structural stability of the building. The engineer
and enjoyment over the land as well as a survey plan. will evaluate the construction and provide recommendations to
Yes, information on ownership of registered real estate may be address any potential issues or violations and may also advise
accessed electronically in some states. It is usually a centralised the buyer not to purchase the real estate. The recent instances
database accessible only at a single location, i.e. the land registry. of collapsed buildings highlight the prudence in conducting a
In Lagos State, for example, the electronic registry database can thorough structural stability test before purchase.
be accessed only by visiting the land registry.
Real Estate 2024

6.2 How and on what basis are these persons non-simultaneous exchange of the purchase price and title in
remunerated? the real estate; for example, where the purchase price is paid in
instalments, or the sale is conditional.
Solicitors are remunerated in line with the Legal Practitioners
Remuneration (for Business, Legal Service and Representation) 7.2 Is the seller under a duty of disclosure? What
Order, 2023. In practice, solicitors charge a percentage of the matters must be disclosed?
purchase price, usually 5% or 10%. It is not uncommon for charges
to be below 5% where the purchase price is quite significant. No, there are no statutory duties of disclosure except for latent
Real estate agents charge a commission between 1–10%. The defects known to the seller. Buyers have the responsibility to
popular rate is 5% or 10%; it is not uncommon for real estate investigate and conduct thorough due diligence of the real
agents to charge a pre-agreed fixed fee in extremely complex and estate title prior to purchase. However, sellers can be placed
protracted sale transactions. under contractual obligations to disclose through the addition
Surveyors, architects and engineers would charge a fixed fee to of specific representations and warranties in the contract to be
provide their services depending on the size and location of the signed by the seller.
real estate. Their respective professional scale of fees may also
guide the fees charged.
misrepresentation?
in your jurisdiction, whether equity or debt? What are the Yes, if the buyer is able to prove that he/she was induced into
main sources of capital you see active in your market? entering the contract by the misrepresentation and has suffered
a loss by doing so, then the seller can be held liable. If the seller
has made a representation or warranty to that effect in the
The main sources of capital for real estate projects are private
contract, this will be considered a breach of the contract, which
investors and financial institutions. The choice between equity
can be the subject of a civil suit to recover damages or demand
and debt is guided by the project requirements. High interest
specific performance.
and inflation rates alongside the general economic downturn
have slowed down debt finance and increased joint venture
arrangements between real estate owners, property developers, 7.4 Do sellers usually give any form of title “guarantee”
and private investors. or contractual warranties to the buyer? What would be
6.4 What is the appetite for investors and/or information)? Would any such guarantee or warranties
developers to invest in your region compared to last year act as a substitute for the buyer carrying out his own
and what are the sectors/areas of most interest? Please diligence?
give examples.
Very much so; the deed and the sale and purchase agreement
Investors and developers have continued to invest in the country’s often include contractual warranties and representations on the
real estate sector, particularly in the densely populated cities of superiority of the title being transferred. The representations
Lagos and Abuja, due to the housing deficits in these cities. Also, could extend to cover pertinent facts that the buyer is relying
Nigeria has had a general economic downturn with great inflation on to enter the contract and operate to give clear information
and devaluation of the Naira but the prices of real estate in Nigeria and indicate liability. The common law principle of caveat
have been able to weather the economic situation in the country. emptor would, however, prevent a substitution of the buyer’s due
diligence, as a buyer must be careful to know the full details
6.5 Have you observed any trends in particular market about the real estate being bought so as to acquire good title; an
sub sectors slowing down in your jurisdiction in terms of exception will apply, however, if the buyer carries out usual and
their attractiveness to investors/developers? Please give proper due diligence and did not discover a defect in the title.
examples.
The emergence of COVID-19 in 2020 led to a decrease in the property post sale? Please give details.
commercial advancements, as many companies have implemented
alternative work arrangements to facilitate remote work for their Liabilities expressly set out in the contract for the seller post-
employees. Consequently, the expansion of office spaces for sale will apply. Generally, the contracts would include liabilities
numerous businesses in Nigeria has significantly decelerated. for transferring a defective title or if the existence of an
encumbrance on the title is discovered or for any outstanding
72 Liabilities of Buyers and Sellers in Real payments of any charge, levy or tax due on the real estate prior
Estate Transactions to the date of sale.
7.1 What (if any) are the minimum formalities for the 7.6 What (if any) are the liabilities of the buyer (in
sale and purchase of real estate? addition to paying the sale price)?
A deed of assignment, partition or sublease is required to The buyer is liable for paying its legal costs for preparing the
transfer interest in real estate to a purchaser. A sale and contractual documents and the necessary fees required to obtain
purchase agreement may be utilised to capture specific the consent of the governor or minister to the sale of the real estate.
terms and conditions of the sale, especially where there is a
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126 Nigeria
82 Finance and Banking 8.3 What are the common proceedings for realisation
8.1 Please briefly describe any regulations concerning involving court proceedings or the contribution of the
the lending of money to finance real estate. Are the rules mortgagor?
entities? In Nigeria, the realisation of mortgaged properties typically
involves a legal process, and court proceedings are often
necessary. Judicial foreclosure is the most common method to
Real estate lending in Nigeria is not subject to industry-specific
realise a mortgaged property in Nigeria. It is unlikely that the
regulations; loans taken to finance real estate projects are
mortgagee realises the mortgaged property without input from
governed by general financial regulations and contractual terms.
either the court or the mortgagor. A mortgagee may appoint a
The Central Bank of Nigeria (CBN), however, regulates the
receiver to intercept and apply the proceeds of the sale to discharge
financial sector and makes regulations that impact real estate
the mortgage debt where the mortgagee fears that the mortgagor
financing. The Security & Exchange Commission also has rules
may jeopardise the security. The court may also appoint a receiver
that govern Real Estate Investment Trust schemes, which can be
to take control of the mortgaged property and administer it in a
set up for the purposes of financing real estate transactions. With
manner that serves both parties’ interests. A mortgagee may also
respect to mortgages, the Property and Conveyancing Law, 1958
realise a mortgaged property and avoid a lengthy court process
and Conveyancing Act of 1881 are the main regulations. States
where a mortgagor has voluntarily agreed to transfer the real estate
retain either of the regulations or enact a version for application
to the mortgagee through a deed in lieu of foreclosure. However,
within the state; for example, the Mortgage and Property Law of
the consent of the mortgagor is crucial to this arrangement and
Lagos State. The Mortgage Institutions Act, 1989 and Banking
any agreement must be properly documented. Some mortgage
and other Financial Institutions Act also regulate mortgage
agreements may also include a power of sale clause that allows
institutions. The Federal Mortgage Bank is also a regulator of
the mortgagee to sell the property without the involvement of the
mortgages and is empowered to make recommendations to the
court, provided certain conditions are met.
Minister of Finance to make such regulations as may be necessary
for the implementation of the National Housing Fund Act, 1992.
The regulations apply to both resident and non-resident persons, 8.4 What minimum formalities are required for real
as well as individual persons and corporate entities, though with estate lending?
certain variations or specific requirements for different categories
of borrowers. For instance, the guidelines may outline criteria The minimum formalities required to establish a legally binding
for credit risk assessment, maximum loan-to-value ratios, and loan agreement and safeguard the lender’s security interest in the
other terms for real estate lending. There might be distinctions asset being financed are as follows:
in requirements based on whether the borrower is an individual ■ Due diligence: lenders often conduct a title search and due
or a corporate entity. Also, regulations might differ in terms of diligence to verify the ownership of the real estate, title
down payment requirements, interest rates, and permissible loan history, and any encumbrances or claims against the real
amounts for residents versus non-residents. Additionally, specific estate.
regulations may exist for foreign investors or non-resident ■ Legal document: a comprehensive loan agreement is
individuals/entities seeking to invest in Nigerian real estate. These necessary. It should specify the terms and conditions
regulations could include provisions related to capital repatriation, of the loan, including the loan amount, interest rate,
foreign exchange controls, or approvals from regulatory bodies. repayment schedule, and any conditions with which both
parties must comply.
8.2 What are the main methods by which a real ■ Valuation: an independent appraisal may be required to
estate lender seeks to protect itself from default by the determine the current market value of the real estate. This
borrower? valuation helps establish the loan-to-value ratio and ensures
that the real estate provides sufficient collateral for the loan.
Financial institutions will usually secure real estate loans with ■ Execution and stamp duty: the loan agreement, mortgage,
the real estate to be purchased serving as collateral for the and other relevant documents must be executed by both
loan. If the borrower defaults, the lender has the legal right parties and stamped with the appropriate stamp duties as
to foreclose on the real estate to recover the unsettled loan. In required by law. Stamp duty payments are crucial for the
Nigeria, the lender will also exercise equitable title over the real legal validity of the documents.
estate on behalf of the borrower and after issuance of the legal
title, and the lender will hold the same until the loan is paid off; a 8.5 How is a real estate lender protected from claims
charge is also registered against the real estate at the relevant land against the borrower or the real estate asset by other
registry. In some cases, lenders may require personal guarantees creditors?
from the borrower or third-party guarantors. Personal guarantees
make the borrower and/or guarantor personally liable for the Priority is crucial in determining the order of repayment in the
debt, providing an extra layer of security. This is commonly the event of foreclosure or sale of real estate, so lenders often aim to
case where the borrower is a corporate entity, and the personal have the first legal mortgage position on the real estate. More
guarantees are required of the individual owners or directors of importantly, the lender ensures registration of the lien, mortgage
the entity. A lender may stagger the disbursement of the loan, or charge with the appropriate land registry or government
such that the borrower needs to reach a construction milestone agency. Registration provides a notice of the existence of the
before additional funds are disbursed by the lender. Here, the mortgage, lien or charge and ensures that it is the primary and
lender limits the risk of default to only the amount disbursed first-ranking charge on the real estate, ahead of any subsequent
rather than the entire loan. mortgages, charges or liens.
Real Estate 2024

8.6 Under what circumstances can security taken by a affects the position of a real estate lender. A key player in
lender be avoided or rendered unenforceable? Nigeria’s financial system is the Asset Management Corporation
of Nigeria (AMCON), which is primarily responsible for
managing and resolving the non-performing loans (NPLs)
a. If the consideration provided by the borrower to the lender
and distressed assets of banks and other financial institutions.
appears to be significantly disproportionate to the value of
Concerns about distressed real estate assets and loans are
the security interest, it may be challenged as a fraudulent
addressed in large part by AMCON. Here are some potential
transaction.
impacts of these processes on real estate lenders:
b. If the borrower can demonstrate that the mortgage
a. In an insolvency or corporate rehabilitation proceeding,
agreement was entered under undue influence, coercion,
creditors’ claims are often ranked based on their legal status
or duress, a court may set aside the security interest.
and priority. Secured creditors, such as real estate lenders
c. Failure to properly register the mortgage or charge with
with a mortgage or charge on the property, typically have
the relevant land registry or government authority can
a higher priority than unsecured creditors. This means
affect the enforceability of the security interest.
that secured creditors are more likely to recover their debts
d. If the lender or borrower misrepresented material facts
from the sale of collateral or assets.
related to the mortgage agreement, or if there was a
b. In insolvency proceedings, assets, including real estate
significant mistake in the transaction, it could lead to a legal
properties, may be sold to repay creditors. Real estate
challenge and potential avoidance of the security interest.
lenders may be involved in the sale of mortgaged properties
e. In the context of bankruptcy or insolvency, a court may
and may have a say in the terms of the sale.
review the validity of security interests to ensure compliance
c. In some cases, the initiation of insolvency or rehabilitation
with applicable laws and prioritise creditor claims.
proceedings may result in an automatic stay or moratorium
on all collection efforts and enforcement actions by
8.7 What actions, if any, can a borrower take to creditors, including real estate lenders. This stay can
frustrate enforcement action by a lender? temporarily delay the lender’s ability to enforce its security
interest or initiate foreclosure proceedings.
The borrower may file legal challenges or counterclaims against d. In a corporate rehabilitation process, a rehabilitation plan
the lender, alleging issues with the loan agreement or the lender’s may be proposed to restructure the borrower’s debts,
conduct. This can lead to legal delays and additional court including those owed to real estate lenders. Lenders may
proceedings. It could frustrate the lender’s position significantly be required to accept modified terms, including extended
due to the time-consuming and longwinded Nigerian judicial repayment schedules or reduced interest rates, as part of
system; for example, a borrower could seek court-issued injunctions the plan.
to prevent the lender from taking specific enforcement actions, e. While an automatic stay may temporarily restrict
such as foreclosure or a property sale. Injunctions can delay the enforcement actions, lenders with valid security interests
process and require legal proceedings to resolve. If the lender typically retain the right to enforce their interests once
obtains a favourable court judgment or order, the borrower may the stay is lifted or when it does not interfere with the
appeal the decision, further prolonging the enforcement process, rehabilitation process.
and, again, the longwinded judicial process and paperwork f. The valuation of assets, including real estate, is often a
presents a potent dose of frustration to the lender. crucial aspect of the insolvency or rehabilitation process.
Allegations of irregularities or fraud in the creation and Real estate lenders may have the opportunity to provide
registration of the security may be introduced by a borrower to input or contest valuations to ensure that the property’s
challenge the validity of the security. Sometimes, the borrowers value is accurately assessed.
may call on regulatory bodies, such as the CBN, to investigate g. Lenders may engage in negotiations with the borrower or
and review the lender’s actions, alleging violations of banking other creditors to reach agreements on the treatment of their
regulations. The borrowers can seek temporary restraining claims. This can involve discussions on debt forgiveness,
orders from the court, which can prevent the lender from taking debt-for-equity swaps, or other restructuring options.
immediate enforcement actions while the legal validity of the h. Lenders may need to defend their security interests in
debt or security is being determined. Filing for bankruptcy court if they are challenged by other parties involved in the
or initiating insolvency proceedings can temporarily halt insolvency or rehabilitation process. Legal challenges can
enforcement actions, as the court takes over the borrower’s impact the lender’s position and require legal representation.
assets and liabilities. The lender must then participate in the
insolvency process to seek repayment. To make the lender’s 8.9 What is the process for enforcing security over
recovery position more challenging, borrowers may proceed shares? Does a lender have a right to appropriate shares
to negotiate with other creditors to consolidate or restructure in a borrower given as collateral? If so, can shares be
their debts. As frustrating as the options may be to the lender, appropriated when a borrower is in administration or has
it is important to emphasise that taking these actions does not entered another insolvency or reorganisation procedure?
guarantee success for the borrower, and many of these tactics
can be successfully opposed and reviewed. Equitable or legal mortgages can be used to create security over
shares and whether a security is held over a share in an equitable
8.8 What is the impact of an insolvency process or a or legal manner will affect how that security is enforced. For the
corporate rehabilitation process on the position of a real enforcement of security over shares created via a legal mortgage,
estate lender? the lender can either foreclose or exercise the power of sale. In
the event that the mortgagor defaults, an authorised lender
Several variables, such as the particular legal framework, the may foreclose legally, granting him ownership of the shares.
nature of the insolvency, and the borrower’s financial situation, Following the completion of the process, the mortgagor’s equity
can affect how an insolvency or corporate rehabilitation process of redemption is eliminated and the title to the shares becomes
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128 Nigeria
fully vested in the lender. The procedure for foreclosure on and is assessed based on the income tax that ought to have
security over shares is the same process that is applicable to been paid for someone able to afford the fair market value of
mortgages generally. Without going to court, the security may the real estate. The buyer would usually provide evidence of
be enforced through a sale. The lender may use the statutory either previously paid income tax that covers or exceeds the sum
power of sale in cases where the loan agreement is sealed. If a assessed or an income tax exemption status or would proceed to
lender has the express authority to sell, they may do so; however, make the payment assessed, and in some cases, the buyer would
the enforcement of the security will still be possible even in the challenge the sum assessed.
absence of such an express power. If the redemption date has
passed or if no repayment date is specified and the mortgagor
has not complied with the reasonable notice provided by the much? Who is liable? Are there any exemptions?
lender demanding repayment within the specified timeframe,
then the power of sale may be implied. For the enforcement
of security over shares created via an equitable mortgage if the Transfer of real estate is not subject to value-added tax in Nigeria.
mortgagor defaults on payment, an equitable lender of shares
may enforce the security by selling the shares. The kind of 9.5 What other tax or taxes (if any) are payable by the
equitable mortgage created determines the mode of sale. The seller on the disposal of a property?
lender may, if appropriate, fill in the blank and register the
document in his own name when an equitable mortgage is No other taxes are levied on a seller on the disposal of a property
supported by a “blank transfer” executed in his favour. He can in Nigeria, save from CGT.
then use his power of sale to give the buyer legal ownership of However, in practice, upon the registration of title by the buyer,
the asset. Any equitable mortgage of shares may be enforced the buyer is given a list of charges, which includes an income tax
by judicial sale or by foreclosure of the mortgagors’ title over assessment sum for the seller of the property. As indicated in
the shares in the event that there is no registered blank transfer. question 9.3, the tax authority exploits the registration of title
Nigeria currently does not recognise appropriation as an process to ensure that people pay income taxes. Where the buyer
enforcement right. A mortgagor may redeem the shares by had engaged the services of a diligent solicitor, the provision of
repaying the loan until sale or foreclosure. evidence of income tax payment would have been a condition
of the sale. Where this is lacking, the buyer would be required
92 Tax to contact the seller for the same and would proceed to pay the
sum assessed for the seller, where the seller is uncooperative or
9.1 Are transfers of real estate subject to a transfer unavailable.
Yes, Capital Gains Tax (CGT) is chargeable on the gains accruing other entity) owning real estate is transferred?
on the disposal of assets in accordance with law. It is calculated
at 10% of the gains and is payable by the vendor/seller of the When there is a transfer in the ownership of a company that
real estate. CGT is due on assignment and leases excluding owns real estate, tax implications arise if the shares of the
mortgages or other charges. Persons subject to payment of company are sold at a profit; the company would be subject to
CGT include companies, partnerships, individuals and personal capital gain tax on such profit.
representatives. In practice, however, the purchaser pays CGT However, a threshold of N100 million annual cumulative
together with other assessments charged on the transfer of the worth of shares must have been disposed at a profit to attract
real estate during the registration process of the purchaser’s CGT. If the profit from the sale of shares is reinvested to acquire
title. Also, depending on the state and location of the real estate, shares in the same company or another Nigerian registered
CGT in Lagos State is about 0.5% of the fair market value of the company within the same tax assessment year, any portion of the
real estate. Stamp duties imposed on and raised from stamps accrued gain not reinvested will be subject to the applicable tax
charged on instruments and other legal documents attract flat rate of 10%. Shares transferred between an approved borrower
or fixed rates. It is payable at the registration of the transfer and lender in a regulated security lending transaction will also
deed and the buyer of real estate is responsible for the payment. not be subject to CGT.
9.2 When is the transfer tax paid? 9.7 Are there any tax issues that a buyer of real estate
In Nigeria, persons who have disposed of a chargeable asset diligence on?
are required to compute their capital gains tax liability, file an
assessment return, and pay the tax no later than 30 June, and 31 No; however, it is advisable for the buyer to request an income tax
December of that year. clearance certificate from the seller as this will be required upon
registration (see the response to question 9.3); this minimises
9.3 Are transfers of real estate by individuals subject to any potential liability for the buyer.
income tax?
The transfer of real estate by individuals is not subject to
personal income tax. However, at the registration of title stage, 10.1 Please briefly describe the main laws that regulate
buyers are provided with an income tax assessment sum, which leases of business premises.
should be paid by the buyer and seller. This is essentially a tax
collection mechanism to ensure that people pay income taxes In Nigeria, there is usually no distinction in the laws that apply
Real Estate 2024

to business leases or residential leases. In Abuja, the Recovery tenant maintains a high-risk business, the tenant would
of Premises Act (Abuja) 1990 applies to leases while the Tenancy insure in this case. However, a covenant to insure may be
Law of Lagos State 2011 is applicable to all areas in Lagos implied by statute, as is the case in Lagos State where the
excluding Apapa, Ikeja GRA, Ikoyi and Victoria Island. The requirement of insurance is implied in all leases.
Rent Control and Recovery of Premises Law of Lagos State 1997 e. Change of control of tenant: with respect to a change of
is applicable to these areas. The Recovery of Premises Law, control of the tenant or the transfer of a lease as a result
Laws of Bendel State 1976 on the other hand regulates business of a corporate restructuring (e.g. merger), these are not
leases in Edo and Delta State. Other states also have equivalent standard provisions included in the lease agreement,
legislations regulating business leases. though the same is anticipated by the parties; in this case,
either party would discuss relevant clauses with the other
party and include agreed terms in the contract.
10.2 What types of business lease exist? f. The responsibility for repairs is often included in the lease
agreement. In the absence of such covenant to repair, the
Business leases are popularly known as commercial leases in tenant has an obligation to repair on account of the implied
Nigeria. The types of leases depend on the use of the real estate, covenant to use the real estate in a tenantable manner. In
tenure or mode of creation. Lagos State, the landlord has an implied duty to keep and
Parole lease: this is an oral lease with a duration of not more maintain external parts of the leased real estate, e.g. roof and
than three years, it must reserve the best rent and exclusive walls, etc. Standard practice leaves the responsibility for all
possession of the property must be given to the lessee. external and structural repairs with the landlord, while the
Written lease: this is essentially in writing; it is easier to tenant is responsible for all internal maintenance and repair.
enforce the terms of a written lease by specific performance in If the disrepair follows from the operation of wear and tear,
addition to the remedy of part performance. the tenant is not responsible for any such repair.
Lease by deed: this is a type of lease required for leases
above three years and must be made under seal. In Nigeria, all 10.4 What taxes are payable on rent either by the
conveyances of land or any interest therein are void unless they landlord or tenant of a business lease?
are by deed.
Withholding tax is payable on the consideration of a lease and the
10.3 What are the typical provisions for leases of tenant is under an obligation to deduct the same and remit to the
business premises in your jurisdiction regarding: (a) appropriate tax authority. In practice, landlords will include a clause
length of term; (b) rent increases; (c) tenant’s right to in the contract stating that the rent is exclusive of all taxes, which
sell or sub-lease; (d) insurance; (e) (i) change of control leaves the tenant with the responsibility to remit withholding tax in
of the tenant; and (ii) transfer of lease as a result of a addition to the rent. That being said, the payment of withholding
corporate restructuring (e.g. merger); and (f) repairs? tax on rent is honoured more in contravention.
a. Length of time: a commercial lease would indicate the 10.5 In what circumstances are business leases
length of term of the lease. It must be ascertainable either usually terminated (e.g. at expiry, on default, by either
expressly or implicitly from the contractual document. party etc.)? Are there any special provisions allowing a
However, where there is no stipulation as to time, the tenant to extend or renew the lease or for either party
applicable laws as to time shall apply based on the nature to be compensated by the other for any reason on
termination?
of the leases, especially on the issue of length of notice to
be given in determination of the lease.
b. Rent increase: the landlord may include a provision to A commercial lease can be terminated by expiration of term,
increase the rent in the lease agreement, which would state proper service of a valid notice to quit to the tenant by the
how the new rent will be determined. In practice, however, landlord, forfeiture, the tenant transferring the remainder of
rent increases may be pre-agreed by the parties where its interests in the lease to the immediate landlord, and merger.
the lease exceeds three years and it is also not unusual to A tenant can renew their lease if the lease agreement includes
include rent caps. Nevertheless, the landlord must comply an express provision for renewal. The option-to-renew clause
with the relevant tenancy laws, which generally contain grants the tenant an automatic right to renew the lease. The
provisions that prohibit arbitrary or unilateral increase of provision must state the time at which the tenant can exercise
rent by landlords. such right to renew the lease, the mode of notice, conditions to
c. Tenant’s right to sell or sub-lease: there is usually an be fulfilled and the terms of the new lease.
express provision in the lease agreement preventing the
tenant from assigning or subletting their interest in a lease 10.6 Does the landlord and/or the tenant of a business
to a third party without the consent of the landlord and, lease cease to be liable for their respective obligations
where this provision is lacking, the tenant may assign or under the lease once they have sold their interest? Can
sublet his interest except prevented by law. For example, in they be responsible after the sale in respect of pre-sale
non-compliance?
Lagos State, the Tenancy Law expressly prohibits a tenant
from assigning or subletting any part of the premises
without the landlord’s consent. Generally, neither the landlord nor the tenant will be liable
d. Insurance: both landlord and tenant have insurable for their obligations in the lease agreements once they sell their
interests and certain factors are considered to determine interests. They can, however, be responsible after the sale in
who is to insure between the parties. For example, where respect of pre-sale non-compliance where certain terms survive
the real estate is being used as collateral for a loan, the termination. The lease may also include a clause indicating that
bank usually directs the landlord to insure the real estate termination will not affect any rights, remedies, obligations
against damage or destruction. If the real estate is being or liabilities of the parties that have accrued up to the date of
used for a lengthy period, say five years and above, or the termination, including the right to claim damages in respect of
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130 Nigeria
any breach of the agreement that existed at or before the date of or implicitly as to a fixed-term lease under the fixed tenancy or
termination. This clearly imposes an enforceable contractual right. tenant by will from the contractual document.
Rent Increase: the landlord may include a provision to increase
the rent in the lease agreement subject to an option to renew;
landlords and tenants designed to promote greater however, where there is no option to renew the clause and after
sustainable use of buildings and in the reduction of the determination of the lease both parties desire to enter another
the “environmental footprint” of a building. Please fixed tenancy, such rent increase must be agreed before execution
briefly describe any “green obligations” commonly of the lease agreement. The Tenancy Law expressly prohibits an
found in leases stating whether these are clearly arbitrary or unilateral rent increases by landlords.
defined, enforceable legal obligations or something not Tenant’s right to sell or sub-lease: there is usually an express
provision in the lease agreement preventing the tenant from
assigning or subletting their interest in a lease to a third party
without the consent of the landlord and where this provision
Green leases are rare in Nigeria. Sustainable real estate is is lacking, the tenant may assign or sublet his interest except
relatively new in Nigeria and mostly involves the use of prevented by law. For example, in Lagos State, the Tenancy Law
technologies that reduce building costs and save energy. In an expressly prohibits a tenant from assigning or subletting any
investor-developer relationship, it is not unusual for the investor part of the premises without the landlord’s consent.
to make the achievement of sustainable real estate goals a Insurance: both landlord and tenant have insurable interests
condition of investment. and certain factors are considered to determine who is to insure
between the parties. For example, where the real estate is being
10.8 Are there any trends in your market towards more used as collateral for a loan, the bank usually directs the landlord
flexible space for occupiers, such as shared short- to insure the real estate against damage or destruction. If the
term working spaces (co-working) or shared residential real estate is being used for a lengthy period, say five years and
spaces with greater levels of facilities/activities for above, or the tenant maintains a high-risk business, the tenant
residents (co-living)? If so, please provide examples/
details.
would insure in this case. However, a covenant to insure may
be implied by statute as is the case in Lagos State where the
requirement of insurance is implied in all leases.
As the real estate market continues to experience rapid growth Change of control of the tenant: concerning a change of
in Nigeria, building owners often maximise spaces and gain control of the tenant or the transfer of a lease as a result of a
profits from shared workspaces rather than depend on income corporate restructuring (e.g. merger), these are not standard
from just one individual or organisation. provisions included in the lease agreement, though the same is
Co-working spaces have become an affordable alternative anticipated by the parties; in this case, either party would discuss
to renting or buying commercial office space. Regus and relevant clauses with the other party and include agreed terms
Workstation International Co-work Limited are examples of real
in the contract.
estate organisations that provide co-working spaces in Nigeria;
Repairs: the responsibility for repairs is often included in the
there are many more who also provide meeting and conference
lease agreement. In the absence of such covenant to repair, the
room facilities.
tenant should repair on account of the implied covenant to use the
The high cost of renting or buying a residential property has
real estate in a tenantable manner. In Lagos State, the landlord
also contributed to the rise of co-living spaces. It has become a
has an implied duty to keep and maintain external parts of the
popular trend in Nigeria’s real estate market. Spleet, Fibre and
leased real estate, e.g. roof and walls etc. Standard practice leaves
Fine & Country are examples of co-living providers in Nigeria.
the responsibility for all external and structural repairs with the
landlord, while the tenant is responsible for all internal maintenance
112 Leases of Residential Premises and repair. If the disrepair follows from the operation of wear and
tear, the tenant is not responsible for any such repair.
In Nigeria, there is usually no distinction in the laws that apply achieve vacant possession if the circumstances existed
to business leases or residential leases. Please see the response for the right to be exercised?
to question 10.1
The landlord (lessor) has legal rights to terminate a residential
11.2 Do the laws differ if the premises are intended for lease based on the terms agreed between the parties. Instances
multiple different residential occupiers? such as the effluxion of time, abandonment, breach of any
covenant, or where the premises are required by the landlord
No, the laws are the same. for personal use or substantial repairs, are also reasons for a
landlord to terminate a residential lease.
Steps to be taken to achieve vacant possession are as follows:
11.3 What would typical provisions for a lease of
a. Service of a statutory notice to quit to be determined by the
(a) length of term; (b) rent increases/controls; (c) the type of tenancy; for example, six months’ notice will apply
tenant’s rights to remain in the premises at the end of to a yearly tenancy.
the term; and (d) the tenant’s contribution/obligation to b. Service of statutory notice, i.e. the seven days’ notice of
the property “costs”, e.g. insurance and repair? owner’s intention to apply to recover his premises for an
effluxion of time.
Length of time: a residential lease would indicate the length of c. Filing the action in the appropriate courts (magistrate or
the term of the lease. It must be ascertainable either expressly high courts) depending on the rental value of the rent lease,
Real Estate 2024

including the following documents: lease agreement; seven also governmental bodies responsible for controlling the use of
days’ notice; letter of authority; power of authority; and land and buildings in various states in Nigeria. For instance, in
correspondence of any ordinary summons with particulars Lagos State, the Lagos State Urban and Regional Planning and
of claim. Development Law of 2010 established three physical planning and
d. Service of the writ to the tenant regarding the matter before development agencies: the Lagos State Physical Planning Permit
the court, calling witnesses on trial. Authority (LASPPPA) is responsible for processing and issuing
e. Obtaining the judgment of the court and an order of planning permits in Lagos State; the Lagos Building Control
possession based on the grounds of the landlord as claimant Agency (LASBCA) is responsible for monitoring and enforcing
in the suit. building control regulations; and the Lagos State Urban Renewal
f. Liaising with the bailiff of the court to take possession of the Agency (LASURA) is vested with the responsibility to implement
premises from the tenants with the warrant of possession. state policy on urban renewal and the upgrade of slums in Lagos.
permitting and related matters concerning the use, Development permits and building plan permits are required.
development and occupation of land? Please briefly They evolve over time and will require a visit to the relevant
describe them and include environmental laws. authority prior to construction works.
The Land Use Act 2004 and Constitution of the Federal

Republic of Nigeria 1999 are the main laws governing the use, obtained in your jurisdiction? Can implied permission be
development and occupation of land in Nigeria. obtained in any way (e.g. by long use)?
The Nigerian Urban and Regional Planning Act 1992, Cap N138
LFN 2004 establishes the National Urban and Regional Planning
In Nigeria, building permits and licences are required from the
Commission, which prescribes planning responsibilities and
relevant authority prior to the construction of a building either
development plans for the federal, state, and local governments,
by a developer or landowners.
respectively. States also exercise physical planning responsibilities Implied permission to use a property in a certain way
and enact planning laws for the state. (residential, commercial industrial, religious, etc.) may be implied
The National Environmental Standards and Regulation by long use only where the state ratifies it by making a change
Enforcement Agency (NESREA) Act 2007 established the of use for property in the area. For example, it is common for
National Environmental Standards and Regulation Enforcement the state to reclassify a residential area to a commercial area due
Agency (NESREA), which is responsible for the protection and to the long use of said area for commercial use by an increasing
development of the environment. number of property owners.
The Environmental Impact Assessment Act 1992 requires an
assessment of public or private projects likely to have a significant
impact on the environment. States enact state-wide environmental 12.6 What is the typical cost of building/use permits and
management and protection laws.
The Harmful Waste (Special Criminal Provisions) Act, 2004
prohibits carrying, dumping or depositing harmful waste in the Building permit timelines vary among states in the federation.
air, land or waters of Nigeria without lawful authority. In Lagos, the process typically takes a minimum of 60 days. To
streamline and expedite the application process, the relevant
agency (the LASPPPA) introduced an online portal for e-permit
12.2 Can the state force land owners to sell land to it? If applications. The intention was to reduce the application timeline
by at least 20 days. Despite these efforts, some applicants continue
mechanism.
to submit physical applications at the registry due to the portal’s
inefficiencies. The cost of a building permit is not fixed and
In Nigeria, the state is not authorised to force landowners would be calculated based on several factors, which include the
to sell their land to it. However, the state has the power to location of the land, size of the land, type of building envisaged
revoke a landowner’s right of occupancy for public interest. If for construction, value of the building, number of residents the
a landowner’s right of occupancy is revoked for public interest building will serve, number of floors in the building, etc.
reasons, the state is required to provide compensation to the
landowner. The compensation is calculated based on the value of
the land at the time of the revocation of the right of occupancy,
and any improvements made on the land are taken into account in and how are they likely to affect the transfer of rights in
the calculation. To legitimately effect a compulsory acquisition of real estate or development/change of use?
property, the relevant procedure for acquisition must be strictly
followed by the state; failure to do so may vitiate the acquisition.
Historic monuments are protected under the National Commis-
sion for Museums and Monuments Act 2004 and the Nigerian
12.3 Which bodies control land/building use and/ Urban and Regional Planning Act, 1992 (URPA). A museum
or occupation and environmental regulation? How do or monument may only be demolished, altered or extended
buyers obtain reliable information on these matters? if the Control Department created under the URPA gives a
written consent for the execution of works on the building upon
The National Environmental Standards and Regulation Enforce- obtaining consent from the National Commission for Museums
ment Agency is the regulatory agency for enforcing environmental and Monuments.
standards, regulations, laws, policies, and guidelines. There are
Real Estate 2024

132 Nigeria
Consent of the governor or minister will be required when there when implemented, has the capacity to save 40% of current
is a transfer of interest; there is the Listed Sites (Preservation) energy usage in buildings. It sets the minimum efficiency
Law of Lagos State, which provides that no property, site, or requirements for new buildings to achieve reductions in energy
monument location to which the law applies as a listed site under use and gas emissions over the life of the building.
grades I, II and III shall be altered, demolished or improved
upon – except as is necessary, owing to normal wear and tear or 132 Climate Change
minor repairs – without the prior issuance of listed site consent
of the governor in accordance with the provisions of the law.
12.8 How can, e.g. a potential buyer obtain reliable emissions (including any mandatory emissions trading
information on contamination and pollution of real scheme).
your jurisdiction? The Climate Change Act, 2021 was enacted to provide a
framework to mainstream climate change action, provide for
Section 55 of the Environmental Impact Assessment Act carbon budgeting and establish the National Council on Climate
provides for the maintenance of a public registry for the purpose Change. It is the only climate change law in West Africa. It
of facilitating public access to records relating to environmental provides for a climate change fund and applies to public and
assessments. A potential buyer may obtain information from private persons as well ministries, departments and agencies. It
the public registry maintained under this Act. Also, any person charges the Federal Ministry of Environment and Ministry of
requiring clarification on environmental issues may also visit Budget and National Planning to set carbon emissions budget,
the Federal Ministry of Environment or any relevant state whilst the National Council sets the National Climate Change
environmental agency for environment-related information. Action Plan. There are currently ongoing plans to launch a
carbon tax and budget policy.
clean-up ever mandatory? 13.2 Are there any national greenhouse gas emissions
reduction targets?
Non-compliance with environmental laws, including the National
Environmental Standards and Regulations Enforcement Agency Yes, a net-zero target is set for 2060.
(NESREA) Act, the Environmental Impact Assessment Act,
National Environmental (Construction Sector) Regulations,
and pertinent state environmental laws and waste-management (not already mentioned) which aim to improve the
regulations, can trigger enforcement actions. In such instances, sustainability of both newly constructed and existing
the NESREA, relevant state environmental regulatory agencies, buildings?
or a court of competent jurisdiction may issue a mandatory
environmental clean-up order against defaulters. There are none at this time.
12.10 Please briefly outline any regulatory 142 COVID-19

Building Energy Efficiency Guidelines for Nigeria give practical the effect of the Coronavirus (COVID-19) pandemic and
advice to professionals in Nigeria on how to design, construct, which remain in place.
and operate more energy-efficient buildings. The National
Building Energy Efficiency Code also specifies the minimum There are no laws to this effect.
energy required to achieve energy efficient buildings. The code,
Real Estate 2024

Ayobami Tunde is the managing partner of Tunde & Adisa Legal Practitioners. He is a highly experienced professional in the real estate and
corporate commercial practice; with over 15 years of expertise, he supervises the real estate practice within the firm and has successfully
advised on regulatory compliance matters in real estate and negotiated concession agreements, development agreements, and project
financing for the development of residential and commercial buildings and facilities.
In the dynamic real estate landscape of Nigeria, Ayobami has established a strong reputation for his innovative approach to structure and
fund real estate projects. He thrives on tackling challenging real estate problems and consistently seeks fresh and resourceful approaches
to commercial real estate transactions.
One of Ayobami’s recent notable transactions includes providing valuable advice on a USD 500 million development of a 120-hectare
manmade island. He is an esteemed member of the Nigerian Bar Association, the International Bar Association, and the Institute of Chartered
Secretaries and Administrators.
Tunde & Adisa Legal Practitioners Tel: +234 802 356 8877
16 Ajasa Street Email: atunde@tundeadisa.com
Onikan, Lagos URL: www.tundeadisa.com
Nigeria
Gbemisola Mosuro is a partner of the firm. With her exceptional expertise in transactional law, she provides invaluable guidance to clients
regarding corporate, commercial, and real estate operations and transactions in Nigeria. Gbemisola’s proficiency lies in drafting, reviewing,
and negotiating corporate commercial contracts, as well as offering advice on regulatory corporate compliance matters. With over 15 years
of experience, she has successfully represented clients in diverse projects, including real estate transactions, investments, share and asset
purchases and sales, company formation and structuring, as well as joint ventures and strategic alliances. Gbemisola is a member of the
Nigerian Bar Association.
16 Ajasa Street Email: gmosuro@tundeadisa.com
Nigeria
Opeyemi Adekanye is a dynamic associate specialising in corporate and commercial law. Her proficiency spans contract drafting, company
secretarial duties, intellectual property and immigration advisory matters. With a keen eye for detail, Opeyemi tailors commercial agreements
to meet client needs and ensures meticulous compliance with statutory requirements. As a trusted advisor, she guides clients to protect their
interests and demonstrates a commitment to deliver exceptional service and practical solutions.
16 Ajasa Street Email: oadekanye@tundeadisa.com
Nigeria
Tunde & Adisa Legal Practitioners (T&A Legal) is a corporate commercial

and dispute resolution law firm with offices in Lagos, Abuja, and Ibadan in
Nigeria. We recognise the pivotal role that our services play in shaping the
business and commercial operations of our clients and we are committed
to ensuring that we provide innovative solutions that not only meet their
present needs but also contribute to their long-term growth and success.
Our comprehensive legal advice and competitive services cater to
individuals and businesses seeking to engage in commercial activities in
Nigeria. The firm’s areas of practice include corporate/commercial practice,
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& immigration, real estate, debt/asset recovery, business advisory, legal
risk consulting. Our clientele includes international corporations, local
businesses, governments and high-net-worth individuals.
www.tundeadisa.com
Real Estate 2024

134 Chapter 14
Portugal
Portugal
Teresa Madeira Afonso
PLMJ Francisco Lino Dias
Portuguese judges cannot create law but only interpret

12 Real Estate Law and apply it. Case law is merely a complementary source
of interpretation and application of the law, and the rule of
1.1 Please briefly describe the main laws that precedent does not exist in Portugal.
response to question 10.1. Those relating to zoning and 1.3 Are international laws relevant to real estate in your
environmental should be listed in response to question jurisdiction? Please ignore EU legislation enacted locally
12.1. Those relating to tax should be listed in response to in EU countries.
Only EU legislation may be relevant to real estate in Portugal.
The main legislation that governs real estate in the Portuguese International law is not relevant, since real estate in Portugal is
jurisdiction is: regulated by national law.
■ The Constitution of the Portuguese Republic, which
enshrines the right to private property. Under the 22 Ownership
Constitutional law, expropriation may only be carried out
based on the law, considering the public interest and upon 2.1 Are there legal restrictions on ownership of real
payment of fair compensation. estate by particular classes of persons (e.g. non-resident
■ The Portuguese Civil Code, which enshrines the right of persons)?
ownership (comprising the full and exclusive right of use,
enjoyment and disposal of the property), the admissibility
There are no legal restrictions on the ownership of real estate by
of co-ownership, the regulation of surface rights, usufruct
particular classes of persons (e.g., non-resident persons).
rights, pre-emption rights and horizontal property. The
Civil Code also regulates sale and purchase agreements,
leases, construction agreements, easements and mortgages. 32 Real Estate Rights
■ The Legal Framework of Urban Development and
Construction (“RJUE”) and the General Regulation 3.1 What are the types of rights over land recognised
of Urban Construction (“RGEU”), which regulate the in your jurisdiction? Are any of them purely contractual
development, construction and use of real estate.
■ Decree-Law 84/2021, which sets out the rights of
consumers in the case of a lack of conformity of digital Ownership in Portugal comprises the full and exclusive right of
goods, content or services, and provides a set of subjective use, enjoyment and disposal of property, although the fiduciary
and objective requirements for assessing conformity. As ownership of assets located abroad is also accepted in the
regards real estate property, a liability period of 10 years is Madeira Free Trade Zone.
established for consumers in the case of structural defects. Co-ownership of property is admissible.
■ Decree-Law 268/1994, which regulates the horizontal The usufruct right is also legally permitted and gives its holder
property regime. the powers of use, enjoyment and administration during an
■ Decree-Law 1/2020, which creates the right in rem of a agreed period or for life. The law imposes the sole limitation that
permanent residence for life. This right in rem allows one the holder retains its form, substance and economic purpose.
or more natural persons to use a third party’s house as Portuguese civil law also provides for the existence of the
their permanent residence for life, upon payment to the surface right, which consists of the right to build or maintain, in
owner of a deposit and periodic payments. perpetuity or temporarily, a construction on land belonging to
■ Decree-Law 275/1993, which establishes timesharing another person, or to plant or maintain plantations on such land,
rights in rem. and may be constituted by contract, will or adverse possession.
Parties may also agree to enter into lease agreements (for a
maximum term of 30 years, which can be renewed) as well as
1.2 What is the impact (if any) on real estate of local lending (“comodato”) agreements (establishing a temporary right of
common law in your jurisdiction? use of an immovable property without economic compensation).
It is also possible for a building or a set of functionally
The Portuguese legal system is based on civil law with written interconnected buildings to be subjected to “horizontal
legislation as the main source of law. property” and condominium regulations.
Real Estate 2024

PLMJ 135
3.2 Are there any scenarios where the right to land months of the date of completion (a fine is due after that period).
diverges from the right to a building constructed Any transfer of ownership that is not registered means the buyer is
thereon? not protected against third parties (“erga omnes effect”) and cannot
transfer the property. Mortgages must be registered to be valid.
Ownership of real estate encompasses the airspace
corresponding to the surface, as well as the subsoil, with 4.4 What rights in land are not required to be
everything contained in it that has not been separated from it registered?
by law or legal transaction.
However, Portuguese civil law also establishes a surface right.
Rural leases (or urban leases if their initial term does not exceed
The surface right consists of the right to build or maintain, in
six years), lending agreements, promissory agreements for
perpetuity or temporarily, a construction on land belonging to
purchase and sale are examples of agreements not required to
another person, or to plant or maintain plantations thereon.
be registered at the land registry. For the promissory contract to
Public entities may also give a third party the right to build on a
be enforceable against third parties, however, the parties must
property, while maintaining ownership of the same.
expressly confer erga omnes effect on it and subsequently register
it. For this purpose, the parties must sign the document before
3.3 Is there a split between legal title and beneficial a notary, lawyer or paralegal (“solicitador ”) who will certify their
title in your jurisdiction and what are the registration signatures and attest to their capacity.
change this?
In principle, there is no split between legal title and beneficial
title under Portuguese law. However, the Civil Code establishes or qualities of title on first registration? Please give
a right in rem to usufruct, which permits the beneficiary to details. First registration means the occasion upon
make the full use of the asset and take any economic benefit which unregistered land or rights are first registered in
for a limited period of time (which cannot exceed the life of the the registries.
beneficiary or, for legal entities, 30 years). The usufruct right
must be recorded in the land registry. Definitive registration constitutes a presumption that the right
exists and belongs to the registered holder, under the precise
42 System of Registration terms in which the registration defines it. The definitive
registration of acquisition rights depends on the prior registration
4.1 Is all land in your jurisdiction required to be of the assets in the name of the person transferring those rights.
registered? What land (or rights) are unregistered? If not registered, the facts subject to registration may only be
invoked between the parties themselves or their heirs.
As of 2 November 2023, land registration is mandatory for Mortgages must be registered to be valid.
all types of land, including private land, land comprised In some cases, it is possible to bring forward the effects of
in the public domain and common land managed by local registration by registering the acquisition on a provisional basis.
communities (baldios). The land registry offices are the public This is usually done after the promissory sale and purchase
bodies responsible for the public system of registration, which is agreement and before the final transfer deed. In this case,
essential to prove the title over a property. The main purpose of when the title is transferred, the effects of the registration are
the land register is to provide information on a property’s legal retroactive to the time of the provisional registration.
status and guarantee the security of the property transaction.
As a rule, registration at the land registry office is compulsory
for all matters relating to titles since 21 July 2008. transferred to the buyer?
The final register constitutes a presumption of the existence
of a right to the property that belongs to the registered holder
under the precise terms set out in the register. Ownership of a property is transferred by the deed of sale and
purchase, rather than the registration. However, it is enforceable
against third parties after the registration of the acquisition.
guarantee?
There is no state guarantee of title. The Portuguese legal system rights?
protects any person acquiring title from a registered owner. Any
transfer of title is normally completed by a public deed executed
before a notary, who will guarantee compliance with the legal Under the principle of priority of registration, if there are
requirements for the transaction to take place. multiple entries in the land register of incompatible rights over
the same property, the right that was registered first prevails
(even if the latter was created prior to that registration date). The
4.3 What rights in land are compulsorily registrable? right first registered prevails over subsequent entries relating to
the same property, in the order of the dates of the entries, and,
on a same date, of the time of the corresponding submissions. It
Only facts determining the constitution, recognition, transfer or is possible to register more than one mortgage. The subsequent
other changes of in rem rights over a property (acquisitions, leases mortgages registered after the first are subordinated to the first
with a duration of more than six years, mortgages, easements, degree mortgage. In some cases, it is possible to bring forward
horizontal property, etc.) are subject to mandatory registration the effects of registration by registering the acquisition on a
at the Land Registry Office, and this must be filed within two provisional basis. This is usually done after the promissory sale
Real Estate 2024

136 Portugal
and purchase agreement and before the final transfer deed. In this authentication of private documents was approved. However,
case, when the title is transferred, the effects of the registration this regime is not applicable to facts subject to land registration,
are retroactive to the time of the provisional registration. unless they relate to the following:
a) the constitution, recognition, acquisition, modification or
52 The Registry / Registries extinction of the rights of ownership, usufruct, use and
habitation, surface or servitude;
b) the constitution or modification of horizontal property;
jurisdiction? If more than one please specify their c) the promise to sell or encumber real estate, if it has been
differing rules and requirements. given real effect, or the assignment of the contractual
position arising from that fact;
d) mortgages, their assignment, modification or extinction,
The land registry offices are the public bodies responsible for
the assignment of the degree of priority of the respective
the public system of registration, which is essential to prove the
registration and the consignment of income.
title over a property. The land registry offices are organised on
To make this possible, the Distance Services Platform
a municipal basis; however, their jurisdiction is not limited by
(“DSP”) became available, establishing the possibility to carry
their geographical location and they can perform acts relating to
out a series of authentic acts, authentications and recognitions
any immovable property in Portugal.
remotely via videoconference. To do this, the authenticator
Access to them is centralised through a national website available
(lawyer, notary, paralegal or enforcement agent) will have to
at https://www.predialonline.pt , which provides online services
make a prior appointment for the act to be carried out at the
for consultation of registrations and requests for registration.
DSP and will be assigned a unique and sequential identification
number. The respective participants must have: (i) active
5.2 How do the owners of registered real estate prove digital signatures; and (ii) computers or devices with an internet
their title? connection, microphone, sound and camera.
Videoconference sessions are subject to audiovisual recording
Definitive registration constitutes a presumption that the right once participants have given their consent to the collection of
exists and belongs to the registered holder, under the precise the information needed to verify their identity by the lawyer or
terms in which the registration defines it. Typically, owners solicitor.
of registered real estate prove their title by means of the All sessions are recorded and stored for a period of 20 years.
presentation of an updated land registry certificate evidencing The documents must be digitally signed by the participants and
the registration of the acquisition in question. submitted to the IT platform and have the same probative value
as acts carried out in person. Access to an electronic copy of the
document signed by all parties will also be available.
5.3 Can any transaction relating to registered real This new service is temporary and runs until April 2024.
After this period, its continuation will be evaluated.
on ownership of registered real estate be accessed 5.4 Can compensation be claimed from the registry/
electronically? registries if it/they make a mistake?
The transfer or constitution of rights in rem is normally completed Should the register application be rejected or made provisionally
by a public deed executed before a notary, who will guarantee due to some remaining doubts, the applicant is informed by
compliance with the legal requirements for the transaction to take reasoned order and may lodge an administrative contentious
place. However, it can also be executed by means of a certified appeal to the registrar’s hierarchical superior or appeal through
private agreement, signed in the presence of a lawyer or a paralegal. the courts. The State and other legal persons governed by public
The application for registration must contain the identification law will be exclusively liable for damages resulting from unlawful
of the applicant, the indication of the facts and properties to which actions or omissions, committed with minor fault, by the
it refers, as well as the list of documents that support it (relevant members of its bodies, employees or agents, in the performance
documents that prove the act to be registered, such as the sale of their administrative duties and due to that performance. The
and purchase deed or other acquisition titles, such as a judicial State and other corporate bodies governed by public law are also
decision or other appropriate documents by means of which the liable when the damage did not result from the specific conduct
title was created). Registration can be requested in person, by of a particular body, official or agent, or when it is not possible
courier or electronically through an active digital signature, either to prove personal commission of the action or omission but
by the interested party or by a lawyer, notary or paralegal. The must be attributed to an abnormal functioning of the service.
viability of the request for an entry is assessed against applicable
legal provisions, the documents submitted and previous entries.
Special attention is paid to checking the identification of the 5.5 Are there restrictions on public access to the
building, the standing of the interested parties, the formal
regularity of the titles and the validity of the acts contained in other rights affecting real estate and is this achieved
them. Further to paper copies of certificates, the information can by a search of the register? If not, what additional
be accessed online by means of an electronic certificate, available information/process is required?
at: https://www.predialonline.pt , which contains up-to-date
information on the legal situation of properties and on pending
The main purpose of the land register is to provide information
applications for registration. The application must be made on
on a property’s legal status and guarantee the security of the
the basis of the property’s description number or its tax number.
property transaction. As a rule, it is compulsory for all matters
Recently, a temporary legal regime applicable to the
relating to titles since 21 July 2008 (including encumbrances
performance, via videoconference, of authentic acts and
subject to registration). The final registration constitutes a
Real Estate 2024

PLMJ 137
presumption of the existence of a right to the property that 6.3 Is there any change in the sources or the
belongs to the registered holder under the precise terms set out availability of capital to finance real estate transactions
in the register. The Predial Online website provides access to in your jurisdiction, whether equity or debt? What are the
information and certificates relating to immovable property main sources of capital you see active in your market?
recorded in the Portuguese land register and is accessible to
any person (any person can obtain a land registry certificate in Both equity and debt are active in the market. However, there are
relation to any property by paying the applicable fee). Access specific financing regulations applicable to bank debt in respect
to the tax certificates of a particular property is limited to the of the ratios between the amount of the loan and the value of the
owners and their legal representatives. However, notaries, property to be financed (loan-to-value (“LTV”)): 90% for loans
lawyers and paralegals may access such information, provided for the purchase of private housing for long-term residence;
they have the tax identification of the property and the taxpayer 80% for credit for purposes other than one’s own permanent
number of the respective owner. There is also a public platform housing; and 100% for loans for the purchase of property owned
showing the limits and geo-location of rural properties that by the institutions and property leasing contracts.
are publicly accessible, designated as “Balcão Único do Prédio” or
“BUPI”. BUPI is not yet available in all municipalities, but it is
expected that it will cover the whole country by 2026. 6.4 What is the appetite for investors and/or
62 Real Estate Market give examples.
6.1 Which parties (in addition to the buyer and seller Investors and developers are particularly interested in touristic
and the buyer’s finance provider) would normally be projects, data centres, logistic parks, student and senior residence
projects, and, generally, sustainable and energy-efficient buildings.
In a real estate transaction, each party usually appoints a lawyer 6.5 Have you observed any trends in particular market
to assist them during the acquisition and negotiation process.
A real estate agent is also usually involved. The activity of examples.
the real estate agents is regulated in Portugal and all real estate
agents must be licensed by the Portuguese Real Estate Regulator
(“IMPIC”) (“Licença AMI”). The attraction for shopping centres has slowed down as a result
In specific types of properties (e.g., commercial and industrial), of the pandemic, which has, instead, increased the appetite
technical or environmental due diligence or inspection may be for logistic asset transactions and build-to-suit transactions,
performed by experts in these fields and can be important in particularly targeting the last mile logistics segment. Also,
order to check the quality of the construction and compliance the More Housing Programme (Programa Mais Habitação),
with all applicable legislation and regulations. approved through Law 56/2023, of 6 October but announced
Accountants also play an important role, as they are equipped in February 2023, has led to a downturn in the residential real
to provide a myriad of services, such as tax representation, annual estate market, namely considering the significant alterations in
tax statements, rents payroll and interaction with the Portuguese several fields, including local lodging (alojamento local ), urban
Tax Authority. All certified and accredited accountants can lease law, mobilisation of vacant properties, residence permits
be consulted at: https://www.occ.pt . If the investor is not an for investment activity and tax measures.
EU resident, a tax representative must be appointed (a resident
taxpayer) to interact with the Tax Authority on its behalf. 72 Liabilities of Buyers and Sellers in Real
The notary is also usually involved as, in general, the Estate Transactions
definitive contract for sale and purchase is normally completed
by means of a public deed executed before a notary. The notary 7.1 What (if any) are the minimum formalities for the
will guarantee compliance with the legal requirements for the sale and purchase of real estate?
transaction to take place. Nonetheless, the law provides that the
definitive agreement can also be executed by means of a private
A contract for sale and purchase (asset deal) is normally completed
agreement certified by a lawyer or a paralegal.
by means of a public deed executed before a notary. The notary
As the deed is always executed in Portuguese, non-Portuguese
will guarantee compliance with the legal requirements for the
speaking parties should appoint an independent translator.
transaction to take place. Depending on the nature of the
property, these are usually the title to the property (land registry
6.2 How and on what basis are these persons certificate), tax certificate, use permit, energy certificate (“EC”),
remunerated? official document with the technical characteristics of the unit
(if applicable), tax payment receipts (Stamp Tax and Real Estate
The commission due to the real estate agent can be a fixed amount Transfer Tax (“RETT”), condominium charges certificate and
or a percentage of the sale price of the property. Most real estate a declaration of the Ultimate Beneficial Owner. The notary will
agencies operating in Portugal define their commission as a also confirm the non-exercise of legal pre-emption rights and
percentage of the sale price. Value Added Tax (“VAT”) will be that the cancellation of encumbrances is ensured (if applicable).
added to the commission. Nonetheless, the law provides that the definitive agreement can
The notary’s fees are not fixed. They depend not only on also be executed as a certified private agreement, signed in the
the notary’s office but also on the complexity and price of the presence of a lawyer or a paralegal. Also, recently a temporary
transaction. These notary fees are usually paid by the buyer. legal regime applicable to the performance, via videoconference,
The fees of the remaining advisers are freely negotiated with of authentic acts and authentication of private documents was
the service providers. approved, including sale and purchase of real estate deeds
Real Estate 2024

138 Portugal
through the DSP. This new service runs until April 2024; after 7.6 What (if any) are the liabilities of the buyer (in
the end of this period, its continuation will be evaluated. addition to paying the sale price)?
7.2 Is the seller under a duty of disclosure? What The buyer is responsible for the payment of the sale price, RETT,
matters must be disclosed? Stamp Tax, and the fees due to the notary and land registry.
The seller must act in good faith without omitting any 82 Finance and Banking
information that, if known by the buyer, would prevent the
buyer from completing the transaction. The information duties 8.1 Please briefly describe any regulations concerning
may be violated both by act, in cases where the seller has made the lending of money to finance real estate. Are the rules
inaccurate statements, and by omission, by remaining silent as to different as between resident and non-resident persons
information that the buyer had an objective interest in knowing. and/or between individual persons and corporate
entities?

misrepresentation? Lending is a regulated activity in Portugal (both to consumers
and corporate clients) and it may only be conducted by authorised
entities. Decree-Law 74-A/2017 implemented the mortgage
If the seller has made specific representations in respect of a credit directive (Directive 2014/17/EU) in Portugal, and this
property (e.g., assured certain qualities) that are proven to be created a set of rules protecting consumers from mortgage-
wrong, the seller is liable toward the buyer, and ultimately, lending transactions. This law does not cover real estate lending
the buyer may be entitled to claim a reduction in the price. In with corporate clients, which are subject to similar protections.
respect of defects, if the buyer knew apparent defects, it is legally The provisions of Decree-Law 74-A/2017 are generally
presumed that they were accepted. In case of concealed defects, considered mandatory provisions and thus apply to any mortgage
the buyer has the right to demand (i) the correction of the defect, credit agreement with Portuguese resident consumers, regardless
(ii) a price reduction, (iii) the termination of the agreement, or of the law elected by the parties governing the agreement.
(iv) the payment of compensation. This obligation does not
exist if the seller was not aware of the defect or lack of quality in
the real estate asset without fault. 8.2 What are the main methods by which a real
borrower?
the scope of these? What is the function of any such A facility agreement secured by a mortgage and additional
guarantee or warranties (e.g. to apportion risk, to give security is the most common financing and security method
information)? Would any such guarantee or warranties for real estate projects in Portugal. Securities usually associated
act as a substitute for the buyer carrying out his own with property financing comprise a mortgage of property,
diligence? assignment of income, pledge of shares/quotas, assignment of
credits as security, pledge of bank accounts or sureties. In line
Parties may negotiate a set of the seller’s representations and with global market practice, it is also common to set operational,
warranties and compensation obligations to reinforce those collateral and/or financial covenants to protect loans (such
provided in the Civil Code or to include relevant facts pertaining as reporting obligations, negative pledges or restrictions to
to the property and the transaction. These usually include the disposals, LTV ratios, interest coverage ratios, debt-service
seller’s legal capacity to dispose of the asset, the non-existence coverage ratios, etc.).
of charges and encumbrances other than those registered at the
land registry, compliance with environmental legislation and 8.3 What are the common proceedings for realisation
planning rules, payment of taxes and other charges, and the of mortgaged properties? Are there any options for a
absence of legal disputes relating to the property, etc. mortgagee to realise a mortgaged property without
Representations and warranties are normally limited by the involving court proceedings or the contribution of the
due diligence information, and specific indemnities may be mortgagor?
agreed to cover issues resulting from the due diligence exercise.
Depending on the type of transaction and parties involved, In case of default of the secured obligation, the lender will
warranty and indemnity insurance may also be considered. not be entitled to repossess the mortgaged asset without court
proceedings. Therefore, the lender must bring an enforcement
7.5 Does the seller retain any liabilities in respect of action in order to request the judicial sale of the mortgaged
the property post sale? Please give details. property.
The seller is liable for defects in the properties it has built or 8.4 What minimum formalities are required for real
rebuilt for five years after the transaction, and claims are subject estate lending?
to an expiry period of one year, running from the knowledge of
the defect. In the case of a real estate asset transaction between Pursuant to Portuguese law, loan agreements entered into by
a professional seller and a consumer, the warranty period licensed entities must be in writing, whereas mortgages are created
applicable to structural defects was extended, as of 1 January by a notarial deed, which is essentially a contract prepared, testified
2022, to 10 years. by and executed before a notary public. The notarial deed for the
creation of mortgages is not sufficient for the full validity and
enforceability of this type of security, because its registration at
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the Land Registry Office is also required as condition for its contract, on the grounds of default, before beginning any
validity (this formality is usually dealt with by the notary). enforcement action.
A credit, due and payable, secured by a mortgage may be
enforced through an enforcement action when the creditor
against the borrower or the real estate asset by other has an enforcement title (such as an authentic document or
creditors? a certified document in which the debtor acknowledges its
obligation – a loan agreement is not an enforcement title itself
unless it is authenticated by a notary or lawyer, which is usually
Upon enforcement or foreclosure proceedings against the
the case when it has in rem security) in relation to it.
borrower, the lender will take priority over other creditors whose
The creditor asks the court to attach the property (real
claims are not preferential or who have no registered priority. In
estate) and prepare for its sale. The creditor usually appoints an
the event of an enforced sale, assets are transferred free of any
enforcement agent who will take the necessary steps to ensure
liens, as well as of any other in rem rights with no registration
the seizure of the property. However, the debtor will continue
prior to any seizure, pledge or guarantee.
to have access to and use of the property.
The borrower may try to frustrate the enforcement action,
8.6 Under what circumstances can security taken by a for instance by entering into a lease agreement, in order to make
lender be avoided or rendered unenforceable? the judicial sale more difficult or to try to make it less attractive.
Although it does not prevent the foreclosure of the security, in
Security over a property (such as a mortgage or an earnings case of judicial sale, the lease agreement may not be considered
assignment) must be registered at the Land Registry Office to be extinguished (which may be a limitation on its effective sale).
effective. Assuming that all the legal requirements are met, the Under Portuguese law, there is currently: (i) no specific protection
security will be valid and enforceable. concerning the enforcement of a mortgage over the main residence
However, there is a special provision under Portuguese of the borrower, including no specific restrictions on the judicial
insolvency law that states that, in a generic way, any acts that sale of that property with reference to the overall amount of the
reduce, frustrate, hinder, endanger or delay the satisfaction of debt; and (ii) no requirements for creditors to accept payment in lieu
the creditors can be clawed back. In the event the borrower is in relation to mortgage loans. However, in the case of the judicial
declared insolvent, the insolvency administrator may attempt to sale of the main residence of the debtor: (i) the sale of family homes
claw back acts carried out up to two years before the insolvency under insolvency or enforcement proceedings may be stayed if the
proceedings were started that are detrimental to the debtor and debtor argues that this is likely to endanger the debtor’s livelihood,
creditors’ interests. As a rule, clawback requires the bad faith of provided the stay does not cause excessive harm to the creditor;
the third party (conditional clawback). Under the law, bad faith and (ii) in cases where the enforcement of the mortgage is being
is understood to be the knowledge, at the date of the act, of any challenged by the debtor on substantive grounds, the debtor can
of the following circumstances: (i) the debtor is in an insolvency ask the judge to order the sale to be suspended until a decision is
situation; (ii) the prejudicial character of the act and that the rendered on the substantive challenge, where a potential sale could
debtor, at that date, is in a situation of imminent insolvency; and/ cause serious harm to the debtor.
or (iii) the start of the insolvency proceedings. However, there Furthermore, as of late 2012, a set of legal and regulatory rules
are certain transactions that are deemed detrimental regardless was approved addressing the approach that credit institutions
of bad faith. As such, these acts may be unconditionally clawed should take in order to prevent and monitor default situations in
back. The transactions include: credit contracts with private bank customers, including:
■ Creation of in rem securities by the debtor securing pre- ■ Decree-Law 227/2012 of 25 October encourages credit
existing obligations or others replacing them, within the institutions to adopt an Action Plan for Default Risk
six months prior to the start of the insolvency proceedings. (“PARI”, the Portuguese acronym). It sets out procedures
■ Creation of securities in rem simultaneously with the and measures to prevent loan default. It also creates the
creation of guaranteed obligations within the 60 days prior Out-of-court Procedure to Correct Default Situations
to the start of the insolvency proceedings. (“PERSI”, the Portuguese acronym). The aim of PERSI
The clawback has retroactive effects, meaning the insolvent’s is to encourage negotiations outside the courts between
estate will be put in the position that would have existed if the act credit institutions and bank customers in cases of default
had not been performed. The other party is under an obligation of loan agreements.
to return what it has received and, if it fails to comply with this ■ Law 59/2012 of 9 November 2012 establishes some other
obligation, the insolvency administrator may take legal action to extraordinary protections for home loan debtors. The
force it to do so. The insolvency administrator may also impose main provisions are:
sanctions if the other party persists in not complying with the ■ The credit institution and debtor can agree to make
obligation after the judicial decision is made. If the acquisition the mortgage loan subject to some special rules. In
was made for no consideration, any third party in good faith particular, they can agree that the judicial sale or the
only has to pay back to the extent it was enriched. If in bad faith, payment in lieu by default of the debtor extinguish all
regardless of whether this is real or assumed, the third party the debtor’s obligations under the loan agreement,
must return everything it has received. In turn, the insolvent except for the proceeds of the sale or the fixed value
estate is also under an obligation to return what it has received if for the payment in lieu.
the assets in question can be identified and separated from those ■ Until the judicial sale of the mortgaged property, if
that belong to the remainder of the estate. no other secured creditors, or the Tax Authority or
the Social Security have filed credit claims against
the debtor in the enforcement proceeding, the debtor
8.7 What actions, if any, can a borrower take to has the right to resume the contract. To be able to
do this, the debtor must pay in full any overdue and
unpaid instalments, as well as any default interest and
As a rule, the lender will be required to terminate the secured expenses incurred by the credit institution, if any.
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8.8 What is the impact of an insolvency process or a In general, none of these procedures will have any effect
corporate rehabilitation process on the position of a real on the real estate lender’s position (unless the lender agrees
estate lender? to change the contract clauses) and the security will remain
effective. However, the payment terms may be modified,
Under Portuguese insolvency law, a borrower is insolvent provided the payment plan is approved by the mandatory legal
whenever it is unable to perform its due obligations; that is, the majority of creditors.
obligations that are already matured. Nevertheless, borrowers are
also considered insolvent whenever their liabilities substantially 8.9 What is the process for enforcing security over
exceed their assets. The declaration of insolvency determines shares? Does a lender have a right to appropriate shares
the immediate seizure of all the borrower’s assets on behalf in a borrower given as collateral? If so, can shares be
of the insolvent estate, including mortgaged real estate. The appropriated when a borrower is in administration or has
assets are then administrated by the insolvency administrator entered another insolvency or reorganisation procedure?
or, in certain cases, by the insolvent company itself. All ongoing
legal actions, including enforcement actions, are suspended and Unlike a mortgage, the enforcement of a pledge may take place
usually subject to or joined to the insolvency proceedings. by means of an enforcement action or can be implemented
The mortgage loans are deemed to have matured and the out-of-court, if the applicable security documents provide for
lender can file its credit claim in the determined time limit after this possibility.
the decision that declares the insolvency is published on the As a rule, under Portuguese law, the pledgee, subject to the
official site for the publicity of insolvencies (Citius, available at: occurrence of an event of default, is entitled to be paid from the
https://www.citius.mj.pt/portal/default.aspx ). proceeds of the judicial sale of the pledged assets, prior to any
An insolvency plan may be presented by the debtor, the common creditor, although after any main statutory privileged
insolvency administrator or any creditor. When an insolvency credits (i.e., payment of court costs, certain types of overdue taxes
plan is being prepared or in any way discussed, the liquidation and overdue employment claims and social security charges).
of the assets and shares are suspended. If the insolvency plan However, the pledge agreement may stipulate – and the market
is not approved, the liquidation stage starts and the insolvency standard is that the contracts do provide for these possibilities
administrator begins to sell all the seized assets. – the enforcement of the pledge by means of the sale of the
In general, all creditors have equal rights and, when the debtor’s pledged assets or rights without recourse to the courts, i.e.,
assets are not sufficient, the creditors will be paid proportionally. through a private sale. In this case, the pledgee may apply the
This determination is excluded in some cases, when, as a result funds thus received to the payment of its credit.
of their ranking, certain debts must be paid first (such as the For financial pledges and pledge agreements executed after
credits secured over properties). However, some categories of 2017 that are not financial pledges, the pledge agreement may
debts, such as amounts owed by the insolvent estate, court costs, also authorise the pledgee to acquire title over the pledged assets
amounts owed to employees (if they work at the mortgaged provided the purchase consideration is set through a valuation
premises), certain tax debts and other special privileges (in this carried out after the secured obligations become due and
order) are paid prior to guaranteed in rem creditors. payable, in accordance with the valuation terms contractually
An insolvency declaration does not suspend the effects of agreed. The parties may also agree that the court will decide on
leasing agreements, thus they remain in effect. However, the the value to be attributed to the pledged assets.
insolvency administrator has the right to opt between contin- In order to facilitate the exercise of the pledgee’s rights, in
uing or terminating the leasing contract and should take this particular, the enforcement of the pledge out of court, it is usual
decision within a reasonable timeframe. If he or she fails to for the security documents to be accompanied by instruments
do so, the landlord may issue a notice to the insolvency admin- such as irrevocable powers of attorney, to enable the creditors
istrator to decide on the continuity of the leasing contract on to take whatever action may be required to protect or enhance
penalty of termination. their rights.
If the leasing contract remains in force, payment of rents If the share pledge agreement itself does not contain any
falling due after the date of the declaration of insolvency is description of the enforcement mechanism, it will be necessary
enforceable against the insolvent estate. Those amounts will be
to enforce the pledge agreement by court action.
considered debts of the insolvent estate. This means they will
In this case, it will be necessary to confirm whether the
be ranked and paid prior to any creditors, including secured/
pledge agreement is considered to be an enforcement title
privileged creditors. If rents due after the opening of insolvency
under Portuguese law. Under the Portuguese Code of Civil
proceedings are not paid, the creditor is also entitled to terminate
Procedures, private documents creating or recognising any
the leasing contract under the applicable contractual terms.
obligation must be registered or authenticated by a notary or
Therefore, within the period between the opening of
other entity or professional with power to so act (e.g., lawyers)
insolvency proceedings and the decision to be taken by the
in order to be valid as the basis for enforcement proceedings.
insolvency administrator regarding ongoing leasing contracts or
Should it be confirmed that the pledge agreement was not
notice of the landlord and termination, the landlord may not
executed under the above-mentioned formalities, the judicial
repossess the asset.
enforcement of the pledge may require a prior and time-
If the leasing contract has already been terminated by the
consuming declarative action (“ação declarativa”) to obtain a court
date of declaration of the insolvency, the landlord/owner can
decision recognising the amount owed. Furthermore, only
request the immediate handover of the property and claim the
afterwards will it be possible to bring an enforcement action
total amount of the rents and other penalties due and unpaid (as
for the seizure of the pledged assets and their further sale or
a common credit, if no in rem security is provided).
adjudication as repayment of the credits in question.
Regarding the corporate rehabilitation process, Portuguese law
The above-described process for the enforcement of mortgages
has established three pre-insolvency procedures for companies:
the Special Revitalisation Process (“PER”); the Out-of-court will apply to the enforcement proceedings based on a pledge.
Business Recovery Scheme (“RERE”); and the Extraordinary In the event of insolvency of the borrower, and in contrast
Business Viability Process (“PEVE”). with the above reorganisation procedures (PER, RERE and
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PEVE), there will be limitations on the possible out-of-court and the acquirer will be liable for the VAT assessment through
enforcement of the pledge. The shares will be seized on behalf the reverse-charge mechanism.
of the insolvent estate and will be sold within the liquidation
procedure (in which the lender may ask for the request to be
awarded to it). After the sale, the pledge creditor (i.e., the lender) seller on the disposal of a property?
will be paid according to the ranking of credits.
No other taxes are due by the seller (besides capital gains
92 Tax mentioned in the answer to question 9.3 above) on the disposal
of a property located in Portugal.
Generally, transfers of real estate located in Portugal are subject
to the RETT, levied on the transfer price stated in the transfer
deed or agreement, or on the taxable value of the property for If more than 50% of the company’s assets comprise real estate,
Municipal Property Tax (“MPT”) purposes, depending on which and by means of the transfer, an ownership of or above a 75%
one is higher. This tax is payable by the acquirer. The RETT threshold in the share capital of a company is acquired, RETT is
rates are 6.5% for urban property, 5% for rural property, and 10% due on the acquisition. The RETT is assessed on the higher of the
if the acquirer is a company resident in a blacklisted jurisdiction taxable value or book value of the real estate, and in proportion
or a company controlled, directly or indirectly, by a company to the percentage of shareholding acquired. Any real estate
resident in a blacklisted jurisdiction. For real estate exclusively directly allocated to an agricultural, industrial or commercial
intended for residential use, progressive RETT rates between 0% activity (excluding real estate resale activity in the case of real
and 7.5% will generally apply in accordance with the taxable value estate companies) is excluded from the above calculation.
of the property. RETT exemptions may apply, for example, on
certain acquisitions of real estate meant for urban rehabilitation, 9.7 Are there any tax issues that a buyer of real estate
or on the acquisition of property for resale purposes by real estate should always take into consideration/conduct due
companies. In addition to RETT, Stamp Tax will also apply on diligence on?
the acquisition of real estate, at a 0.8% rate applicable on the
taxable value of the property for RETT purposes. The buyer should conduct the appropriate searches and other
due diligence to check that RETT on previous acquisitions,
9.2 When is the transfer tax paid? MPT and Tax Additional to the MPT (if applicable) was properly
assessed and paid. This is done by requesting the RETT proof
of payment, the property’s MPT or Tax Additional to the MPT
The interested party (i.e., the acquirer) must file the appropriate
assessments and/or a certificate of the inexistence of tax debts
official RETT assessment form with the local tax office or
issued by the Tax Authority regarding the seller.
electronically, and the tax should be paid on that same day or in
the first following business day. Where the transfer takes place
through an act or contract executed in a foreign country, the 102 Leases of Business Premises
payment of the tax must be made during the following month.
income tax?
The following laws regulate the lease of business premises:
■ the Civil Code; and
Capital gains obtained by resident and non-resident individuals
■ the New Urban Lease Regulations (“NRAU”) approved
on the transfer of real estate generally fall under category G
by Law 6/2006.
(unless deemed business income), and the taxable income for
The applicable Portuguese urban lease regulations divide
Personal Income Tax (“PIT”) purposes corresponds to only
leases into two types: (i) leases for housing purposes; and (ii)
50% of the net gain of the year (i.e., the total capital gains minus
leases for non-housing purposes.
the total capital losses), which is then added to the taxpayer’s
total income (i.e., deriving from all types of income), and
subsequently subject to the general IRS progressive rates up to 10.2 What types of business lease exist?
48% (plus an additional solidarity tax up to 5%, if applicable).
The acquisition value may be updated by applying the monetary The assignment of the use of non-residential properties such as
depreciation coefficients whenever, on the date of sale, at least retail, industrial and offices may be agreed by a lease agreement
two years have passed since the acquisition. under the Urban Leasing Law. This law gives the parties
more flexibility to negotiate the conditions of the lease when
9.4 Are transfers of real estate subject to VAT? How compared to residential leases. In order to assign the use of
much? Who is liable? Are there any exemptions? non-residential properties, services agreements (if services are
provided and not only the use of the premises is assigned) or
shop-use agreements (if the premises are in a shopping centre
Transfers of real estate are generally exempt from VAT in
or commercial complex and ancillary services are provided) can
Portugal. It is possible to waive the VAT exemption to allow
also be considered.
for the deduction of input VAT, if certain conditions are met
(including the allocation of the property to VAT-taxed activities,
etc.). In that case, the standard VAT rate of 23% will be applicable
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10.3 What are the typical provisions for leases of ■ Change of control of the tenant does not affect the validity
business premises in your jurisdiction regarding: (a) of the lease, unless agreed otherwise.
length of term; (b) rent increases; (c) tenant’s right to ■ Insurance: multi-risk/fire insurance is mandatory for the
sell or sub-lease; (d) insurance; (e) (i) change of control owner if the building is divided as horizontal property.
of the tenant; and (ii) transfer of lease as a result of a Nevertheless, even when buildings are not divided as
corporate restructuring (e.g. merger); and (f) repairs? horizontal property, it is standard market practice for the
leased building to be covered by a multi-risk/fire insurance
The Urban Lease Law is relatively flexible, especially for policy – in this scenario, the parties may freely agree that
non-residential purposes, as the most important features of the tenant is responsible for underwriting the insurance
the lease can be freely stipulated by the parties. These include policy. Additionally, it is not unusual for the parties to
duration, renewal and termination – although with certain limits agree that the tenant is responsible for the coverage of the
– rent review scheme, maintenance, and works, among others. contents of the lease premises.
Lease contracts must be executed in writing, and if their term A change of control of the tenant does not usually have an
is greater than six years, the contract must be registered at the impact on the validity and effectiveness of the policy. However,
Land Registry Office. it must be confirmed on a case-by-case basis in the terms and
In addition to the mandatory references (identification of the conditions of the policy.
parties, description of the leased premises, rent amount, reference If, however, the building is leased under a financial lease,
to the applicable use permit, etc.), lease contracts normally Decree-Law 149/95 of 24 June, as amended by Decree-Law
include provisions on the term, renewal conditions, termination, 30/2008, of 25 February, provides that the tenant is the one
rent review mechanisms, security (typically a security deposit or obliged to underwrite a multi-risk insurance policy to cover the
a bank guarantee), maintenance of the leased premises, execution leased property against damage.
of works in the leased premises and reinstatement duties. ■ The parties may freely agree on the allocation of
■ Term: The initial term of non-residential lease agreements maintenance, repair and other costs, as well as determine
cannot exceed 30 years. According to some scholars, it which party is liable for the execution of works in the
cannot be less than one year, save for the cases of leases leased premises.
for transitional non-housing purposes. Others are of the ■ It is standard market practice for the landlord to pass on
opinion that no minimum term is applicable. If the parties to the tenant all costs of maintenance, repair, utilities
do not stipulate any term for the lease agreement (and did and other services, whilst the landlord takes on the
not expressly opt for the – uncommon – undetermined costs relating to building insurance, property taxes and
duration), the agreement is deemed to have been executed structural works.
for a fixed term of five years. The renewal or non-renewal ■ Although not common (except in “built-to-suit” or
of the agreement may be freely agreed by the parties. “sale and leaseback” transactions), it is permitted under
According to some scholars, however, each renewal period Portuguese law to provide for “triple net” leases, whereby
must have a duration equal to its initial term, or of five the tenant bears all the costs relating to the premises
years if the initial term is less. during the duration of the lease/contract.
■ Rent Increases: Rent update mechanisms are freely agreed In both cases, service charges are normally determined by
by the parties. In the absence of specific regulation, reference to the area of the premises in proportion to the overall
updates can occur annually, by notice to the tenant at least area of the building.
30 days before the update takes place, according to the
rent update coefficient published yearly by the Portuguese
National Institute of Statistics (which is based on the landlord or tenant of a business lease?
consumer price index – excluding housing). Considering
the increase in the inflation rate throughout Europe, Law
19/2022 was published on 19 October, establishing a 2% The renting of a property is usually VAT-exempt. It is possible
cap on the legal rent updating coefficient for 2023, which for the landlord, if certain requirements are met, to waive the
should have been 5.43%. This was counter-balanced by VAT exemption, in which case a 23% VAT rate is charged on the
a tax compensation to landlords. For 2024, the legal rent rent. From another perspective, the renting of a property that
updating coefficient will be 6.94% and no similar cap has includes areas properly prepared and equipped for carrying out
been established. a business activity – usually with related services of cleaning,
■ Unless agreed otherwise, the tenant may not assign its security or reception – in “office centre”-type contracts (meaning
contractual position to third parties nor sublet the leased that the provision of the space is not the main component of
premises without the prior consent of the landlord. In the the service) is subject to (and not exempt from) VAT. VAT at a
case of a transfer of business (“trespasse”), the tenant’s right 23% rate applies over the amount of the rent, to be assessed and
to transfer it when established in the premises is allowed paid by the landlord. Payments made to Portuguese-resident
and cannot be eliminated by the parties or be waived in landlords will be deducted at source at the rate of 25% if the
advance by the tenant. Unless otherwise agreed by the tenant is a company or an individual with organised accounting.
parties, the landlord is lawfully entitled to a pre-emption The tax withheld will be credited against the landlord’s final
right in the case of a business transfer, or in the case that tax liability. For PIT purposes, rental income will be subject to
the business (including the lease right) is given as payment- withholding tax at the rate of 28% (if not classified as business
in-kind by the tenant. income). For Corporate Income Tax (“CIT”) purposes, rent
■ The landlord may sell the premises to third parties without income derived by Portuguese-resident landlords will be subject
prior consent of the tenant (the landlord’s position being to the general CIT rate (21%), whereas payments made to
automatically assigned to the acquirer, pursuant to law), non-resident landlords will be subject to withholding tax at the
although tenants with leases in force for more than two rate of 25%. Stamp Tax will also be levied once on a month’s
years have a pre-emption right in the sale of the property. rent and, for each agreed rent increase, at the rate of 10%, to be
paid by the landlord, if the renting is not subject to VAT.
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10.5 In what circumstances are business leases 10.7 Green leases seek to impose obligations on
usually terminated (e.g. at expiry, on default, by either landlords and tenants designed to promote greater
party etc.)? Are there any special provisions allowing a sustainable use of buildings and in the reduction of
tenant to extend or renew the lease or for either party the “environmental footprint” of a building. Please
to be compensated by the other for any reason on briefly describe any “green obligations” commonly
termination? found in leases stating whether these are clearly
Either party may terminate the contract, in general terms of law, aspirational objectives).
on the basis of non-performance by the other party that, due to
its gravity or consequences, renders the subsistence of the lease
unenforceable against the other party. In addition, the applicable Green leases are being implemented in Portugal following
Portuguese lease regulations establish a non-exhaustive list of the international practice to achieve the “Green Deal” goals.
cases of default justifying a landlord’s decision to terminate the Portuguese law does not impose any meaningful green
lease contract. The landlord’s termination must be declared obligations, save for the obligation of having an Energy
judicially, except when based on the tenant’s opposition to works Performance Certificate.
ordered by public authorities or on a delay of three months or The contractual practice has been to retain some non-
more in the payment of the rent, charges, costs or expenses or prescriptive models provided by international organisations, as
delay for a period of more than eight days, in the rent payment, well as the best practices for the sector. The extent of these
on more than four occasions, whether or not consecutive, in a provisions depends on the ambition of the parties as to how
period of 12 months with reference to each agreement. green they wish for the lease to be. In Portugal, the bar on
If not stipulated otherwise, the landlord is not entitled to sustainable lease goals is high, given the profile of landlords and
terminate the lease agreement during the lease term. If the tenants wanting to have a green stamp at this early stage (namely:
agreement is subject to renewal, the landlord can terminate it institutional investors; international brands; and funds).
for the end of the initial period or of the renewal in course, by Typical provisions normally relate to a building’s environmental
means of a written notice to the tenant with the prior notice performance (consumptions and emissions of greenhouse gases),
periods agreed by the parties or established in the law for the sharing of data, co-operation in improving environmental
housing purposes lease regime (which is subsidiary applicable). performance and rules, and materials to be employed in any works
In any event, the Civil Code provides that “in the first five years and improvements.
after the beginning of the agreement, regardless of the term
stipulated, the landlord may not oppose the renewal”. As such, 10.8 Are there any trends in your market towards more
in agreements that are subject to renewal, the landlord must flexible space for occupiers, such as shared short-
respect a minimum initial period of five years. In this regard, term working spaces (co-working) or shared residential
one cannot exclude the interpretation (of the tenant and, at the spaces with greater levels of facilities/activities for
limit, of a court of law) according to which, in an agreement residents (co-living)? If so, please provide examples/
details.
entered into for an initial period of five years, the landlord may
only express its intention to oppose to the renewal – that is, send
the letter to the tenant – after five contractual years have passed. Co-working spaces and the offer of office spaces with a set of
Lease agreements entered under the undetermined duration services attached are a trend that has increased in recent years.
arrangements may be terminated by the landlord due to demolition, These cases are usually based on service agreements and not
refurbishment or deep restoration where the maintenance of the lease agreements. Serviced apartments and co-living are also
lease is not possible (with the limits and under the conditions increasing in the Portuguese real estate market.
legally provided) or with a minimum prior notice of five years.
In that case, the tenant and its workers are entitled to receive 112 Leases of Residential Premises
compensation for any losses proven to have resulted from the
termination. 11.1 Please briefly describe the main laws that regulate
If, upon termination of the lease, the leased premises are not leases of residential premises.
handed over to the landlord, the tenant will have to pay to the
landlord, as compensation, from the moment the tenant is in
The following laws regulate the lease of business premises:
delay and up to the date when the leased premises are handed
■ the Civil Code; and
over, an amount equivalent to double the rent agreed, for each
■ the NRAU approved by Law 6/2006.
month of delay or for each day of delay on a pro rata basis.
The applicable Portuguese urban lease regulations divide
Compensation for improvements made by the tenant may also
leases into two types: (i) leases for housing purposes; and (ii)
apply in certain circumstances.
leases for non-housing purposes.

non-compliance? The law does not differ if the premises are intended for multiple
different residential occupiers. The Civil Code establishes that,
The landlord is no longer liable for its obligations once the in housing leases, besides the tenant, the following persons may
property is sold. The new owner is liable towards the tenant. reside in the premises:
Except where otherwise agreed between the original tenant and ■ All those who live with the tenant in common economy
the assignee, the latter is not responsible for rents relating to the (those living with the tenant in a non-marital partnership,
period prior to the assignment. the tenant’s relatives or kin in the direct line or up to the
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third degree of the collateral line, even if they pay some maintain valid a multi-risk/fire insurance policy for the leased
remuneration, as well as people in relation to whom, by property. In other cases, the parties may freely agree that the
force of law or by legal transaction not directly related tenant is responsible for taking out the insurance. Nonetheless,
to the dwelling, there is an obligation of cohabitation or in the case of a financial lease over the property, the tenant is
maintenance of the dwelling). obliged to take out an insurance policy to cover the property
■ A maximum of three guests, unless otherwise stipulated. against damages.
11.3 What would typical provisions for a lease of 11.4 Would there be rights for a landlord to terminate
residential premises be in your jurisdiction regarding: a residential lease and what steps would be needed to
(a) length of term; (b) rent increases/controls; (c) the achieve vacant possession if the circumstances existed
tenant’s rights to remain in the premises at the end of for the right to be exercised?
The applicable Portuguese lease regulations establish a list of
cases of default justifying a landlord’s decision to terminate the
The agreement’s initial term cannot exceed 30 years and lease contract. The landlord’s termination must be declared
cannot be less than one year, save for the cases of leases for judicially except when based on: (i) the tenant’s opposition to
non-permanent housing purposes or special transitional works ordered by public authorities; or (ii) a delay of three months
purposes. If the parties do not stipulate any term for the lease or more in the payment of the rent, charges/costs or expenses, or
agreement (and did not expressly opt for the – uncommon – a delay for a period of more than eight days in the rent payment,
undetermined duration), the agreement is deemed to have been on more than four occasions, whether or not consecutive, in a
executed for a fixed term of five years. period of 12 months with reference to each agreement.
Rent increases are freely agreed by the parties. In the absence If, upon termination of the lease, the leased premises are not
of specific regulation, updates can occur annually, by notice to the handed over to the landlord, the tenant must pay to the landlord,
tenant at least 30 days before the update takes place, according to as compensation, from the moment the tenant is in delay and
the rent update index that is approved annually by the Government. up to the date when the leased premises are handed over, an
Considering the increase in the inflation rate throughout Europe, amount equivalent to double the rent agreed, for each month
Law 19/2022 was published on 19 October, establishing a 2% cap of delay or for each day of delay on a pro rata basis. Moreover,
on the legal rent updating coefficient for 2023, which should have the landlord may resort to the National Lease Platform (“Balcão
been 5.43%. This was counter-balanced by a tax compensation Nacional do Arrendamento”) to obtain an eviction (with certain
to landlords. For 2024, the legal rent updating coefficient will limitations, depending on the situation of the tenant). Recently,
be 6.94% and no similar cap has been established, although Law 56/2023, of 6 October (in force from 7 October 2023)
support measures for housing tenants with low income have been replaced the National Lease Platform by the “Landlord and
approved. Still, with respect to the leases’ rent amount, it should Tenant Desk” (“Balcão do Arrendatário e do Senhorio”). This new
be noted that the “More Housing Programme”, approved by Law platform will take effect 120 days after the law comes into force.
56/2023, of 6 October (in force from 7 October 2023), establishes
a cap of 2% applying to the initial rent of new residential leases
over properties for which there have been lease agreements signed
in the five years prior to the entry into force of the law (with some
exceptions, namely where major renovation or restoration works 12.1 What are the main laws which govern zoning/
were carried out or whenever the rent amount is already limited
within a specific regime). describe them and include environmental laws.
The renewal or non-renewal of the agreement may be freely
agreed by the parties. According to some scholars, however,
each renewal period must have a duration equal to its initial term Development, construction and the use of real estate must
or of three years if the initial term is less. comply with the urban planning legislation and all the
The parties may freely agree on the allocation of maintenance, administrative procedures regarding licensing and use permits.
repair and other costs. They may also determine which party These are based on the principle that urban development should
will be liable for the execution of works in the leased premises. comply with all relevant plans governing the occupation, use and
It is the landlord’s responsibility to carry out all ordinary or transformation of land. The territorial management instruments
extraordinary maintenance works required by the laws in force are classified and divided into different levels: national;
or by the end of the contract, unless stipulated otherwise. regional; and municipal. The national regional planning policy
The parties must stipulate, in writing, the charges and (“PNPOT”) defines the fundamental directives and guidelines
expenses arrangements and, in the absence of stipulation to the for the organisation of the national territory. At a national level,
contrary, the following will apply: sector plans and special planning instruments should also be
■ The ongoing charges and expenses relating to the supply considered. There are Regional Land Management Plans and
of goods or services in relation to the leased premises will intermunicipal and municipal masterplans, urban development
be borne by the tenant. plans, and detailed urban development plans. Portugal regulates
■ In the lease of an autonomous unit (condominium regime), the development, construction and use of real estate through
the charges and expenses relating to the administration, the RJUE and the RGEU. There are numerous different laws
maintenance and use of common parts of the building, as governing environmental protection. The main environmental
well as the payment of services of common interest, will be laws that may be relevant in standard real estate projects are:
borne by the landlord. (i) the legal framework for environmental impact assessment
The provisions regarding insurance are similar to those for (Decree-Law 151-B/2013 of 31 October); (ii) the water law (Law
business premises. This means that if the property is divided 58/2005 of 29 December) and the legal regime for the use of
as horizontal property, the landlord is obliged to take out and water resources (Decree-Law 226-A/2007 of 31 May); (iii) the
Portuguese Law on Climate (Law 98/2021 of 31 December); (iv)
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the legal framework for nature conservation and biodiversity Commissions for Regional Coordination and Development
(Decree-Law 142/2008 of 24 July); (v) the legal framework of (“CCDR”) – one for each region; (iii) the Portuguese Institute
the conservation of wild birds and the conservation of natural for the Conservation of Nature and Forests (“ICNF”); and (iv)
habitats and wild flora (Decree-Law 140/99 of 24 April); (vi) the Portuguese Institute of the Sea and Atmosphere (“IPMA”).
the general noise regulation (Decree-Law 9/2007 of 17 January); The websites of these entities, especially the APA and ICNF,
and (vii) Directive (EU) 2023/959, 10 May, which amends the provide information on a range of environmental matters,
EU Emissions Trading System (“ETS”) Directive (Directive including frequently asked questions, guides, and information
EU 2003/87), establishing the ETS for buildings not yet notes. There is also the possibility of contacting these organisa-
transposed into national law. Regarding the granting of licences tions by email or in person at their customer service centres.
and authorisations to cut down or uproot trees, the following
laws are also important: Decree-Law 169/2001 of 25 May for
cork oaks and holm oaks; Decree-Law 120/86, of 28 May for building works and/or the use of real estate?
olive trees; and Decree-Law 173/88, of 17 May for eucalyptus
and pine trees.
The execution of urban planning operations (e.g., building
works) must generally be examined in advance and may require
12.2 Can the state force land owners to sell land to it? If licensing or prior notice procedures. The RJUE establishes
so please briefly describe including price/compensation which cases require licensing and prior notice and also lists
mechanism.
operations that are less relevant and are thus exempt from
these requirements. Upon completion of the construction, a
Properties and the rights inherent to them may be expropriated use permit will be issued for the building or units to certify its
for reasons of public utility included in the powers, purposes or conformity with approved plans and projects.
object of the expropriating entity, upon the contemporaneous
payment of fair compensation in accordance with the Portuguese
Expropriation Code. The compensation is not intended to
reimburse the benefit achieved by the expropriating entity but obtained in any way (e.g. by long use)?
to compensate the losses that the expropriated party incurred.
The parties may agree that the compensation is satisfied, in
full or in part, through the transfer of assets or rights to the Building/use permits and licences are commonly obtained in
expropriated party. When the need for expropriation arises from Portugal. In fact, it is not possible to execute a sale and purchase
public calamity or from internal security or national defence deed without proof of the existence of the use permit if it is legally
requirements, the State or the competent public authorities may required, because, in general, properties built before 1951 will be
take immediate administrative possession of the assets in order exempt from the need for a use permit. Even a lease contract
to meet the need that determined their intervention, without any with a duration longer than six months must be made in writing
prior formality, following, without further steps, the provisions and identify the use permit. A lease for a purpose different to the
of compensation established for litigious proceedings. authorised use under the use permit is null and void.
Apart from the exemption cases described, it is always
necessary to follow the appropriate procedure to obtain a use
12.3 Which bodies control land/building use and/ permit. There are no implicit authorisations as a result of
or occupation and environmental regulation? How do continued use for a certain period of time. The use of buildings
without a use permit, contrary to the use provided for in the use
permits, as well as contrary to the terms and conditions of those
The municipal services are responsible for controlling these use permits, constitutes an administrative offence. In addition,
administrative procedures, including the construction and the illegal use of buildings may also lead to the application of
use of buildings and the division of land into separate titles. measures to restore the legality, which may imply the compulsory
Depending on the development, other public authorities could closure of buildings.
also be called on to give binding opinions. In the case of failure
to comply with planning decisions or zoning requirements, fines
12.6 What is the typical cost of building/use permits and
could be imposed, as could embargoes, prohibitions of use,
demolition orders and compulsory works.
An interested party may submit a request for advance
information on the feasibility of a specific urban project and on The fees for obtaining building/use permits are defined locally
any legal or regulatory constraints. The advance notice decision by the municipal authorities. In Portugal, the time involved
is binding and remains in force for one year. to obtain them may vary depending on the Municipality in
The key regulatory bodies with authority in environmental question and can be delayed considerably in cases that require
matters are divided in two main categories. opinions from different external bodies.
On the one hand, there are the governmental bodies. This first
category includes the Ministry of the Environment and Climate 12.7 Are there any regulations on the protection of
Action, the Secretariat of State of Environment, the Minister historic monuments in your jurisdiction? If any, when
of Economy and Sea, the Inspectorate General of Agriculture, and how are they likely to affect the transfer of rights in
Sea, Environment and Land Planning (“IGAMAOT”) and the real estate or development/change of use?
Directorate-General for Natural Resources, Safety and Maritime
Services (“DGRM”). In addition, there are also other important Law 107/2001 of 8 September is the Basic Law of Cultural
authorities, arguably at least as important as the governmental Heritage and the main legislation governing this subject.
ones, that are not directly dependent on the Government: From the time of the notification of the beginning of the
(i) the Portuguese Environmental Agency (“APA”); (ii) the procedure for classifying the building as property of national,
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public, or municipal interest, a set of rules applies to safeguard Environmental Liability Law does not apply, every operation
the building. These include the registration in the land registry for the remediation of the soil requires a specific licence and
of the property’s status as a “classified property” or “property in all prevention and remediation costs are borne by the operator.
the process of being classified”. Under the above framework, the obligation to remediate the soil
Considering the transfer of property rights, these protection only applies when soil excavation works must be carried out.
rules include:
(i) the prior written communication to the Directorate
General of Cultural Heritage of the sale, the establishment requirements for the assessment and management of
of another right in rem to use the property, or the payment- the energy performance of buildings in your jurisdiction.
in-kind for the building; and
(ii) the co-owners, the State, the Autonomous Regions and
As of January 2009, all buildings must necessarily be awarded
the Municipalities have, in the order indicated, the right
a valid EC; this is a legal requirement for all properties sold in
of pre-emption in the case of sale or payment in classified
Portugal. The EC is a document issued by the Agency for Energy
properties or properties in the process of being classified,
(“Agência para Energia” or “ADENE”) within the National
or properties located in the respective protection zone (a
Energy Certification System (“SCE”) that assesses the energy
50-metre buffer area around the property).
performance of the property through a graded classification
Project development or the change of use of historic buildings
system of A to F. This makes it possible to identify properties
must comply with the territorial urban plans in force and during
that are more energy efficient, under Decree-Law 101-D/2020
the licensing procedure before the competent authorities,
of 7 December (see question 13.1 below).
opinions issued by the General Authority of Cultural Heritage
Operators carrying out their activity in installations
must be obtained.
classified as energy-intensive consumers (with an annual energy
consumption exceeding 500 tonnes of oil equivalent per year)
12.8 How can, e.g. a potential buyer obtain reliable are exempt from the EC. Nonetheless, these operators are
information on contamination and pollution of real subject to compliance with certain obligations relating to the
estate? Is there a public register of contaminated land in energy performance of buildings, under Decree-Law 71/2008.
your jurisdiction?
These obligations include (i) carrying out energy audits of the
facilities, (ii) preparing the energy consumption rationalisation
There is no public register of contaminated land in Portugal. In plans based on the audits, and (iii) implementing and complying
fact, although the prevention of emissions into the soil is covered with the approved energy consumption rationalisation plans.
by some environmental procedures such as environmental
licensing and the environmental impact assessment, there are 132 Climate Change
no specific laws concerning contaminated land (see question
12.9). Considering the absence of regulation on this matter, the
APA recommends that, in the case of the transfer of property
of a land where potentially polluting activities were carried emissions (including any mandatory emissions trading
out, or where there are signs of contamination, a technical scheme).
quality assessment be carried out. Moreover, the APA issued
supporting documents about the technical requirements to use
The development of the key policies to combat climate change
in contamination assessments and remediation operations, for
is based on the fundamental principles of environmental law; in
instance, addressing the reference values for the soil.
particular, the principle of sustainable development, the “polluter
pays” principle and the principle of intergenerational solidarity.
12.9 In what circumstances (if any) is environmental The reduction of greenhouse gas emissions is one of the goals that
clean-up ever mandatory? have been set to tackle climate change, alongside the strengthening
of the capacity for carbon dioxide (“CO2”) sequestration and the
There are no specific laws concerning contaminated land. A adaptation to expected climate change impacts.
draft law has been under discussion in Portugal since 2015 and There are important planning instruments to achieve these
a proposal for a European Directive on soil monitoring and goals:
resilience was released in 2023, but no official publication of ■ the European Climate Law (Regulation (EU) 2021/1119 of
these pieces has yet occurred. 30 June) establishes the framework for achieving climate
Nevertheless, the prevention of emissions into the soil is covered neutrality in the EU by 2050, which entails zero balance
by environmental procedures, such as environmental licensing between the emissions of greenhouse gases and their removal;
(Decree-Law 127/2013) and the environmental impact assessment ■ the National Energy and Climate Plan 2030 (“PNEC
(Decree-Law 151-B/2013). Moreover, the Legal Framework on 2030”), which arose in the context of the Regulation of
Liability for Environmental Damage (Decree-Law 147/2008 the Union’s Governance for Energy and Climate Action,
of 29 of July, “Environmental Liability Law”) determines that establishes policies for decarbonisation of the economy,
environmental damage, which includes significant damage to energy efficiency and energy transition, and goals for
the soil that corresponds to any contamination that creates a sectors to reduce greenhouse gas emissions. This plan is
significant risk to human health, must be communicated to the currently under review;
appropriate authorities within 24 hours. When an operator causes ■ the Roadmap for Carbon Neutrality 2050 (“RNC 2050”),
or is in imminent danger of causing these types of damage, this approved by Council of Ministers Resolution 107/2019 of
legislation requires the adoption of preventive and/or remedial 1 July, aims to reach carbon neutrality by 2050;
measures, and their payment by the operator in question. ■ the National Strategy to Adapt to Climate Change,
Furthermore, pursuant to the General Framework of Waste approved by Council of Ministers Resolution 56/2015 of
Management (Decree-Law 102-D/2020 of 10 December), if the 30 July and extended until 31 December 2025 by Council
of Ministers Resolution 53/2020 of 10 July, seeks to adopt
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solutions to adapt various sectors to the effects of climate 13.2 Are there any national greenhouse gas emissions
changes (e.g., agriculture, forestry and transport); reduction targets?
■ the Action Programme to Adapt to Climate Changes,
approved by Council of Ministers Resolution 130/2019 of
The European Climate Law (Regulation (EU) 2021/1119) defines
2 August, was created for the specific implementation of
that climate neutrality should be reached by 2050. To achieve this
the adaptation measures set out in the National Strategy to
purpose, a goal is set for 2030 to reduce greenhouse gas emissions
Adapt to Climate Change; and
at the EU level of at least 55% (compared to 1990 levels), along with
■ the National Roadmap for Adaptation 2100 is still under
a carbon sequestration target in the land use and forestry sector of
development – its conclusion is expected for December 2023
at least 13 megatonnes (on average) between 2045 and 2050.
– and will carry out an evaluation of Portugal’s vulnerability
This law followed the Green Deal, approved in December
to climate change and will define the guidelines in order to
2019, and is an increase to previous targets, which were to
plan the territorial adaptation and adaptation of the different
reduce GHG by at least 40% until 2030.
sectors to climate change.
In line with this goal, “Fit for 55”, a package of proposals
Furthermore, there is legislation that addresses the emission of
was recently published through the Communication from the
greenhouse gases and seeks to achieve the established goals:
Commission of 14 July 2021. It proposes a comprehensive set
■ Law 98/2021 of 31 December, which defines the grounds for
of measures to ensure that GHG emissions are reduced to at
climate legislative politics and acknowledges the existence
least 55% by 2030 (compared to 1990 levels). The amendment to
of a climate emergency, setting forth an ambitious and
the Effort Sharing Regulation (Regulation (EU) 2018/842) sets
transversal approach to climate change. This law adopts
forth that between 2023 and 2030, Portugal shall reduce 28.7%
greenhouse gas emission reduction targets, respecting
of GHG emissions (compared to 2005 levels), representing an
European and international commitments, providing for a
aggravation of more than 10 percentage points in relation to the
reduction of at least 55% by 2030 and at least 90% by 2050,
current goal of 17% reduction.
while also considering a carbon sequestration target in the
These proposals are to be inserted into legal texts, which may
land use and forestry sector of at least 13 megatonnes (on
affect the Portuguese legislation. Other legislation is expected
average) between 2045 and 2050.
to be published in the meantime that will lead to changes to
Several instruments are provided for to prevent and adapt to
these goals. As an example of additional legal measures to be
climate change, including tax, monitoring by specific bodies, etc.
implemented in the short term, and in line with the European
■ Law 43/2023 of 14 August, which created a counsel for
Commission strategy, the Portuguese Government is preparing
climate action and governed its functioning.
an act on the voluntary carbon credits market, which is expected
■ Decree-Law 15/2022 of 14 January, which governs the
to provide the norms on the standards and eligibility of
organisation and operation of the National Electric system
projects to generate carbon credits, as well as mechanisms for
and the promotion of the use of renewable energy sources.
the issuance, transfer, and use of such credits in a state-owned
■ Decree-Law 30-A/2022, of 18 April, which aims to intensify
and -managed market. According to the last version of such
the production of green energy, establishing exceptional
act made public, the state-owned and -managed market is not
measures (including the simplification of the licensing
implemented in such a way that prevents the creation of private
procedure), and to ensure the installation of renewable
markets on the same kind of green assets.
energy production centres and self-consumption production
Currently, in Portugal, the main planning instruments that
units, among others.
define the strategies to promote a transition to a low carbon
■ Decree-Law 12/2020 of 6 April, which establishes the
economy, to meet national targets for the reduction of greenhouse
framework for the trading of licences for the emission of
gas emissions and to promote carbon sequestration by forestry
greenhouse gases.
and other land uses are the PNEC 2030 and the RNC 2050.
■ Decree-Law 145/2017 of 30 November, which incorporates
The PNEC 2030 – which was approved before the new Euro-
into Portuguese law Regulation (EU) 517/2014 of 16 April,
pean Climate Law was enacted – establishes that the reduction
to reduce the emission of greenhouse gases, by regulation,
of the emission of greenhouse gases must be between 45% and
for example, of the use of equipment containing such gases.
55%, by reference to 2005. Additionally, the PNEC 2030 sets
Specifically concerning real estate, the reduction of carbon
sectoral targets for the reduction of greenhouse gas emissions,
emissions through energy efficiency policies is also present in
by reference to the emissions recorded in 2005: 70% for services;
Portuguese legislation as buildings represent 30% of the carbon
35% for the residential sector; 40% for transport; 11% for agri-
emissions in Portugal. Adding to the legislation covered insofar,
culture; and 30% for the waste and industrial wastewater sector.
Decree-Law 68-A/2015, implementing Directive 2012/27/EU,
The RNC 2050, a long-term strategy for carbon neutrality
sets forth specific rules on energy efficiency on buildings owned
of the Portuguese economy, concludes that carbon neutrality
by non-small and medium-sized enterprises. The scheme provided
by 2050 is economically and technologically feasible, and is
for in this Decree-Law determines an obligation of registration
based on an emission reduction of between 85% and 90% by
near the Directorate-General of Energy and Geology and an
2050 compared to 2005 and on an offsetting of the remaining
obligation to run certified energy efficiency audits, the results of
emissions through the sinks provided by land use and forests.
which are then communicated to said Directorate-General. Also,
The path to neutrality anticipates reductions in greenhouse gas
as mentioned in question 12.10, Decree-Law 71/2008 created an
emissions between -45% and -55% in 2030 and between -65%
energy efficiency policy in an energy-intensive industry and its
and -75% in 2040, in relation to 2005.
respective industrial buildings. This scheme provides for some tax
benefits, especially in oil and gas energy sources, provided energy
efficiency measures are implemented under agreements to be 13.3 Are there any other regulatory measures
executed between the owner of the enterprise and the Directorate- (not already mentioned) which aim to improve the
General. Decree-Law 64/2020 and Decree-Law 71/2022 both sustainability of both newly constructed and existing
buildings?
implement Directive 2018/2002/EU, provided for additional
energy efficiency measures, mainly in the State’s buildings.
There are some regulatory rules that are intended to improve
or contribute to the improvement of the sustainability of both
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newly constructed and existing buildings. Firstly, the Legal Regarding this matter, there is also the SCE. In combination
Framework of Urban Development and Building dispenses with with Decree-Law 101-D/2020 of 7 December, this establishes
the prior control of urban development operations considered to the requirements applicable to buildings for improving their
be of little relevance, such as the installation of solar photovoltaic energy performance. They are applicable and mandatory for
panels or wind generators associated with the main building both new buildings and renovations of existing buildings. The
for the production of renewable energy and of solar thermal energy certification of buildings is intended to support owners
collectors for heating sanitary waters. The same applies to the in identifying opportunities to improve buildings and implement
replacement of external cladding or roofing materials by others them, and there are even financial support programmes granted
that, by providing an external finish identical to the original, in this context. Certain properties are subject to specific
promote energy efficiency. mandatory requirements, such as office buildings or large
Furthermore, in works subject to licensing or prior notice commercial premises with an area exceeding 1,000 square metres,
under the terms of the Legal Framework of Urban Development in which case they will be subject to regular evaluations of their
and Building, the producer of construction and demolition air quality every eight years and must keep a specific and updated
waste is obliged to promote the reuse of materials, the maintenance plan regarding their air conditioning infrastructures.
incorporation of recycled materials and the recovery of waste Finally, in public procurement, both for the purposes of
that may be used in the work. In turn, in public works contracts admission and exclusion of candidacies and proposals, and
and concessions, the execution project is accompanied by a for the purposes of their evaluation and classification, special
Plan for the Prevention and Management of Construction and importance is given to environmental aspects. In other words,
Demolition Waste (“PPGRCD”), which ensures compliance it is desirable for the minimum qualification requirements for
with the general principles for the management of construction candidates, and the factors that define the award criteria and
and demolition of waste and other applicable regulations. In the binding aspects of the specifications of the procedures to
these cases, the contractor or concession holder is responsible reflect, consider and value environmental concerns relating to
for implementing the PPGRCD by ensuring the promotion of the object of the contract to be signed. Moreover, the National
the reuse of materials and the incorporation of recycled materials Action Strategy for Green Public Procurement, approved by
in the construction work. Council of Ministers Resolution 13/2023, of 10 February, also
Another piece of legislation of importance regarding this establishes goals and objectives for the administration with
matter is the one applicable to the rehabilitation of buildings regard to the introduction of environmental criteria in the
or autonomous units, set out in Decree-Law 95/2019 of 18 July. procedure for the acquisition of goods and services by the State.
This legislation is intended to protect and value pre-existence,
environmental sustainability, and proportional and progressive 142 COVID-19
improvement. In fact, environmental sustainability is one of the
main principles that should inform the activity of rehabilitating
buildings. The rehabilitation of buildings contributes to your jurisdiction which were introduced in response to
environmental sustainability by increasing the useful life of the effect of the Coronavirus (COVID-19) pandemic and
buildings and favours the reuse of construction components, which remain in place.
the use of recycled materials, the reduction of waste production,
the use of materials with reduced environmental impact, the In the context of the COVID-19 pandemic, exceptional and
reduction of greenhouse gas emissions, the improvement of temporary measures have been adopted to protect tenants from
energy efficiency and the reduction of energy needs, including its effects, most of which are no longer in effect.
energy incorporated in the construction itself, as well as the use Nonetheless, we highlight Decree-Law 66-A/2022 of 30
of renewable energy sources. September, which is still in force and established that:
In an effort to reduce bureaucracy, the Government approved ■ scanned copies and photocopies of acts and contracts
Decree-Law 11/2023 of 10 February, creating a procedure to have the same probatory force as originals, except where
facilitate processes in certain types of private projects (e.g., the person to whom they are presented requests the
renewable energy, water collection infrastructures, water reuse, presentation of the original; and
logistic platforms), by simplifying and eliminating the need for ■ scanned copies of acts and contracts can be signed in
redundant environmental licensing acts. The Government also handwriting or by means of a qualified electronic signature,
expects to extend this to other areas, including planning and which will not affect their validity, even if different forms
zoning, industry, retail, services and agriculture. of signature coexist in the same act or contract.
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Teresa Madeira Afonso is a partner and co-head of the Real and Tourism practice and has 12 years’ professional experience in the area of
commercial law, in particular, commercial real estate and finance.
Teresa focuses on structuring, negotiating and carrying out M&A and private equity transactions. She advises on the set-up and operation
of investment and venture capitals funds, acquisitions of loan portfolios, and financing operations and corporate restructuring in various
sectors of the real estate and tourism industries.
She also has experience in developing and operating large-scale agricultural projects.
Teresa has an LL.M. from the University of Virginia, USA.
PLMJ Tel: +351 210 103 714

Av. Fontes Pereira de Melo, 43 Email: teresa.madeiraafonso@plmj.pt
1050-119 Lisboa URL: www.plmj.com
Portugal
Francisco Lino Dias is a partner and co-head of the Real Estate and Tourism practice. He is responsible for advising investors and real estate
developers on all operations involving the purchase, sale or renting/use of all types of properties. Over the past 15 years, he has gained broad
experience in advising on all phases of real estate projects, including defining and implementing the corporate and financing structures. Francisco
has represented real estate investors and developers in acquisitions of property portfolios, sale and leaseback transactions, and construction
and sale of logistics parks, office buildings, shopping centres and retail parks. He has also advised on urban rehabilitation operations.
Francisco has a law degree from the Faculty of Law of Universidade Católica Portuguesa in Lisbon and an Executive MBA from Nova SBE
(Nova School of Business & Economics). In 2019, Francisco won the prestigious 40 under Forty Award, in the category of Real Estate. This
award is given by the magazine Iberian Lawyer.
PLMJ Tel: +351 213 197 300

Av. Fontes Pereira de Melo, 43 Email: francisco.linodias@plmj.pt
1050-119 Lisboa URL: www.plmj.com
Portugal
PLMJ is a law firm based in Portugal that combines a full service with
bespoke legal craftsmanship. For more than 50 years, the firm has taken
an innovative and creative approach to produce tailor-made solutions to
effectively defend the interests of its clients. The firm supports its clients
in all areas of the law, often with multidisciplinary teams, and always acts
as a business partner in the most strategic decision-making processes.
With the aim of being close to its clients, the firm created PLMJ Colab,
its collaborative network of law firms spread across Portugal and other
countries with which it has cultural and strategic ties. PLMJ Colab makes the
best use of resources and provides a concerted response to the international
challenges of its clients, wherever they are. International collaboration is
ensured through firms specialising in the legal systems and local cultures
of Angola, Cape Verde, China/Macao, Mozambique, São Tome and Príncipe
and Timor-Leste.
www.plmj.com
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150 Chapter 15
Puerto Rico
Puerto Rico
Eidalia González-Tosado
Ferraiuoli, LLC Eduardo Tamargo-Motroni
12 Real Estate Law 32 Real Estate Rights
1.1 Please briefly describe the main laws that 3.1 What are the types of rights over land recognised
govern real estate in your jurisdiction. Laws relating in your jurisdiction? Are any of them purely contractual
to leases of business premises should be listed in between the parties?
12.1. Those relating to tax should be listed in response to The three basic rights of (i) ownership, (ii) possession, and (iii)
questions in Section 9. use – and variations thereof – are recognised in Puerto Rico.
Ownership can be acquired through sale, donation, inheritance
and the court resolution of disputes, including mortgages and
Statutory law and the case law interpreting the pertinent statutes
other foreclosures. The government can also exercise eminent
– or holdings in equity in the few cases where there is no statute or
domain rights. Possession may be acquired through, among
case law precedent – are the main source of laws that govern real
others, leasing, use and occupancy, usufructs, surface rights or
estate. Most of the applicable statutory law is found in the Puerto
surface estate rights, and easements. The use of land may be
Rico Civil Code and the Puerto Rico Registry and Mortgage Law.
acquired by, among others, rights of use, usufructs, easements,
Puerto Rico, as part of the United States, is subject to applicable
restrictive covenants, donations and inheritance. Purely
federal statutory and case law, which will supersede state law in
contractual rights include sales, donations, mortgages, leasing,
cases where is it expressly established by statute or the court.
surface rights and certain easements.

thereon?
Local common law is developed through the Puerto Rico Supreme
Court holdings and decisions; such holdings are binding. The owner of realty may grant another person a right to a surface
estate upon the land and confer to the grantee the right to erect
1.3 Are international laws relevant to real estate in your a building and retain title to the building constructed thereon.
in EU countries.
The Puerto Rico Civil Code establishes that real estate located in consequences of any split? Are there any proposals to
Puerto Rico will be governed by local law. change this?
22 Ownership Under Puerto Rico’s current legal framework, there is a split

between legal title and beneficial title in cases such as easements,
2.1 Are there legal restrictions on ownership of real usufructs, rights of use and residency.
estate by particular classes of persons (e.g. non-resident The Puerto Rico Property Registry will record the rights of
persons)? the beneficiary in the corresponding section of the Puerto Rico
Property Registry.
Minors and individuals of legal age declared by a court resolution
incapable of making decisions, including decisions relating to 42 System of Registration
their possessions, may own real estate as long as a court of law
has approved such ownership. Moreover, the aforesaid persons 4.1 Is all land in your jurisdiction required to be
may become owners of real estate by the operation of law in registered? What land (or rights) are unregistered?
cases of inheritance.
Even though there is no requirement to register the land, most
of the real estate in Puerto Rico is registered with the Puerto
Rico Property Registry. The registration of a right over realty
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creates a legally rebuttable presumption of the validity of such 5.2 How do the owners of registered real estate prove
right. Therefore, anyone with a right over real estate will have their title?
access to the Registry for the registration of such right.
The Land Registry will not issue a physical title document to
4.2 Is there a state guarantee of title? What does it evidence ownership over a property; however, a review of the
guarantee? books and records of the Puerto Rico Property Registry and a
corresponding title report or title abstract by a title company will
Please see the answer to question 4.1. evidence title.
4.3 What rights in land are compulsorily registrable? 5.3 Can any transaction relating to registered real
What (if any) is the consequence of non-registration? estate be completed electronically? What documents
The following rights are compulsorily registrable: mortgages; on ownership of registered real estate be accessed
surface rights; constitution of horizontal property regimes; electronically?
and time-sharing agreements. An unrecorded mortgage will
not be valid against any third person and the courts will not
Documents granting rights may be filed through the Puerto
order foreclosure of an unrecorded mortgage. Time-sharing
Rico Property Registry Karibe web-based online docket.
agreements, surface rights and horizontal property regimes are
The documents required for filing are deeds, court orders or
not officially recognised unless they are registered.
resolutions, and, in certain cases authorised by law, a petition
to the Registrar requesting a cancellation of a recorded right
4.4 What rights in land are not required to be based on the lapse of the statutory tolling period. Certain basic
registered? information may be accessed electronically for all documents filed.
It should be noted, however, that some documents that were filed
Apart from the rights set forth in the answer to question 4.3, no for recording prior to the year 2003 may not be obtained online
other rights are compulsorily registrable. and only by requesting a copy to the authorising notary or the
corresponding Puerto Rico Property Registry archives.
land or rights is there a probationary period following 5.4 Can compensation be claimed from the registry/
first registration or are there perhaps different classes registries if it/they make a mistake?
details. First registration means the occasion upon
which unregistered land or rights are first registered in No, compensation cannot be claimed.
the registries.
Rights that have been registered are afforded a rebuttable register? Can a buyer obtain all the information he
presumption of the validity and such validity may only be might reasonably need regarding encumbrances and
questioned in a court of law by a person claiming a preeminent other rights affecting real estate and is this achieved
right. The initial registration of land may only be achieved by by a search of the register? If not, what additional
a court order. information/process is required?
There are no restrictions on access. All documents filed in the

transferred to the buyer? Registry are public and may be accessed by any person. This can
be achieved by a review of the books and records of the Puerto
Rico Property Registry and a corresponding title report or title
Title is transferred to the buyer upon signing the deed of sale. abstract by a title company. To ascertain the status of a specific
real property in the Puerto Rico Property Registry and complete
4.7 Please briefly describe how some rights obtain a title report or title abstract, a party will need the following
priority over other rights. Do earlier rights defeat later information: property number; section (geographical) of the
rights? Puerto Rico Registry Property; book/volume; and page number
of the property. An online search may be performed through
Generally, earlier rights will defeat later rights. A contractual the Karibe web-based online search engine. Access to Registry
covenant between parties may allow for the creation of a later data through the web-based search engine is continuously being
right that might have priority over the rights granted in a particular upgraded.
contract. The priority of rights recorded in the Registry, however,
operates on the basis of “first in time, first in priority”. 62 Real Estate Market
52 The Registry / Registries 6.1 Which parties (in addition to the buyer and seller
5.1 How many land registries operate in your involved in a real estate transaction in your jurisdiction?
jurisdiction? If more than one please specify their Please briefly describe their roles and/or duties.
When applicable, real estate brokers and title insurance company
Only one Land Registry operates in Puerto Rico. The Registry representatives would be involved in a real estate transaction.
is divided into 32 sections. If any of the parties used the services of a real estate broker,
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152 Puerto Rico
the latter usually participates in conversations and negotiations

leading up to the closing. In commercial real estate closings
72 Liabilities of Buyers and Sellers in Real
of certain complexity, you will find the title insurance Estate Transactions
representative participating in the review of title documents,
surveys and property tax documents leading up to the closing. 7.1 What (if any) are the minimum formalities for the

remunerated? Conveyancing must be executed by means of a public deed
and should be filed before the corresponding division of the
Property Registry.
Fees are based on the amount of the transaction.

main sources of capital you see active in your market? A seller has no duty to disclose. However, it is customary that
the buyer requests from the seller information regarding real
Puerto Rico’s distressed financial situation, among other and personal property (e.g. title reports, surveys, appraisals,
factors, drove down the value of real estate on the island. rent records, easements and liens encumbering the property),
However, the COVID-19 pandemic resulted in a high demand structural sufficiency matters, environmental matters and
for residential properties in both the luxury and the affordable concerns, pending litigations affecting the property, insurance,
housing markets. This high demand resulted in higher prices, zoning, subdivision and land use matters and any issues
which made it challenging for certain real estate investors to connected to compliance with the law.
purchase properties during this time. On the other hand, the
real estate market benefited from an influx of foreign investors 7.3 Can the seller be liable to the buyer for
purchasing significant luxury residential real estate that would misrepresentation?
allow them to benefit from tax incentives granted under Act No.
20 of 2012, which was later amended and is now known as, the Yes, the seller can be liable to the buyer for misrepresentations
Puerto Rico Incentives Code, Act No. 60 of 2019. This made in the conveyancing documents.
the residential real estate market much more competitive and
cash offers became the norm. This brought with it an increase
in demand for residential properties that drove up market values 7.4 Do sellers usually give any form of title “guarantee”
and property prices. Today, with demand still high, and higher or contractual warranties to the buyer? What would be
mortgage interest rates due to inflation, real estate investors
anticipate that prices will continue to decrease and thus, more information)? Would any such guarantee or warranties
opportunities for real estate investment will emerge. This would act as a substitute for the buyer carrying out his own
enable such investors to dispose of the realty quickly earning a diligence?
solid rate of return on its investment.
Notwithstanding the increase in cash offers within the
In Puerto Rico real estate transactions, there are three basic
residential real estate market, banking institutions continue
warranties: (i) warranties of title; (ii) warranties against observable
to be the primary source of funding for individuals or private
defects; and (iii) warranties against hidden defects. With regards
companies acquiring real estate in Puerto Rico.
to the warranty of title, the seller would be liable to the buyer in the
event a court of law determines the seller was not the owner of the
6.4 What is the appetite for investors and/or property at the time of the sale and thus unable to transfer title. If
developers to invest in your region compared to last year the sale is “as is, where is”, the buyer waives the warranty against
and what are the sectors/areas of most interest? Please observable defects, otherwise the seller would be responsible for
give examples. those observable defects at the point of conveyancing. Finally,
a seller is bound to give a warranty against hidden defects if
New developments are limited in scope and size. There are the property sold is unfit for its intended use/purpose, or if the
certain significant residential/tourism real estate developments defects diminish said use in such a manner that if the purchaser
that are either currently under construction or in a planning/ had known thereof, he would not have acquired it or would have
permitting phase. Another important industries impacting real offered a lower price for it. The buyer may waive, as part of an “as
estate transactions are the energy sector with investment in is, where is” sale, the warranty against hidden defects.
realty property for development of renewable energy projects.
6.5 Have you observed any trends in particular market the property post sale? Please give details.
See the answer to question 7.4.
examples.
See the answer to question 6.3. During and post-COVID-19, 7.6 What (if any) are the liabilities of the buyer (in
real estate investment has also shown an increase interest in
investing in short-term property rentals.
There are none, unless otherwise agreed to by the parties in the
deed of sale.
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best protection a real estate lender will have against claims by

82 Finance and Banking borrower or other creditors. Only recorded liens in favour of the
Puerto Rico government (such as lien on account of property tax
8.1 Please briefly describe any regulations concerning debt) and the U.S. federal government (such as lien on account
social security debts) have priority, by operation of statutory law,
over the aforesaid mortgage.
entities?
U.S. federal banking laws are applicable in Puerto Rico and banks lender be avoided or rendered unenforceable?
are authorised by statute to engage in real estate lending. The
authority for national banks is found in 12 United States Code 371. A security may be avoided and rendered unenforceable in a
Furthermore, national banks are subject to a uniform code on bankruptcy proceeding if it is deemed preferential or fraudulent
real estate lending – the “Real Estate Lending Standards”, found under Sections 547 and 548 of the U.S. Bankruptcy Code.
in subpart D of 12 Code of Federal Regulations 34, including
the “Interagency Guidelines for Real Estate Lending Policies”
contained in appendix A to subpart D of part 34. Banks and
other financial institutions in Puerto Rico follow basic statutory
regulations found in Title 7 of the Laws of Puerto Rico Annotated.
Chapter 143 (Part 7) of Title 7 contains an Act to Regulate the The filing of a bankruptcy proceeding in the U.S. Bankruptcy
Business of Mortgage Lending and Chapter 144 (Part 7) contains Court automatically stays the commencement or continuation
an Act to Protect Consumers of Reverse Mortgages. The statutes of a state or federal judicial action against the debtor to recover
do not differentiate between residents and non-residents; certain a claim against the debtor that arose before the commencement
regulations, e.g. reverse mortgages, apply to individual persons. of the bankruptcy case. The filing of a bankruptcy proceeding
also stays any act to create, perfect, or enforce any lien against
property of the debtor.
borrower? 8.8 What is the impact of an insolvency process or a
estate lender?
The lender will require the debtor to provide a security interest
or lien, typically a mortgage, upon the real estate.
In the event that a debtor files or is forced into an insolvency
or bankruptcy proceeding, a stay will be issued causing any and
8.3 What are the common proceedings for realisation all obligations of the debtor and collections efforts by debtors
to be stayed until a payment plan is approved by the court or
the debtor is liquidated. If a foreclosure process has already
mortgagor? been initialised, it will also be halted as a result of bankruptcy
proceedings pursuant to the U.S. Bankruptcy Code.
Mortgage foreclosures can only be accomplished by means
of court action. The debtor, however, may, with the lender’s 8.9 What is the process for enforcing security over
consent, sign a deed transferring the property to the lender as shares? Does a lender have a right to appropriate shares
partial or full payment of the debt. The lender and any creditors in a borrower given as collateral? If so, can shares be
have a preference for judicial foreclosures since, as a result of the
process, the court orders the cancellation of any liens primed
by the foreclosed mortgage and there are no cancellation costs.
Any enforcement of security granted as collateral to a lender
shall require a judgment by the adequate court (forum is
8.4 What minimum formalities are required for real generally agreed in the loan, or ancillary, documents) granting
estate lending?
lender the right to appropriate collateral granted by the debtor.
If an insolvency proceeding has been initiated, the collateral
For residential lending, typically, the minimum formalities enforcement or foreclosure process will be stayed (see question
required are a promissory mortgage note and the mortgage. 8.8). In certain cases, banks or investors will request as part
In the case of commercial lending, the lender requires a loan of a forbearance negotiation that a debtor executes a consent
agreement, disbursement note, and a pledge agreement in judgment, which will facilitate the enforcement proceeding.
addition to the aforesaid. Common to both types of lending
are title reports of the property to ascertain lien status, title 92 Tax
insurance and a certificate stating that there is no tax debt
associated with the property.
against the borrower or the real estate asset by other Transfer taxes, paid as deed stamps and recording vouchers, on the
creditors? sale of real estate amount to approximately 0.55% of the property
value established in the deed of transfer. The seller is liable for the
A recorded mortgage, secured by a title insurance policy, in stamps on the original deed and the purchaser is liable for stamps
favour of the lender and superseding all other liens is the on the certified copy of the deed and recording vouchers.
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154 Puerto Rico
9.2 When is the transfer tax paid? sell or sub-lease; (d) insurance; (e) (i) change of control
The transfer tax is paid at closing, i.e., the date when the transfer
deeds are signed.
The typical provisions for leases of businesses in Puerto Rico
are as follows:
9.3 Are transfers of real estate by individuals subject to (a) The length of a lease is five to 10 years, including renewals.
income tax?
(b) Rent increases of 3% per year are not uncommon currently.
(c) Unless with the landlord’s written consent, the tenant is
The transfer may trigger a capital gains tax payable by the seller. not allowed to assign the leasehold interest or sub-lease.
Generally, any applicable capital gains tax will be withheld at the (d) Most leases deem a change of control of the tenant an
source by the purchaser. unconsented assignment and grounds for termination.
(e) Transfer of the lease may be allowed in the lease agreement
9.4 Are transfers of real estate subject to VAT? How without releasing the original tenant from liabilities
much? Who is liable? Are there any exemptions? thereunder.
(f) The costs of ordinary wear and tear are borne by the
This is not applicable in Puerto Rico. tenant; the costs of extraordinary repairs are borne by the
landlord.
seller on the disposal of a property? 10.4 What taxes are payable on rent either by the
Property taxes due when the real estate is sold and not paid as
of the closing date are paid by the seller in order to complete a Generally, the landlord will be taxed on net income from rental
transfer free from any lien on such account. income (payable upon filing an income tax return). From the
perspective of the tenant, payments of rent are not subject to
taxation unless the landlord is a non-resident corporation, in which
9.6 Is taxation different if ownership of a company (or case the tenant will be required to withholding tax at source.
10.5 In what circumstances are business leases

The withholding tax on capital gains will be different depending
on whether the owner is a non-resident or has residency in Puerto party etc.)? Are there any special provisions allowing a
Rico. If seller is considered a non-resident under the Puerto Rico tenant to extend or renew the lease or for either party
Tax Code, then seller will be subject to withholding tax on the sale. to be compensated by the other for any reason on
termination?
should always take into consideration/conduct due Most leases terminate on the expiry date. Leases usually contain
diligence on? clauses providing for terminations by default of both tenants
and landlords. Renewal or extension terms are typical in lease
As part of the due-diligence process, a real estate buyer should agreements, both commercial and residential, and landlord
review a recent debt certification issued by the local real property compensation clauses for a tenant’s termination are typical.
tax agency (Municipal Revenue Collection Centre) and a debt Such clauses are seldom in favour of the tenant.
certification issued by the Puerto Rico Treasure Department
related to special contributions to ascertain what taxes are owed
and ensure they are paid out prior to conveyance. lease cease to be liable for their respective obligations
102 Leases of Business Premises they be responsible after the sale in respect of pre-sale
non-compliance?
leases of business premises. Unless otherwise agreed in the lease, the selling party would
cease to be liable from the date of sale of its interest. Parties will
The Puerto Rico Civil Code is the statute that regulates leases be liable for pre-sale non-compliance, unless otherwise agreed
in Puerto Rico. to in the pertinent agreement.
10.2 What types of business lease exist? 10.7 Green leases seek to impose obligations on
Business leases fall into two categories: commercial; and the “environmental footprint” of a building. Please
residential. briefly describe any “green obligations” commonly
10.3 What are the typical provisions for leases of amounting to enforceable legal obligations (for example
business premises in your jurisdiction regarding: (a) aspirational objectives).
In Puerto Rico, “green obligation” clauses are generally
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Ferraiuoli, LLC 155
addressed as part of the tenant obligation to comply with any (e) Repairs – it is common that a landlord will assume repairs
environmental law or regulation. that exceed a specific amount or if they are required during
the first month.
(f) Maintenance – a tenant will be required to carry out regular
flexible space for occupiers, such as shared short- maintenance work on the property (e.g. air conditioning
term working spaces (co-working) or shared residential unit maintenance, generator maintenance, pool cleaning,
spaces with greater levels of facilities/activities for landscaping and gardening work). Non-regular maintenance,
residents (co-living)? If so, please provide examples/ such as painting, will be performed by the landlord.
details. (g) Tax – the landlord and tenants will negotiate who pays
for the real property tax. If the landlord pays for the real
Following the trend in other jurisdictions, various flexible property tax but there is an increase as result of a new law
coworking spaces have been established in Puerto Rico, mostly or amendment, the tenant will assume the increase.
in the urban areas, which vary in costs, footprint and ancillary
services. This began as a more flexible option for small
companies, start-ups and technology companies. More recently,
local tax incentives have attracted many out-of-state individuals achieve vacant possession if the circumstances existed
that have moved their business operations to Puerto Rico and, for the right to be exercised?
subsequently, they have opted to use coworking spaces over
long-term leases during the initial stages of their move. As a
result, coworking spaces have proliferated. Generally, residential leases, as well as commercial leases,
In the residential realm, short-term leases have flourished will include specific instances that will grant landlords the
as vacation rentals and options for the individuals that have right to terminate a lease. The most common are: (a) failure
moved to Puerto Rico interested in the tax incentives mentioned of payment beyond the applicable grace period; (b) a material
above. All of this in part is facilitated by sites like Airbnb default on the lease; and (c) non-compliance with an applicable
and HomeAway. However, many condo developments have law or regulation (including any particular regulation issued by
regulations that prohibit such types of rentals. the condo board). The eviction process will be initiated with
a formal letter notifying the specific defaults and granting a
112 Leases of Residential Premises specific term to abandon the premises. In many events, this
will not be effective to obtain the possession but will set the
basis for the eventual judicial process. The landlord should file
leases of residential premises. a complaint in the adequate court asking for eviction and may
request collection of the moneys owed in the same filing, and
request that tenants vacate the premises. An eviction process
Leases for residential properties are regulated by the Puerto may be filed under a summary process, which will accelerate
Rico Civil Code. a hearing, judgment and order to vacate (three to six months).
Once a judgment is issued by the court, the landlord may
11.2 Do the laws differ if the premises are intended for proceed to evict the tenants with the assistance of a bailiff. It
multiple different residential occupiers? should be kept in mind, however, that in the event tenant raises
affirmative defences or counterclaims, the summary proceeding
Laws do not differentiate if the premises are intended for will be converted to an ordinary proceeding and the litigation
different residential occupiers. In practice, the lease should may last years.
establish how many occupiers will be allowed in the property
at any given time. 122 Public Law Permits and Obligations
11.3 What would typical provisions for a lease of 12.1 What are the main laws which govern zoning/
residential premises be in your jurisdiction regarding: permitting and related matters concerning the use,
(a) length of term; (b) rent increases/controls; (c) the development and occupation of land? Please briefly
tenant’s rights to remain in the premises at the end of describe them and include environmental laws.
Act No. 75 of 1975, as amended, created the Puerto Rico
Planning Board (the “Board”) to guide the integrated
Typical provisions for residential leases in Puerto Rico are as development of Puerto Rico. As part of its duties, the Board
follows: must develop Land Use Plans (known by its Spanish acronym
(a) Term – anywhere between one year to three years, with “PUT”) and regulation pertaining to zoning and land use
possible extensions of similar terms. Tenants shall issue matters. In general terms, the PUTs designate the distribution,
adequate notice to inform their decision to extend the lease. location, extension and intensity of the land use in Puerto Rico
(b) Rent – rent will generally exclude utilities. Rent will (i.e. rural, urban, mining, agriculture, forests, conservation,
generally increase on the first anniversary of the lease, recreation, transportation, communications, generation of
anywhere between 2% to 5%, depending on the property. energy, protection of natural resources, residential, commercial,
(c) Holdover rent – holdover rent will be stipulated at times. industrial, educational, public, and institutional). The Board
However, under the Puerto Rico Civil Code, a lease will also promulgates regulations on natural reserves established by
be considered extended if, after the expiration of the lease, law that restrict the use of certain land in Puerto Rico.
a tenant remains at the premises with the acquiesce of the Additionally, Act 81 of 1991, as amended, allows municipalities
landlord. in Puerto Rico to develop a Zoning and Land Use Plan (known
(d) Insurance – tenants will be required to carry insurance to by its Spanish acronym “POT”) to guide the development
cover general liability and content. within their jurisdiction. Municipalities have the option to
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156 Puerto Rico
create partnerships with other municipalities for the preparation uses for the proposed location, the proponent must obtain
of POTs. The main purpose of the POT is to designate the a location approval (“consulta de ubicación”) from the Board.
distribution, location, extension and intensity of the land use on Once the Board issues the location approval, the proponent
a local scale. The Board shall evaluate and approve the POT may need to file an “Anteproyecto” application before OGPe or
before it can be implemented by the Municipality. the Autonomous Municipality, as applicable, for variances of
Furthermore, pursuant to Act 161 of 2010, as amended, the building requirements. Upon the approval of the “Anteproyecto”
Permits Management Office (known by its Spanish acronym or if no variance is required, depending on the construction
“OGPe”), is the central government agency in charge of project, the proponent may need to file an application for a
evaluating permits related to land use and/or construction work preliminary development (similar to a master plan) and/or
when issuance by a municipality is not applicable. urbanisation permit (infrastructure related). After the approval
Finally, regulation adopted by the Puerto Rico Environmental of the preliminary development and/or urbanisation permit, the
Quality Board (“EQB”) may affect the use of a property based proponent must file an application for a construction permit
on its environmental conditions. Also, given Puerto Rico’s before OGPe or the Autonomous Municipality, as applicable.
territorial status, a dual jurisdiction system permeates our legal After the building works are completed, the proponent shall
framework. As a result, the U.S. Environmental Protection request a use permit before using and/or operating the building.
Agency (“EPA”) can also establish liens and restrictive conditions
on the property based on its environmental conditions.
Other laws that may restrict zoning and land use in Puerto obtained in your jurisdiction? Can implied permission be
Rico include: (i) the Puerto Rico Wetlands Act of 1998; and (ii) obtained in any way (e.g. by long use)?
the Conservation Easement Act of 2001.
Yes. In Puerto Rico, a construction and use permit must be
12.2 Can the state force land owners to sell land to it? If obtained before the commencement of any building works and/or
so please briefly describe including price/compensation use of the building. As a result, implied permission for building
mechanism. and/or use is not contemplated by Puerto Rico’s legal framework.
Yes, the Constitution of Puerto Rico and the Eminent Domain

Act of 1903 (“Act 1903”), as amended, allows the government the time involved in obtaining them?
of Puerto Rico to force a landowner to sell its land to the
government provided that there is a public interest and the
owner receives fair compensation. As per the Act 1903, public The cost of construction and use permits can vary depending on
interest includes the development of roads, schools, urban trains, the proposed project (e.g. acreage of the property, footprint area,
cemeteries, economic reconstruction plans, and/or any purpose number of units). There are regulations that establish these costs
that advances public interest. The Supreme Court of Puerto and other fees/costs (e.g. impact fees) that may be applicable.
Rico (known by its Spanish acronym “TSPR”) has held that the
government does not have to establish a particular use for the land 12.7 Are there any regulations on the protection of
during the eminent domain proceedings. The TSPR’s rationale is historic monuments in your jurisdiction? If any, when
based on the premise that the “well-being” of society supersedes and how are they likely to affect the transfer of rights in
individual property interest. Notwithstanding the foregoing, real estate or development/change of use?
the government must ensure the owner’s rights to due process
during the proceedings by filing a declaration of acquisition and Yes, the Regulation for the Designation, Registration and
simultaneously depositing fair compensation with the competent Conservation of Historic Buildings and Historic Areas of 2002
court. With regards to fair compensation, the TSPR has adopted protects not only monuments but buildings and areas. Also, any
the undivided fee rule, which allows the owner to receive the proposed project that requires a federal permit must evaluate
reasonable market value of the property without taking into whether it may impact a property of historic significance under
account the liens and encumbrances affecting the property. The the jurisdiction of the State Historic Preservation Office before
TSPR has determined only one exception to this rule: when a the commencement of any building works. These regulations
property is affected by a long-term lease with high rental fees. and/or requirements are unlikely to affect the transfer of rights
in real estate. They would rather require the owner to comply
12.3 Which bodies control land/building use and/ with applicable parameters provided the property or building
or occupation and environmental regulation? How do has been declared historic or is within a historic area.
12.8 How can, e.g. a potential buyer obtain reliable
The Board, Autonomous Municipalities, and OGPe control information on contamination and pollution of real
land and building use regulation. Typically, the EQB, EPA, estate? Is there a public register of contaminated land in
and the Department of Natural and Environmental Resources your jurisdiction?
(“DNER”) control environmental regulation. Buyers obtain
reliable information on these matters through the online A potential buyer must review the EQB’s and EPA’s records
dockets, files and/or records of the above-referenced agencies on the environmental conditions of the real property to be
and others, and the Public Property Registry. purchased, as well as adjacent properties. In Puerto Rico, there
is no public register of contaminated land/properties.
If required by law or when a project is not within the allowed
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Ferraiuoli, LLC 157
12.9 In what circumstances (if any) is environmental energy efficiency must be 4,744 GWh per year. For this reason,
clean-up ever mandatory? the Energy Bureau must measure the progress toward the
statutory target of 30% efficiency by 2040 from different sources
and report said progress annually on its webpage.
The EQB has not adopted any regulations and/or guidelines to
use risk-based assessment analysis when determining clean-up
standards. 13.2 Are there any national greenhouse gas emissions
reduction targets?

requirements for the assessment and management of The U.S. Clean Energy and Security Act of 2009 established
the energy performance of buildings in your jurisdiction. a reduction target of 17% below 2005 levels by 2020, and
83% below 2005 levels by 2050. These targets are applicable
The Puerto Rico Energy Transformation and RELIEF Act to Puerto Rico. Locally, the EQB has not yet developed any
enacted by the Energy Bureau of the Puerto Rico Service additional greenhouse gas emission reduction targets outside of
Regulatory Board (“Energy Bureau”) adopted the Energy the federal reduction targets. However, we anticipate that the
Savings Performance Contract Regulation. The purpose of this results of the study prepared by the SEPPO, DNER and EQB
Regulation is to provide government entities with a standardised on the amount of greenhouse gases generated in Puerto Rico
process with clear direction and accountability for all will encourage the government to establish reduction targets.
participants in the development, implementation, measurement,
and verification of Energy Savings Performance Contracting 13.3 Are there any other regulatory measures
projects, by: defining roles and responsibilities; formalising (not already mentioned) which aim to improve the
process steps; and providing standard contract documents. sustainability of both newly constructed and existing
buildings?
132 Climate Change
The Board adopted the Land Use and Construction Joint
13.1 Please briefly explain the nature and extent of Regulation, which establishes the requirements and procedures
any regulatory measures for reducing carbon dioxide to obtain a green permit. This permit is issued to any
emissions (including any mandatory emissions trading development that incorporates into its design sustainable
scheme). construction and land use practice (e.g. reduction in energy and
water consumption, reduction in emission of greenhouse gases).
In 2021, the United States officially rejoined the Paris Agreement, Finally, in Puerto Rico, there are tax incentives for any person
which set a course for the United States to tackle the climate or entity that purchases and installs renewable energy equipment
crisis both internally and externally. For this reason, the United (e.g. solar and wind) in their residence or business to ensure
States implemented the Nationally Determined Contribution, energy efficiency by reducing energy consumption.
enacted in 2021, which sets an economy-wide target of reducing
its net greenhouse gas emissions by 50–52% below 2005 levels 142 COVID-19
in 2030. These targets are applicable to Puerto Rico. In 2022,
President Biden consolidated the Appropriations Act, which 14.1 Please detail any laws that govern real estate in
includes $1 billion for the establishment of the Puerto Rico your jurisdiction which were introduced in response to
Energy Resiliency Fund to help the local government meet its the effect of the Coronavirus (COVID-19) pandemic and
goal of 100% renewable energy by 2050. Locally, the Energy which remain in place.
Bureau enacted the Regulation for Energy Efficiency in 2022,
which establishes that the 2040 target for Annual Cumulative There are none.
Reduction in electric consumption resulting from increased
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158 Puerto Rico
Eidalia González-Tosado is a member in the firm’s Corporate, Real Estate and Environmental, Energy & Land Use Practice Groups. She represents
clients in general corporate law, contracts, the petroleum industry, the energy industry, real estate, retail leasing, the telecommunications industry,
government procurement, the construction industry, environmental, land use and energy regulatory and permitting matters, including the siting of
infrastructure, telecommunication and energy projects. Eidalia advises clients on compliance with federal and state telecommunication, permitting,
government procurement, real estate, land use, energy and environmental statutes and regulations including the National Environmental Policy
Act, the Clean Water Act, the Clean Air Act, the Federal Insecticide, Fungicide, and Rodenticide Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Resource Conservation and Recovery Act, the Puerto Rico Environmental Policy Act, the Puerto Rico Solid
Waste Act, the Puerto Rico Telecommunications Act, the Puerto Rico Energy Transformation and RELIEF Act, and the Puerto Rico Gasoline Act.
Eidalia represents clients before federal and state agencies, including the EPA, the Puerto Rico Environmental Quality Board, the Puerto Rico
Department of Consumer Affairs, the Puerto Rico General Services Administration, the Puerto Rico Electric Power Authority, the DNER, the Puerto
Rico Planning Board, the Federal Energy Regulatory Commission, the U.S. Department of Energy, the Energy Bureau (previously known as the
Energy Commission) and the Puerto Rico Public Service Board.
Before joining the firm in 2013, Eidalia worked as a geologist with the U.S. Forest Service in the Caddo/LBJ Grasslands Decatur, Texas on oil and
gas matters, and with the Savannah District, U.S. Army Corp of Engineers on environmental and geotechnical matters.
She has been recognised as a Rising Star in the practice of energy, natural resources, and environmental law in Puerto Rico by The Legal 500
( https://www.legal500.com/c/puerto-rico/energy-natural-resources-and-environment/ ).
Ferraiuoli, LLC Tel: +1 787 766 7000

250 Muñoz Rivera Avenue Email: egonzalez@ferraiuoli.com
American International Plaza, 6th Floor URL: www.ferraiuoli.com
San Juan, PR 00918
Puerto Rico
Eduardo Tamargo-Motroni is a senior member of Ferraiuoli and a member of the firm’s Corporate Department. He joined Ferraiuoli in 2011,
having worked in corporate law, banking law, the petroleum industry and the real estate sector. Mr. Tamargo-Motroni worked for Malley,
Tamargo & Melendez-Sauri, LLC from 2010 to 2011, was a named partner of Coto, Malley & Tamargo, LLP from 1999 to 2010, a partner in the
Corporate Department of McConnell Valdés from 1993 to 1999, and an associate in Sweeting, Gonzalez, Cestero & Bruno from 1987 to 1992.
Mr. Tamargo-Motroni obtained his Juris Doctor from Cornell Law School, in Ithaca, New York and his bachelor’s in business administration,
specialising in accounting, from Franklin and Marshall College, in Lancaster, Pennsylvania.
His knowledge of real estate law has benefitted from his experience throughout the years in the aforesaid areas of practice and provides
depth of experience to the collective knowledge of the real estate department at Ferraiuoli.
Ferraiuoli, LLC Tel: +1 787 766 7000

250 Muñoz Rivera Avenue Email: etamargo@ferraiuoli.com
American International Plaza, 6th Floor URL: www.ferraiuoli.com
San Juan, PR 00918
Puerto Rico
Ferraiuoli LLC (Ferraiuoli) is one of the leading full-service law firms based closing a transaction. Several of our attorneys hold dual professional
in San Juan, Puerto Rico. We understand the complexity of business licences and are authorised to practice in the State of New York, the State
transactions and legal challenges faced today by our clients. Ferraiuoli has of Florida, the State of Texas and the State of California, in addition to being
an experienced and agile team of professionals that provide an unparalleled authorised to practice in the Commonwealth of Puerto Rico and the U.S.
and personalised service to our clients. We provide high quality, and Federal Court System.
comprehensive legal advice and representation to industry-leading www.ferraiuoli.com
private and publicly owned companies, as well as financial institutions,
on corporate, tax and regulatory issues, among many others. Ferraiuoli
provides these services to clients in Puerto Rico, the U.S. mainland, as well
as the Caribbean and Latin America.
At Ferraiuoli, our attorneys work in teams, as appropriate, with stateside
and international advisors and counsel, with a commitment to pursuing
the business goals of our clients in a responsive and cost-effective manner.
Our approach is based on discipline, a value-added focus and effectively
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Chapter 16 159
Slovenia
Slovenia
Domen Neffat
Law Firm Neffat and Partners Jakob Stanič Gruden
12.1. Those relating to tax should be listed in response to There are some restrictions concerning the ownership of real
questions in Section 9. estate by particular classes of persons. The Constitution of the
Republic of Slovenia sets the restriction that foreigners may
acquire ownership rights to real estate under specific conditions
The main law that governs real estate law in Slovenia is the Law on
provided by law or an international treaty. Firstly, we must take
Property Code (Stvarnopravni zakonik). Other important laws are:
into consideration if there exists an international agreement
■ Agricultural Land Act (Zakon o kmetijskih zemljiščih);
concluded with the foreigner’s country of origin. The main
■ Housing Act (Stanovanjski zakon);
principle to obtain the ownership of real estate in Slovenia is
■ Land Register Act (Zakon o zemljiški knjigi );
reciprocity. Foreign citizens and legal entities established abroad
■ Real Estate Cadastre Act (Zakon o katastru nepremičnin);
can be classified into three groups considering the possibility of
■ Protection of Buyers of Apartments and Single
acquiring ownership rights to immovable property:
Occupancy Buildings Act (Zakon o varstvu kupcev stanovanj
(i) those who do not need a reciprocity decision to acquire
in enostanovanjskih stavb);
ownership of immovable property (EU citizens, etc.);
■ Real Estate Agencies Act (Zakon o nepremičninskem
(ii) those who need a positive reciprocity decision to acquire
posredovanju); and
ownership of immovable property (nationals and legal
■ Act Establishing Commonhold Tenure in Certain
persons of candidate countries for EU membership); and
Buildings and Determining Commonhold Land (Zakon o
(iii) those who cannot acquire ownership of immovable
vz postavitvi etažne lastnine na določenih stavbah in o ugotavljanju
property or can acquire it only by inheritance on the
pripadajočega zemljišča).
condition of reciprocity (People’s Republic of China, etc.).
1.2 What is the impact (if any) on real estate of local 32 Real Estate Rights

Slovenia does not have a common law system; therefore, it has in your jurisdiction? Are any of them purely contractual
no influence on real estate. Real estate is governed by the Law between the parties?
on Property Code and other Acts. However, even if they do not
enjoy the status of a formal legal source, the Supreme Court and There are five different types of rights in rem divided into two
higher court decisions are used in practice to help interpret the groups: whether the rights are on your own land or on land
statutory law. owned by someone else. In the first group, there is only the right
of ownership (lastninska pravica). If two or more legal entities
1.3 Are international laws relevant to real estate in your jointly own a real estate, it can be as a co-ownership (solastnina),
jurisdiction? Please ignore EU legislation enacted locally where the percentages of ownership are fixed, or as common
in EU countries. property (skupna lastnina), where the percentages are not fixed.
Regarding the rights on the foreign land, the Slovenian law
Since foreigners may only acquire ownership rights on real estate recognises the following rights: servitudes/easement (služnost);
under specific conditions provided by law or an international lien (zastavna pravica); encumbrance ( pravica stvarnega bremena); and
treaty ratified by the National Assembly, bilateral and other building rights (stavbna pravica). There are two types of servitude:
international treaties can be relevant to real estate in this regard. predial servitude (stvarna služnost); and personal servitude (osebna
služnost). All these rights shall be entered into the Land Register
in order to have an erga omnes effect.
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160 Slovenia
However, there are additional rights that can be contractually who acts fairly and relies on the information on the rights
agreed between the parties, such as rent or prohibition of recorded in the Land Registry in legal transactions should not
encumbrance and alienation. These are purely obligation rights, suffer adverse consequences. Therefore, all entries regarding
which are sometimes under specific conditions entered into the rights on real estate in the Land Register are consequently
Land Register. considered true, unless proven otherwise.
3.2 Are there any scenarios where the right to land 4.3 What rights in land are compulsorily registrable?
diverges from the right to a building constructed What (if any) is the consequence of non-registration?
thereon?
All in rem land rights (such as (co)ownership, lien, building right)
The general rule under Slovenian law is that anything that is are required to be registered in the Land Register in order to be
permanently merged by purpose or permanently on, above or established and to have an erga omnes effect. Non-registration
below the property is an integral part of the property, meaning means non-existence and is not secured by the principle of trust
the ownership of the land includes all the components on it in the Land Register.
(including buildings).
However, an exception to this is the so-called building right and
condominium (etazna lastnina). A building right is the right to own
registered?
a building above or below a foreign property. It can be constituted
by a contract between the parties, can be transferred to a third
party and may be established for a fixed or indefinite period of As opposed to land rights, all obligation rights (which have effect
time. Registration with the Land Register is a prerequisite for inter partes) concerning real estate are not required to be registered
such right. In a condominium, there is the right to own part of in order to be established. They exist without registration in the
the building and co-own the common parts of the building and its Land Register. However, there is a possibility to enter some of
machines (elevators, building heating equipment, etc.). these rights in the Land Register in order to achieve an erga omnes
effect (for example, prohibition of disposals and encumbrances
under certain conditions) or to ensure publicity.
consequences of any split? Are there any proposals to 4.5 Where there are both unregistered and registered
change this? land or rights is there a probationary period following
Under Slovenian law, only the legal owner can file the application details. First registration means the occasion upon
into the Land Register and has full power over real estate. The which unregistered land or rights are first registered in
legal owner is the only one who has the power to dispose of the the registries.
real estate. However, there is a possibility to dispose the use
of the real estate to another person with inter partes agreements.
All land is registered in the Land Register. Under Slovenian law,
There is a possibility to enter some obligation rights into real
there is no probationary period following the first registration
estate, such as lease and tenancy right, the right to prohibit the
of the real estate.
disposal or encumbrance if it arose from the legal agreement of
the owner, the pre-emptive or redemption right, if it arose from
a legal agreement, and the special right of the use of public good. 4.6 On a land sale, when is title (or ownership)
There are currently no intentions to change this. transferred to the buyer?
42 System of Registration The ownership of land is transferred to the buyer upon

registration in the Land Register and has effect from the time
4.1 Is all land in your jurisdiction required to be the motion is submitted. The registration is usually carried out
registered? What land (or rights) are unregistered? by the Land Registry, which can take from a few days up to
several months (if there are other registration procedures that
temporarily impede registration) before the actual transfer of the
All rights of ownership and other in rem rights on land (such
ownership happens in the Land Register.
as servitudes) are required to be entered in the Land Register.
There is a presumption that the person registered in the Land
Register as owner of the land is its owner (has ownership right). 4.7 Please briefly describe how some rights obtain
In principle, ownership rights and other in rem rights on land priority over other rights. Do earlier rights defeat later
must be registered. Obligation rights concerning land (lease rights?
rights, pre-emptive rights, etc.) need not be registered in the
Land Register to exist, as their existence is not dependent on The Land Registry Court decides on the entries and performs
registration in the Land Register. the entries in the order determined after the moment when the
Land Registry Court receives the proposal for registration. In
Slovenian Land Registry law, there is the general principle of
guarantee? priority. This means that an earlier proposal will always rank
higher than a later one. The rank of the registered (submitted)
rights is visible in the Land Register.
In Slovenian law, there is the principle of trust in the Land
Register (načelo zaupanja v zemljiško knjigo), meaning that anyone
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Law Firm Neffat and Partners 161
for damage caused to third persons by unlawful actions in

52 The Registry / Registries connection with the performance of its function. Any person
suffering damage has the right to also claim, in accordance with
5.1 How many land registries operate in your the law, compensation directly from the person or authority that
jurisdiction? If more than one please specify their has caused such damage.

There is one central Land Register (zemljiška knjiga) in Slovenia,
which is managed by district courts (although it is administered might reasonably need regarding encumbrances and
by the Supreme Court). All district courts are responsible for other rights affecting real estate and is this achieved
deciding on entries in the Land Register, carrying out entries in by a search of the register? If not, what additional
the general ledger and maintaining the collection of documents. information/process is required?
The Land Register is a public book intended for the entry and
public publication of data on rights to real estate and legal facts Information on rights in the Land Register is publicly accessible. A
related to real estate. The real estate cadastre is a basic record of limited amount of data can be obtained electronically by registering
data on the location, shape, and physical/other characteristics of an account on the electronic site of the register. The buyer can
plots, buildings and parts of buildings, which shows the actual obtain information regarding ownership rights and encumbrances.
condition of the real estate. In the register, the buyer can also see whether there is a new and
unresolved filing regarding a real estate and the nature of the rights
(change of ownership, registration of encumbrance, etc). The
their title? buyer has only limited information on pending procedures.
Other data can be acquired for a fee by sending a request to
the Land Register. Each person that proves a justified cause has
Owners of registered real estate prove their title with a Land the right to claim access to copies of the documents in the Land
Register excerpt, or, if appropriate, with a historical Land Register and to those that are connected with pending procedures.
Register excerpt. As already mentioned, all the rights entered in This enables buyers to obtain information on filings and pending
the register are public, and, by law, the owner of the immovable procedures.
property is presumed to be (unless proven otherwise) the person
who is registered in the Land Register.
5.3 Can any transaction relating to registered real 6.1 Which parties (in addition to the buyer and seller
estate be completed electronically? What documents and the buyer’s finance provider) would normally be
need to be provided to the land registry for the involved in a real estate transaction in your jurisdiction?
registration of ownership right? Can information Please briefly describe their roles and/or duties.
electronically?
When buying real estate, the public notaries are involved. The
seller’s signature on the grant of deed for the transfer of the
At the time of writing this chapter, it is not possible for a title over the real estate to the buyer must be notarised. When
transaction relating to registered real estate to be completed buying or selling real estate, a real estate agent/broker can be
electronically. present alongside the buyer and seller. When the seller or buyer
The Land Register registers the ownership right if the is a corporation, it is quite often that they have their own legal
following documents are provided: (lawyers) and tax advisors. Real estate appraisals often take part
■ a contract and an explicit Land Registry permit (grant deed as support professionals to either buyer or seller.
for transfer of title) on which the signature of the seller is
verified by a public notary;
■ a certificate on the use of land, issued by the municipality, 6.2 How and on what basis are these persons
remunerated?
for the transfer of ownership right on land;
■ a certificate from the tax office stating that the taxes have
been paid (if required); or The remuneration of public notaries and attorneys is governed
■ a decision of an authority (court of justice, decision in an by the statutory tariffs, more precisely for notaries it is governed
administrative procedure, etc.) that is legally final. by the Notary Tariff (Notarska tarifa) and the remuneration of the
Depending on the nature of the transaction, some other attorneys by the Attorney Tariff (Odvetniška tarifa). However, the
documents may be required. client can conclude an agreement for a different remuneration with
The Land Register in Slovenia is in the form of an electronic their attorney. The real estate agent/broker is paid on commission,
database and can be accessed electronically, including the which is determined by the Real Estate Agencies Act where the
information on the ownership of registered real estate. remuneration for the real estate agent/broker is limited by 4%
(+VAT) of the contract price. However, this limit does not apply
where the contract value of the property is less than EUR 10,000.
There is no special provision for claims of compensation if a in your jurisdiction, whether equity or debt? What are the
mistake is made by the Land Register. main sources of capital you see active in your market?
However, as the Land Register is administrated by the “land
book” court (de facto by the Supreme Court of the Republic of The most common sources of capital in the Republic of Slovenia
Slovenia), and as the latter is a state authority, it can be liable to finance a real estate transaction (acquisition) is debt (a bank
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162 Slovenia
loan). Usually, the bank requires as insurance the establishment which is usually included in the contract but it can be made
of a mortgage on such real estate. Own equity is not usually used separately. The signature of the seller on the Land Register
to finance a real estate acquisition. However, one developer/ permission must be verified by a notary. Before the notary
investor of a large condominium project in Ljubljana, the capital signature verification, a certificate on the use of land, issued by
of Slovenia, has financed the project (at least partially) by issuing the municipality, must be obtained and a transfer tax at a fixed
bonds to private investors and different funds. rate of 2% of the purchase price must be paid.
6.4 What is the appetite for investors and/or 7.2 Is the seller under a duty of disclosure? What
developers to invest in your region compared to last year matters must be disclosed?
give examples.
The seller has a general duty of disclosure based on the
fundamental principles (the principles of good faith and integrity).
Slovenia is open to foreign investors and with the cooperation Furthermore, in accordance with the Protection of Buyers
of Spirit Invest Slovenia all investment opportunities are of Apartments and Single Occupancy Buildings Act, upon the
gathered. Most foreign investors are attracted to Slovenia’s delivery and acquisition of the real estate, the seller must remind
strategic position at the heart of Europe, its excellent transport the buyer of the right to demand that the seller rectify the defect
and Information and Communication Technology (ICT) that are detected upon the acquisition and to the right to demand
infrastructure. One of the many attractions for investors in payment of the contractual penalty for possible delay in the delivery
Slovenia is the land-sea-air transport system. of the real estate and to inform him that he will lose these rights
Other advantages include the adaptability of companies and if he does not acquire them upon the acquisition of the real estate.
of the workforce, business legislation, investment incentives, If a seller explicitly guarantees to the buyer or it is in the nature
19% corporate income tax rate and investment tax allowances. of the transaction that the buyer is acquiring the real estate for
In Slovenia, one of the most attractive features is the ICT a specific purpose that the real estate has specific qualities, the
manufacturing and services sector, since it is one of the seller’s liability is stricter.
government’s key commitments to boost the ICT sectors as part
of a national development priority. Further, there are trends of
investments in the pharmaceuticals and chemical products and 7.3 Can the seller be liable to the buyer for
misrepresentation?
investments in the production of renewable energy and green
engineering and the IT sector.
Commercial Real Estate (apartments) is, in our opinion, still The seller of old buildings is liable for misrepresentation
the most interesting area in which to invest. Office buildings according to the Obligations Code (Obligacijski zakonik).
and public transportation facilities are under construction Additionally, the Protection of Buyers of Apartments and Single
in Ljubljana, combined with residential apartment buildings, Occupancy Buildings Act protects the final buyer of a newly built
indicating that it is a field that can offer good opportunities for building from the risk of breaching the contract by the investors,
investments as well. with mechanisms such as the right of the buyer to withhold 5%
However, inflation, an increase of EURIBOR (interest rates) of the purchase price if defects are discovered at the handing over
and general market instability, based on energy prices, evidently of the property. Mandatory bank guarantees are to be set by the
influence the real estate (housing) market as bank loans are investor/seller for the repair of hidden defects in the amount of
more expensive, which could influence the real estate prices. 5% of the purchase price and the prolongation of warranty time.
6.5 Have you observed any trends in particular market 7.4 Do sellers usually give any form of title “guarantee”
sub sectors slowing down in your jurisdiction in terms of or contractual warranties to the buyer? What would be
their attractiveness to investors/developers? Please give the scope of these? What is the function of any such
examples. guarantee or warranties (e.g. to apportion risk, to give
It is difficult to highlight a trend, but the short-term lease diligence?
market (Airbnb or similar) has been warming up and maybe
even returning to the pre-COVID era; it is difficult to predict
Sellers give guarantees or contractual warranties that derivate
the future outcome but optimism exists. Soaring energy prices
from the Slovenian legislation, for example:
and general market instability with inflation have undoubtedly
■ the condition of the real estate; and
had an impact on investors; nevertheless, investors may adopt
■ the non-existence of other rights in rem or obligations.
a different, more cautious approach. Nonetheless, these
From a purely legal perspective it would be possible to use
influences could be visible in the following year as they usually
the seller’s guarantees to substitute buyer’s due diligence. In
come with delay.
Slovenian practice, this is not very common. Usually, the
seller tries to exclude his warranties as much as possible. Such
72 Liabilities of Buyers and Sellers in Real guaranties shall be accompanied by strong security arrangements.
Estate Transactions Such additional contractual warranties are common only in
complex transactions.
7.1 What (if any) are the minimum formalities for the Furthermore, under Slovenian obligation law, the buyer must
sale and purchase of real estate? take over the agreed rent as it exists. Change of ownership of
such apartment does not affect an existing rental agreement.
The contract must be concluded in written form. For acquiring Therefore, the buyer must enter the landlord’s legal position.
the title, entry into the Land Register is required. Entry in the Also, liens pass over to the buyer if they are duly registered in the
Land Register is made upon the Land Register permission, Land Register. In such cases, a detailed due diligence is essential.
Real Estate 2024

7.5 Does the seller retain any liabilities in respect of 8.3 What are the common proceedings for realisation
the property post sale? Please give details. of mortgaged properties? Are there any options for a
When the sale purchase agreement is concluded, the seller is mortgagor?
generally liable under the contractually agreed or statutory
warranties. However, the seller is always liable for hidden defects
of the real estate and for damages incurred by the purchaser as a The proceeding for the realisation of mortgaged properties
result of any intentional conduct by the seller. depends on the type of mortgage that was established. In
general, mortgages must be realised through court where the
foreclosing lender files a lawsuit against the defaulting borrower.
7.6 What (if any) are the liabilities of the buyer (in In case the judgment is in the lender’s favour, then the real estate
addition to paying the sale price)? is usually the subject of public auction, which is conducted by a
court-appointed seller.
One specific liability of a buyer, besides the payment of the Under Slovenian legislation, there is a possibility to avoid the
purchase price, is taking over the real estate (possession) and litigation phase. Such mortgage shall be entered into the special
through that stepping into the position of the owner from the form of a directly enforceable notarial deed, where a mortgage
payment of public liabilities (taxes) point of view. Additionally, is directly enforceable. For this type of mortgage, the pledger
buyer’s liabilities can be: agrees that after the claim has fallen due, it can be repaid from
■ payment of notary fees; and the proceeds obtained through the sale of the immovable. The
■ payment of a commission to a real estate agent/brokers, etc. process of notarial sale of a real estate is conducted by the
■ The buyer is also liable for obligations from lease Financial Collateral Act (Zakon o finančnih zavarovanjih).
agreements concerning the sold property, if they exist.
82 Finance and Banking estate lending?
8.1 Please briefly describe any regulations concerning It greatly depends on what kind of agreement is concluded.
Based on the Obligations Code, the credit agreement shall be
in writing, while in the case of entering into a loan agreement,
entities? an agreement in writing is not required. In case of the latter, in
practice the contracting parties usually conclude an agreement in
writing. However, a mortgage can only be entered into the Land
A credit agreement between two legal entities is in general Register if it is made on the basis of the document containing
regulated by the Obligations Code. However, Slovenian the Land Registry permit.
legislation contains different legislation for B2C loans, which When a loan is given to the consumer (i.e. B2C relationship),
is as lex specialis regulated by the Consumer Credit Act (Zakon o then the mandatory provisions of the Consumer Credit Act are
potrošniških kreditih) and offers special protection in comparison applicable. The real estate lender shall give all the necessary
to corporate entities. Other than that, each bank in Slovenia has information to the consumer in order to easily decide what kind
its own special rules regarding obtaining the loan. of loan the consumer will take based on his financial status. The
For bank financings, there is generally no difference for loan agreement shall always be concluded in writing.
residential or non-residential persons. Usually, the amount of The loan agreement/credit agreement for real estate, the
the loan depends on the creditworthiness of the buyer and the claim of which is secured by a lien (mortgage) on the real estate,
value of the purchased real estate. must be concluded in the form of a notarial deed.

borrower?
creditors?
The most common method of protection for the real estate The protection of the real estate lender depends solely on the
lender to protect itself from default by the borrower is a mortgage type of the security. When the mortgage is entered into the
or a maximum mortgage, where all existing and future claims Land Registry, the lender is protected by the general principle
arising from specific business relationships are secured by the prior tempore, potior iure or in other words, “he who is before in time,
same mortgage on real estate up to a specific amount. Other is preferred in right”. This principle protects a real estate lender in
than that, there are personal securities available (additional cases where the real estate is sold because of the default of the
claims against individual persons), the most common of which borrower – when the loan is secured with a mortgage, that is
being surety. first in order in comparison with all the securities entered into
In addition, a lender can sign with the borrower an enforceable the Land Registry and will be paid first from the purchase price.
notarial deed, where the mortgage is directly enforceable (i.e. In case of insolvency of the borrower, the loan protected with
enforceable without the need to initiate any legal action first). a mortgage offers to the lender a separation right, which is the
A real estate lender can also protect itself by lien on all future right of a creditor to pay his claim from certain assets of the
leases (claims to pay the lease). insolvent debtor before paying the claims of other creditors of
that debtor from that property.
In the case of execution of the debt, when a creditor who
proposed the execution of his debt and has a mortgage that is
entered into the Land Register behind the real estate lender, the
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164 Slovenia
real estate lender has a right to propose that the court suspends claims of creditors to be converted into shares for the borrower.
enforcement if the establishment value of the real estate does not This process is called conversion. When the subject of the
even partially cover the claim of the creditor who has proposed in-kind contribution to the company is the creditor’s claim that
the enforcement of the debt. is secured by the mortgage, his declaration of subscription and
payment of new shares must be accompanied by a notarised
permission for cancellation of the mortgage. This rule is also
lender be avoided or rendered unenforceable? applicable when the claim is secured by a lien entered in the
central registry of dematerialised securities.
In general, the real estate lender has a legitimate interest in
obtaining collateral. However, the security can be avoided
92 Tax
or rendered unenforceable when the agreement is proclaimed
as null or the lender agrees that security ceases to exist. The 9.1 Are transfers of real estate subject to a transfer
enforcement and realisation of collateral by the real estate lender tax? How much? Who is liable?
can be avoided by assertion of objections, provided for by law.
Real estate transfer tax is paid at the rate of 2%. The tax base
for real estate transfer tax is the purchase price of the real estate.
Liable for real estate transfer tax is the seller of the real property.
However, the buyer can undertake contractually to pay the tax.
If the real estate is considered a newly built object or if it was
In general, the enforcement procedure does not verify the not yet used, then it is subject to VAT and therefore there is no
correctness of the enforcement title, but it must be claimed in obligation to pay transfer tax.
legal proceedings. In the case of enforcement, the lender can
file an objection against the court order claiming he has already
paid the loan within the due time (opposition objection). In this 9.2 When is the transfer tax paid?
case, the enforcement is stopped by the court. In addition, under
Slovenian law, an individual can, under conditions provided for The taxable person shall file a tax payment within 15 days of
by law, prevent the sale of the real estate that represents his the conclusion of the contract. The taxable person shall pay the
home when the debt is relatively low. assessed tax within 30 days of the tax assessment decision being
served on him.
corporate rehabilitation process on the position of a real 9.3 Are transfers of real estate by individuals subject to
estate lender? income tax?
In the case of the insolvency process, the claim of the real estate If an individual transfers the real estate, then he is a subject
lender against the borrower becomes an insolvency claim. If to income tax under the Personal Income Tax Act (Zakon o
the claim was secured with the mortgage, then the lender has a dohodnini ) if the real estate was owned for no more than 15 years.
so-called separation right, which allows the lender to be repaid The tax base is the difference between the value of the capital
before other insolvency creditors. This means that the real estate at the time of disposal and the value of the capital at the time
may be sold and the purchase price obtained where the selling of of acquisition. The tax rate depends on the years of ownership
the real estate shall be used to repay the real estate lender first. of the real estate. If the real estate was owned for less than five
If the claim is not secured with the mortgage, then his claim will years, the tax rate is 25% of the tax base; if it was owned for more
be only fulfilled proportionately with other insolvency creditors. than five years but no more than 10 years, the tax rate is 20% of
The compulsory settlement procedure does not have any effect the tax base; if it was owned for more than 10 years but no more
on secured claims; neither the amount nor the maturity of these than 15, the tax rate is 15% of the tax base. If the real estate was
claims will be modified by the confirmation of the compulsory owned for more than 15 years, the individual is not subject to
settlement. The debtor is obliged to fulfil his obligations the income tax.
regarding the payment of the secured claims within the time
limits specified in the basic contractual relationship from which
the secured claims originate, otherwise he is late in fulfilling his 9.4 Are transfers of real estate subject to VAT? How
obligations. The delay set out in the decision confirming the
compulsory settlement does not apply to these obligations.
The transfer of the real estate is subject to VAT in two situations:
■ the real estate is considered a new building (if the transfer
is made before the building is first used or within of two
years of its use); or
appropriated when a borrower is in administration or has ■ land suited for construction.
entered another insolvency or reorganisation procedure? The tax rate solely depends on the usage of the building.
The lower tax rate (9.5%) applies when the subject of the sale
is residential buildings measuring up to 120m 2 (apartments) or
Security over shares may be enforced outside the court procedure
250m 2 (houses). For real estate falling outside these thresholds,
if this is agreed in a contract between the seller and buyer. In the
or if the selling of the land is suited for construction, the tax rate
case of commercial agreement, the latter is assumed.
is higher (22%).
A debt-to-equity swap is considered a contribution in-kind
The seller is liable for the payment of VAT and will usually
and therefore shares given as collateral are also possible. During
charge this to the buyer.
the drafting of the restructuring plan, it is possible to provide for
Real Estate 2024

9.5 What other tax or taxes (if any) are payable by the (b) The rent increases are usually determined on the basis of
seller on the disposal of a property? the consumer price index.
(c) Unless agreed otherwise, the tenant can sell or transfer its
The seller must pay the following taxes at the disposal of a right to lease without the landlord’s permission. The same
property: applies to the right to sub-lease the premises.
■ Real Estate Transfer Tax. (d) The landlord usually provides insurance of the business
■ Personal Income Tax on Capital Gains from Property premises and the tenant bears the costs.
Disposal. (e)(i) The change of control of the tenant is usually not covered
■ VAT. by provisions of the contract.
For more, please see the answers to questions 9.1, 9.3 and 9.4. (e)(ii) The transfer of lease as a result of a corporate restructuring
is usually not covered by provisions of the contract.
However, these clauses are seen in larger real estate leases.
9.6 Is taxation different if ownership of a company (or (f) The landlord is responsible for repairs and maintenances
other entity) owning real estate is transferred? of business premises, which are significant for their use.
If the landlord fails to maintain or make certain repairs
Yes. In case of the transfer of business shares or stocks of a to the leased property, the failure may be considered a
company owning real estate, there is no obligation to pay real material breach of the lease agreement. If the landlord
estate transfer tax. does not make certain repairs on time, the tenant holds
There is a difference when the seller is a natural person the right to do so. In that case, the tenant has the right to
and when they are a corporate entity. In the case of a natural reimbursement for the cost or the cost may be deducted
person, he is liable to pay Capital Gains tax – it is calculated from the future rent under certain conditions.
as the difference between the sales value (reduced by 1%
of the standardised cost) and the cost of the real estate (plus
standardised cost of 1%). The tax rate depends on the years of
the ownership of the real estate. For this, please see question
9.3. When the seller is a corporate entity, the amount of the
profit becomes part of the corporation tax. If the landlord is a natural person, the rent is considered as income
from lending a property and is taxed under the Personal Income
Tax Act. From 1 January 2023, income from lending property is
9.7 Are there any tax issues that a buyer of real estate taxed on a ceded basis at a proportional rate of 25% of the taxable
amount and is not included in the annual taxable amount for
diligence on?
annual income tax purposes. There are certain rental expenses
that can be deducted from the tax base, but no more than 10%.
The buyer shall take into consideration whether the seller is These expenses may include operating expenses, repairs and
subject to VAT or not. If it is, the selling price shall then include investments, which increases the value of the property.
an additional 9.5% or 22% of VAT. In this case, there is no If the landlord is a legal person, the rent is considered revenue
obligation to pay the real estate transfer tax. and is taxed as corporate income tax. The tax rate of corporate
income tax is 19%.
102 Leases of Business Premises Revenue from the lease is generally not subject to VAT, except
accommodation in hotels or similar establishments, including
10.1 Please briefly describe the main laws that regulate accommodation in holiday homes, holiday campsites or camping
leases of business premises. pitches, in which case the VAT is 9.5%.
If the landlord is a natural person and the tenant is a legal
Due to an amendment of the Housing Act that entered into person, the calculation and payment of personal income tax is
force on 19 June 2021, the Commercial Buildings in Commercial carried out by the latter.
Premises Act (Zakon o poslovnih stavbah in poslovnih prostorih) ceased to
apply. Therefore, business leases are now entirely regulated by the 10.5 In what circumstances are business leases
general rules of the Code of Obligations, whilst the Commercial usually terminated (e.g. at expiry, on default, by either
Buildings in Commercial Premises Act shall continue to apply for party etc.)? Are there any special provisions allowing a
contracts that were concluded before that date. tenant to extend or renew the lease or for either party
termination?
A lease contract that has been concluded for a fixed period is

Slovenian law does not regulate different types of business lease. terminated when the period for which it was concluded ends. If
following the end of the period for which the lease contract was
10.3 What are the typical provisions for leases of concluded the tenant continues to use the business premises and
business premises in your jurisdiction regarding: (a) the landlord does not oppose to such use, it is deemed that the
length of term; (b) rent increases; (c) tenant’s right to lease contract has been renewed for an indefinite period under
sell or sub-lease; (d) insurance; (e) (i) change of control the same terms and conditions as the previous contract.
of the tenant; and (ii) transfer of lease as a result of a A lease contract that has been concluded for an indefinite
corporate restructuring (e.g. merger); and (f) repairs? period can be terminated any time observing the stipulated
period of notice of termination. In case it is not defined by the
(a) Business leases of premises can be concluded for an contract, by an Act or according to local customs, the period of
indefinite period or for the short term (with no minimum notice of termination is eight days.
duration required).
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166 Slovenia
A landlord can withdraw from the contract any time regardless 11.3 What would typical provisions for a lease of
of the contract and law provisions on a duration of the lease residential premises be in your jurisdiction regarding:
under certain conditions (breach of contract by a tenant). (a) length of term; (b) rent increases/controls; (c) the
The liability for damages caused by the breach of the contract tenant’s rights to remain in the premises at the end of
of both parties is governed by the Obligations Code. the term; and (d) the tenant’s contribution/obligation to

lease cease to be liable for their respective obligations (a) Length of term
under the lease once they have sold their interest? Can There is no law that governs the length of a lease contract.
they be responsible after the sale in respect of pre-sale The time period of residential leases is generally around
non-compliance? 11 months in order to avoid the obligation to obtain
an Energy Performance Certificate. There is only one
If a landlord sells its business premises that are the subject of a exception regarding non-profit housing where a lease
lease contract according to the Obligations Code, the purchaser contract must be concluded only for an indefinite term.
or acquirer assumes the place of the landlord; henceforth, the (b) Rent increases
rights and obligations deriving from the lease exist between the It depends what kind of lease agreement is concluded. If
acquirer and the tenant. The landlord is jointly and severally the lease agreement is concluded for a specific term and the
liable as a surety for the obligations held by the acquirer deriving amount of rent that shall be paid is defined, the landlord
from the lease. cannot unilaterally change the rent. This can only be carried
out if the annex to the existing agreement is concluded.
10.7 Green leases seek to impose obligations on However, there is a possibility that rent is linked to a
landlords and tenants designed to promote greater reference index, usually the Consumer Price Index, defined
sustainable use of buildings and in the reduction of by the Statistical Office of the Republic of Slovenia.
the “environmental footprint” of a building. Please (c) The tenant’s rights to remain in the premises at the
briefly describe any “green obligations” commonly end of the term
found in leases stating whether these are clearly The prolongation of the contract is left to the explicit
amounting to enforceable legal obligations (for example demand of the tenant. The tenant, who wishes to prolong the
aspirational objectives). duration of the tenancy, is obliged to ask for the permission
of the landlord within 30 days before the termination of the
contract. If the landlord agrees, the annex to the contract
There have been no green obligations that must be stated in a
is concluded. Otherwise, the tenant is obliged to vacate
contract yet. Nevertheless, there is an energy regulation that
the premises within the period determined in the contract.
imposes that the business premises that are leased for more than
This is only enforced in the case of market rentals, since
one year must have an energy certificate for the building.
non-profit rentals are always open-ended.
(d) The tenant’s contribution/obligation to the property
10.8 Are there any trends in your market towards more “costs” e.g. insurance and repair
flexible space for occupiers, such as shared short- Unless the lease contract stipulates otherwise, the tenant
is obliged to pay all costs from the operation of a multi-
residents (co-living)? If so, please provide examples/ apartment building (e.g. cleaning of common areas,
details. electricity consumption in common areas, garbage
collection, heating, water heating). All other costs are
covered by the landlord.
Yes. It is common in the field of innovation. The innovation
In the rental agreement there shall include the method
hubs for knowledge and technology transfer usually have their
own innovation infrastructure, which include co-working payment and the scale of other costs not included in the
spaces. The main idea is to lend the meeting point to individuals rent price. The tenant shall pay the costs of any repair
with entrepreneurial ambitions, where they can connect with made in an apartment resulting from the improper or
start-up teams to share ideas and experiences. negligent use of the apartment in accordance with the
provisions of the lease agreement. Tenants are, for
instance, obliged to repair broken glass windows and to
repair entry and indoor doors, etc. On the other hand, the
landlord is obliged to maintain the dwelling and building,
11.1 Please briefly describe the main laws that regulate in which the dwelling is located, in a condition to provide
normal use and function.
The main legislation for the leasing of residential premises is the

Housing Act, which regulates all necessary questions regarding 11.4 Would there be rights for a landlord to terminate
leases of residential premises. However, if something is not
regulated by the Housing Act completely, then the Law on for the right to be exercised?
Property Code and the Obligations Code apply subsidiarity for
the issues that are not governed.
The landlord may terminate the contract due to one or more
reasons for termination of contracts (due to culpable reasons),
11.2 Do the laws differ if the premises are intended for which are set by the Housing Act. However, 11 of the
aforementioned reasons are applicable to all tenancy relations
(also market, employment-based and purpose), whereas one of
No. Slovenian law does not contain such differentiation. the reasons is applicable only to non-profit relations. There
Real Estate 2024

is no specification on the content of the warning, nor does it 12.3 Which bodies control land/building use and/
determine the manner in which the warning must be delivered or occupation and environmental regulation? How do
to the tenant. In practice, landlords use a number of methods buyers obtain reliable information on these matters?
to deliver the warning; however, the courts use different criteria
when assessing whether the warning was duly served upon. The Construction, Surveying and the Housing Inspection
There is also the possibility that landlords in market, Service (Gradbena, geodetska in stanovanjska inšpekcija) and the
employment-based and purpose rentals may terminate the Inspectorate for Natural Resources and Spatial Planning
contract for any reason, under the condition that is governed in (Inšpektorat za naravne vire in prostor) are the two most important
the contract. bodies that exercises the control.
If the tenant does not comply with the requirements from the A buyer can obtain information on land use through the
warning in the given deadline, the landlord may file a lawsuit for certificate of land use issued by the municipality or by reviewing
termination of the contract and order that the tenant move out the municipalities’ spatial planning Acts. These Acts include
of the premises. If after the final judgment the tenant does not environmental requirements up to a certain point.
move out, there is the possibility that the court can impose a fine. Environmental regulation and requirements are determined
in legislation including special regulations.
12.1 What are the main laws which govern zoning/ building works and/or the use of real estate?
describe them and include environmental laws. A building permit is the most important and required
administrative permit. After the construction work is concluded
The Spatial Planning Act (Zakon o urejanju prostora) defines the the owner must obtain an operating permit (a permit to use a
objectives, principles and rules of spatial planning, participants construction work/building).
involved in the field, types of spatial planning documents, their Some projects require an Environmental Impact Assessment
content and interrelationships, procedures for their preparation, procedure that results in an Environmental Consent. In the
adoption and implementation, and a joint planning and case that the construction has an impact on the environment
permitting process. It also defines spatial measures, instruments (over the threshold foreseen in the legislation), the integrated
and measures of land policy, and regulates the monitoring of the procedure is required where an Integrated Permit is issued
state of space, the operation of the spatial information system (includes Building Permit and Environmental Consent).
and the issuing of certificates in the field of spatial planning. An environmental permit is required for operating specific
The Building Act (Gradbeni zakon) regulates the conditions devices/construction works.
for the construction of facilities and other issues related to the
construction of facilities. 12.5 Are building/use permits and licences commonly
The Environmental Protection Act (EPA or Zakon o varstvu obtained in your jurisdiction? Can implied permission be
okolja) regulates environmental protection against pollution as obtained in any way (e.g. by long use)?
a prerequisite for sustainable development and sets out in this
context the basic principles of environmental protection, envi- Building/use permits are mandatory for construction to start
ronmental protection measures, environmental monitoring and and after completion for the building to be used. Implied
environmental information, economic and financial instruments permissions are not foreseen in legislation. However, illegal
for environmental protection, public environmental protection housing could be under certain circumstances declared legal in
services and other environmental protection-related questions. a special procedure.
The Nature Conservation Act (Zakon o ohranjanju narave) lays
down biodiversity conservation measures and a system for
the protection of natural values in order to contribute to the
conservation of nature.
The Waters Act (Zakon o vodah) governs the management of
the sea, inland and groundwater (hereinafter referred to as: There is an Administrative Fee/Tax to be paid at the beginning of
“waters”) and water and coastal land. each procedure that is quite insignificant in comparison to other
costs. Costs of preparation work with all mandatory blueprints
and involvement of relevant officials with opinions differ from
12.2 Can the state force land owners to sell land to it? If project to project. Communal Tax depends on the regulation
of each municipality and characteristic of the planned building.
mechanism.
The state can force landowners to sell the land against 12.7 Are there any regulations on the protection of
compensation or compensation in kind (expropriation). This is
permitted only for public benefit. The owner of the expropriated real estate or development/change of use?
property is entitled to adequate compensation or equivalent
replacement property. The compensation includes the value
of the expropriated property, compensation for damages and The Cultural Heritage Protection Act (Zakon o varstvu kulturne
other costs associated with the expropriation. Compensation dediščine) has these provisions. The state and municipalities have
is determined using the methodology of real estate valuation. a pre-emptive right on land and real estate that is pronounced as
cultural heritage. They have the right to expropriation as well.
Development and change of use are connected with cultural
protection conditions and cultural protection consent.
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168 Slovenia
12.8 How can, e.g. a potential buyer obtain reliable The EPA also envisages a Climate Fund, which is not an
information on contamination and pollution of real individual institution, but an “earmarked part” of a state budget,
estate? Is there a public register of contaminated land in intended for co-financing measures to mitigate and adapt to
your jurisdiction? climate change.
The public and centralised register of contaminated land does 13.2 Are there any national greenhouse gas emissions
not exist in Slovenia. Some general information on grounds of reduction targets?
monitoring the status of certain environment (air, water, land,
etc.) are published and archived at the Environmental Agency
The Comprehensive National Energy and Climate Plan (NEPN
of the Republic of Slovenia. The only efficient way to check
as per its Slovenian acronym), adopted in February 2021, is an
whether the real estate is polluted is by performing special
action strategy document setting out objectives, policies and
analysis of the targeted real estate with the consent of its owner.
measures for the period up to 2030 (with a view to 2040) in five
dimensions of the Energy Union: 1) decarbonisation (GHG and
12.9 In what circumstances (if any) is environmental RES emissions); 2) energy efficiency; 3) energy security; 4) the
clean-up ever mandatory? internal market; and 5) research, innovation and competitiveness.
A National Strategy for coal exit and the restructuring of coal
Environmental clean-up is mandatory if the owner of the land regions was adopted in January 2022, which foresees a coal exit
causes environmental damage (environmental liability with regard by 2033.
to the prevention and remedying of environmental damage). The Slovenian government also adopted the Operational Plan
for GHG reduction by 2020 (with a view to 2030) (OP GHG) in
December 2014.
12.10 Please briefly outline any regulatory Slovenia is a member of the EU and a signatory party to the
Paris Agreement and therefore it has internationally committed
itself to significantly reducing carbon dioxide emissions.
Some time ago an Energy Performance Certificate (Energy ID

of a building) was introduced through the Energy Act (Energetski 13.3 Are there any other regulatory measures
zakon). It is a public document containing benchmarks that enable
the comparison and assessment of the energy performance of the buildings?
building. Recommendations for cost-effective energy efficiency
improvements are an integral part of the energy performance
certificate, except for new buildings and leases. As already mentioned, the Eco Fund provides financial
It is obligatory for the sale of the building or its individual part instruments for individuals, and also municipalities, who wish
and for renting for a period of one year or more. It is mandatory to proceed with investments in newly constructed or existing
for the seller and the landlord. private and public buildings in order to improve their energy
balance or to construct them as low energy and passive buildings
or renovated in passive standard. These measures are – among
132 Climate Change others – also based on an Action Plan for almost-zero energy
building from 2015 and a long-term strategy for almost-zero
13.1 Please briefly explain the nature and extent of energy buildings.
scheme). 142 COVID-19
Principal climate policy measures are aiming at increasing the 14.1 Please detail any laws that govern real estate in
share of renewables, e.g. through feed-in tariffs, Eco Fund loans
and grant schemes, or various Ministry public calls for financing which remain in place.
renewable energy sources (RES) technologies and energy-
efficiency renovations of buildings.
The EPA – together with EU legislation and Slovenian Major changes to rules that govern real estate were adopted
implementing government acts – regulates the trading in mainly by the Act on intervention measures to help mitigate
greenhouse gas (GHG) emission allowances. the consequences of the second wave of the COVID-19
Operators not included in the trading system may be bound pandemic (Zakon o interventnih ukrepih za pomoč pri omilitvi posledic
to pay an environmental tax on GHG pollution, based in a drugega vala epidemije COVID-19), which temporarily amended
government regulation on the environmental tax on air pollution some provisions of the Commercial Buildings in Commercial
caused by carbon dioxide. Premises Act (which at the time was still in force), namely:
The EPA also envisages the Slovenian Environmental Public ■ it introduced a shorter, eight-day period of notice of
Fund (Eco Fund), whose main purpose is to promote development termination, with the possibility of terminating the
in the field of environmental protection. It is the only specialised contract by a simple written statement instead of a legal
institution in Slovenia that provides financial instruments such as proceeding;
grants, loans, etc. for environmental projects. These instruments ■ a payment deferral for obligations under the lease
are also available for individuals that aim to convert from fossil agreement; and
fuels to RES and energy saving investments but also investments ■ a request for renewal of a short-term lease.
in water consumption reduction, connections to sewage systems,
small wastewater treatment and replacement of asbestos roofs.
Real Estate 2024

Domen Neffat, LL.M., is the founder and Managing Partner of Law Firm Neffat and Partners. Mr. Neffat focuses his practice on Corporate
Law, Real Estate (including construction), Environmental Law, Waste Management Law, Copyright Law and Public-Private Partnerships
(PPP). He has extensive experience in domestic and cross-border business transactions and is one of the leading lawyers in the field
of Environmental and Waste Management Law in Slovenia. Mr. Neffat has the capability to create innovative solutions in a compressed
timeframe and is valued for always providing advice that benefits his clients the most. His work also covers transactions designed to support
restructurings of group companies by change of ownership. He is very strong in advising on construction projects.
Mr. Neffat also has a very broad base of skills in restructuring, crisis management and in corporate governance in general. He regularly holds
lectures on the topics of Corporate Law, Environmental Law and Real Estate. He is an arbitrator at the Slovene National Football Association.
He is a member of the management board of German – Slovene Chamber of Commerce.
Law Firm Neffat and Partners Tel: +386 01 300 00 70

Miklošičeva cesta 18 Email: neffat@neffat.si
1000 Ljubljana URL: www.neffat.si
Slovenia
Jakob Stanič Gruden specialises in the fields of Real Estate Law, Corporate Law and Public Procurement. He also has extensive experience
in Data Protection Law. Jakob advises local and foreign clients and represents them in court proceedings.
He is a native speaker of Slovenian and is fluent in English and Italian. He is also moderately proficient in German and French.
Law Firm Neffat and Partners Tel: +386 01 300 00 70

Miklošičeva cesta 18 Email: gruden@neffat.si
1000 Ljubljana URL: www.neffat.si
Slovenia
Law Firm Neffat and Partners advises clients in the fields of Corporate Law,
M&A, Public Procurement, Waste Management and Environmental Law,
Construction and Engineering law, Real Estates, Litigation, Commercial Law,
GDPR, White Collar Crime, Copyright Law and many others.
In an increasingly complex economic world, we believe that our role is to
assist our clients: working out the possible course of action resulting from
various situations; obtaining efficient, comprehensive and tailored legal
advice in various complex situations; and optimising decision-making in
every term possible. In order to achieve this, our team believes that the quality
of the relationship that we have with our clients is one of the key factors to
the success of the legal work entrusted to us and we must understand the
economic, sector-based, financial and managerial culture of our clients.
www.neffat.si
Real Estate 2024

170 Chapter 17
Switzerland
Switzerland
Wolfgang Müller
MLL Meyerlustenberger Lachenal Froriep AG Cosima Trabichet-Castan
the Lex Koller should be abolished altogether on the one hand,

12 Real Estate Law or made even stricter on the other. Swiss Parliament decided
to maintain the Lex Koller since it is widely recognised that the
1.1 Please briefly describe the main laws that Lex Koller is the only effective measure to reduce the demand
for Swiss residential properties and thus to reduce the risk of
“over-heating” residential real estate markets.
12.1. Those relating to tax should be listed in response to 32 Real Estate Rights
Switzerland is a civil law country. Real estate is mainly governed in your jurisdiction? Are any of them purely contractual
by written laws on a federal level, such as the Swiss Civil Code, between the parties?
the Swiss Code of Obligations, the Act on the Acquisition of
Real Estate by Persons Abroad (the so-called Lex Koller), the The most important types of rights over land, on the one hand,
Debt Enforcement and Bankruptcy Act and the Ordinance on are ownership, co-ownership (in particular, in the form of the
the Land Register. condominium-principled co-ownership), building rights and
usufructuary rights. On the other hand, lease contracts play a
1.2 What is the impact (if any) on real estate of local major role for both residential and commercial properties. The
common law in your jurisdiction? latter are purely contractual between the parties unless they are
annotated in the land register.
As mentioned above, Switzerland is a civil law country. Hence,
there is, in principle, no common law in Switzerland. Nevertheless, 3.2 Are there any scenarios where the right to land
there is case law that offers guidance on the interpretation of diverges from the right to a building constructed
written laws. In particular, such case law has an impact in the thereon?
field of landlord-tenant law where a lot of cases are produced, in
particular, in the Western (French-speaking) part of Switzerland. Yes, in the case of a building right, the right to real estate
diverges from the right to a building constructed thereon. In
such a scenario, there are two owners: one that owns the soil;
jurisdiction? Please ignore EU legislation enacted locally and the other that owns the building built thereon. Building
in EU countries. rights can, under certain conditions, be registered as separate
and independent “real estate” in the land register and can
therefore be the object of an individual mortgage.
International laws do not play an important role with respect
to real estate in Switzerland. The Agreement on the Free
Movement of Persons, however, has an impact on the Lex Koller 3.3 Is there a split between legal title and beneficial
mentioned above. title in your jurisdiction and what are the registration
change this?
22 Ownership
Beneficial ownership cannot be based on property law provisions
because Swiss law does not know a legal principle comparable to
persons)? the common law concept of trust (even if trusts under foreign law
are, under certain conditions, recognised under Swiss law – in
the case of assets under a trust established abroad that are entered
The Lex Koller (see the answers to questions 1.1 and 1.3 in the name of the trustees in the land register in Switzerland,
above) restricts the acquisition of Swiss residential and other reference shall be made to the trust relationship by means of an
non-commercial real estate by foreign (i.e. non-Swiss) persons annotation; a trust relationship that is not annotated in the land
while the acquisition of business premises is, as a rule, unrestricted register in such a way may be considered invalid against bona fide
under the Lex Koller. In recent years, it has been debated whether third parties). Any beneficial ownership is therefore of a purely
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MLL Meyerlustenberger Lachenal Froriep AG 171
contractual nature under Swiss law, which means, in particular, 4.5 Where there are both unregistered and registered
that the right of the beneficiary is not based on an in rem title to land or rights is there a probationary period following
the property, but only on a contractual claim against the holder first registration or are there perhaps different classes
of the property rights. If that holder disposes of the property in or qualities of title on first registration? Please give
violation of the contractual provisions, the beneficiary is limited details. First registration means the occasion upon
which unregistered land or rights are first registered in
to a claim for damages. Although a purchase of property on a
the registries.
fiduciary basis is considered to be valid, such fiduciary purchase is
void where the parties intended to circumvent legal provisions; this
may especially be the case if a non-resident foreigner or a company No, there is no such probationary period following first
with a registered office abroad, respectively, intends to acquire a registration under Swiss law.
Swiss property in breach of the Lex Koller without disposing of the
necessary permit (see question 2.1 above). A common method of 4.6 On a land sale, when is title (or ownership)
acquiring a beneficial interest in land is by purchasing shares or the transferred to the buyer?
majority of shares in a real estate company; the ownership of the
property in an economical sense is transferred simply by conveying Transfer of title occurs upon the respective entry into the “journal”
the shares of the company owning the property. However, in such of the land register, provided, however, that the application is later
a case, the restrictions of the Lex Koller also apply. See question registered in the “main register” of the land register.
2.1 above regarding the failed attempt to amend Lex Koller.

42 System of Registration priority over other rights. Do earlier rights defeat later
rights?
Except for mortgages that have an assigned rank among each
other, irrespective of the time of registration, registered rights
In principle, all privately owned land is registered in the land obtain priority over other rights in accordance with the “rule
register. However, no rights of private ownership apply to public of seniority”, which means, in principle, “first in time, first in
waters or to land not suitable for cultivation, such as rocks and right”. Such rule, however, can be contracted away.
scree, fern and glaciers, or springs rising therefrom, unless proof
to the contrary is produced. Immovable property that is not 52 The Registry / Registries
privately owned and is in public use will be recorded in the land
register only if rights in rem attaching to such property are to be
registered or if cantonal law provides for its registration. jurisdiction? If more than one please specify their
guarantee? For land register purposes, the cantons are divided into districts.
Hence, the 26 cantons are responsible for setting up the land
There is no explicit state guarantee of title. However, the land registries, the demarcation of the districts, the appointment and
register is assumed to be complete and correct and everyone remuneration of officials and supervision arrangements.
may, in good faith, rely on it. Therefore, the state (i.e. the
respective canton) is liable for any losses arising from the undue 5.2 How do the owners of registered real estate prove
maintenance of the land register. their title?
4.3 What rights in land are compulsorily registrable? The owner is shown in the land register, which is deemed to be
What (if any) is the consequence of non-registration? correct and complete (“public faith”, see question 4.2 above).
No further proof is necessary. In the event of an erroneous
All acquisition of land ownership must be recorded in the land entry, an action for rectification may be filed.
register. The consequence of non-registration is that the title
remains with the seller – hence, the respective transaction is not 5.3 Can any transaction relating to registered real
yet closed. In addition, all rights relating to the property and estate be completed electronically? What documents
relevant to everyone (not just to a contractual party) must be need to be provided to the land registry for the
registered in the land register. registration of ownership right? Can information
electronically?
registered?
The cantons can allow their land registries to communicate and
conduct transactions electronically. The transferor of real estate
Emption rights, pre-emption rights, repurchase rights and lease (e.g. the seller) must file to the land register an application for
agreements, for example, are rights in land that are not required the registration of the new owner (e.g. the buyer) and furnish
to be registered. However, these rights are generally entered supporting documents (e.g. the purchase and sale deed). In
in the land register by the parties voluntarily in order to make some cantons, it is possible to access certain information (e.g.
them enforceable against any rights subsequently acquired over the name of the registered owner) electronically.
the property.
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172 Switzerland
5.4 Can compensation be claimed from the registry/ attractive to insurance companies and pension funds, standards
registries if it/they make a mistake? put in place by the Swiss National Bank and the Swiss Bankers
Association have meant that banks have been forced to be more
prudent when lending money to private individuals (see the
Yes, the state (i.e. the respective canton) is liable for any losses
answer to question 8.1 below).
arising from the undue maintenance of the land register.

register? Can a buyer obtain all the information he and what are the sectors/areas of most interest? Please
might reasonably need regarding encumbrances and give examples.
information/process is required? As the time of the negative interest rates is over and interest rates
have been rising steadily since 2022, real estate does not remain
Any person is entitled to obtain the following information from the only attractive asset class and other investments are now
the register without showing a legitimate interest: considered more often. However, even though the demand for
owner-occupied housing has decreased, as residential property
(1) the name and description of the immovable property;
buyers are directly feeling the strong rise in inflation (which,
(2) the name and identity of the owner;
however, stabilised to under 2% during summer 2023) in the form
(3) the form of ownership and the date of acquisition;
of higher financing costs, the demand for residential property in
(4) the charges and mortgages; and
general is still high.
(5) the notifications (subject to exceptions).
After COVID-19 and the resulting trend towards working from
A person showing a legitimate interest is entitled to consult
home, which led to a decline in the demand for office space, many
the full land register or to be provided with an extract. Hence,
employers have asked their employees to return to the office; as
a buyer could also directly obtain from the land register all the
a result, companies have set aside their demand-side restraint.
information it might reasonably need regarding encumbrances Demand for office space is also supported by a booming labour
and other rights affecting real estate. Furnishing evidence to market (the unemployment rate lies under 2% and employers are
establish a legitimate interest, however, takes time. In practice, still looking to hire, cf. Wüest Partner Immo-Monitoring 2023/2).
it is thus more convenient for the buyer to get an extract from Construction activity has slowed down at a nationwide level
the land register via the seller or, in certain cantons, via the over the past two years, leading to a decline in the number of new
notary public. Accordingly, the land register cannot simply be residential and commercial buildings offered for sale. Demand
searched without reason; a legitimate interest must be proven for for residential buildings as well as for well-located, well-equipped
a particular property in order to get a full land register extract. retail and office space remains strong, which ensures stable
yields. Investors, however, face uncertainties due to increasing
62 Real Estate Market constraints imposed on owners to meet new energy efficiency
standards. Asking prices remain high for the time being, resulting
6.1 Which parties (in addition to the buyer and seller in a slowdown in transactions since the beginning of 2023.
and the buyer’s finance provider) would normally be Furthermore, the risk of an energy crisis is still looming. Fears
involved in a real estate transaction in your jurisdiction? about interruption of the energy supply chain as well as newly
Please briefly describe their roles and/or duties. introduced energy retrofit obligations aimed at eliminating the
need for fossil fuels are forcing owners to consider refurbishment
Lawyers who assist the seller and/or the buyer in conducting due work (capital expenditure) ahead of schedule. The demand for
diligence and drafting and/or reviewing the contract documents photovoltaic modules also remains high in Switzerland, since such
are often involved. In addition, notaries publicly draft and installations contribute to some security and provide protection
notarise the purchase and sale deed. Other parties involved are, against the rising electricity prices.
for example, banks, realtors, technical/environmental consultants
and appraisers. 6.5 Have you observed any trends in particular market
6.2 How and on what basis are these persons examples.
remunerated?
After several years of increases, construction prices have shown

The fees of the notaries public are subject to the respective laws a tendency to stabilise in 2023. While raw material costs are
of the cantons. Realtors normally receive a certain percentage expected to decrease further, inflation is likely to increase wage
of the purchase price for their brokerage services. Lawyers, costs. The number of new construction projects has fallen sharply
consultants and appraisers are normally remunerated on an over the past five years, with only a few regions’ respective sectors
hourly basis. showing signs of a resumption in construction activity. The
decline in construction activity for owner-occupied properties
6.3 Is there any change in the sources or the as well as for rental apartments, together with the generally
availability of capital to finance real estate transactions increasing demand for housing due to demographic factors,
in your jurisdiction, whether equity or debt? What are the have contributed to a fall in the number of vacant apartments.
main sources of capital you see active in your market? With respect to office and retail space, the anticipated decline in
construction activity is becoming clearer, as the downward trend
In Switzerland, it has always been possible to access reasonable in construction permit applications was confirmed in 2023.
finance for real estate transactions, even following the 2008 Even after COVID-19, the negative trend for retail stores
financial crisis. While real estate as an asset class is still continues; the market share represented by online trade has
now stabilised, which can be viewed as a normalisation after the
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growth during the pandemic. However, the trend clearly points

towards less surface for the stationary retail market.

72 Liabilities of Buyers and Sellers in Real the lending of money to finance real estate. Are the rules
Estate Transactions different as between resident and non-resident persons
7.1 What (if any) are the minimum formalities for the entities?
The measures against the continued increase of residential
The purchase and sale deed needs to be notarised by a notary property prices and the amount of mortgage loans introduced by
public, and the seller (or the notary public, respectively) must the Swiss National Bank (SNB) and the Swiss Bankers Association
file an application for the registration of the new owner (i.e. the (SBA) in 2014 are, in principle, still in place today. These measures
buyer) with the land register. have shown effects and a certain slow down (fewer transactions,
decreasing prices) was seen in some areas and segments of the
residential and commercial real estate market (see also the answers
matters must be disclosed? to questions 6.3 and 6.5 above). In 2023, the SNB did further
increase interest rates and set an end to the long-lasting negative
interest rates in Switzerland. Higher interest rates (currently at
There is no formal duty of disclosure. However, the seller is
1.75%) make investments in real estate less attractive than during
under a duty to act in good faith, which implies, for example, that
the period of the negative interest rates; however, real estate still
it must answer questions of the buyer relating to the transaction
remains an investment to be considered.
truly and accurately.
Since 30 September 2022, the countercyclical buffer
obligations set out by the Capital Adequacy Ordinance (CAO)
7.3 Can the seller be liable to the buyer for apply to banks active in the Swiss residential mortgage market.
misrepresentation? Such banks must hold additional capital of 2.5% on direct and
indirect mortgage-backed credit exposures for residential real
Yes; if the seller does not disclose important information or estate in Switzerland, in order to combat the increasing risks on
gives false information, it may be liable for misrepresentation. the mortgage and real estate markets.
In August 2019, the Swiss Financial Market Supervisory
Authority (FINMA) recognised the adjusted self-regulation by
or contractual warranties to the buyer? What would be the SBA in the area of mortgage lending for investment properties
the scope of these? What is the function of any such as a binding minimum standard. This self-regulation, applicable
guarantee or warranties (e.g. to apportion risk, to give since 1 January 2020, requires borrowers to provide a minimum
information)? Would any such guarantee or warranties down payment of at least a quarter of the loan-to-value ratio.
act as a substitute for the buyer carrying out his own The lower cost of market principle continues to apply, whereby
diligence? any difference between a higher acquisition price and lower
loan-to-value ratio is to be financed entirely with the borrower’s
According to the Swiss Code of Obligations, the seller is liable own funds. In addition, the mortgage is now to be amortised
to the buyer for any breach of warranty and for any defects that to two-thirds of the loan-to-value ratio of the property within
would materially or legally negate or substantially reduce the value a maximum of 10 years. The tightened rules only apply to new
of the purchase object or its fitness for the designated purpose. borrowers, but not to existing loans or to the existing standards
Such warranty is, however, in practice, often contracted away (at relating to owner-occupied residential property.
least to some extent) in real estate asset transactions. However,
any agreement to exclude or limit the warranty obligation is
void if the seller has fraudulently concealed a defect or material 8.2 What are the main methods by which a real
information. Other than that, any additional warranty is a result estate lender seeks to protect itself from default by the
borrower?
of the negotiations and depends on the type of property that is
sold (e.g. rent, soil contamination, etc.).
In Switzerland, the main method by which a real estate lender
seeks to protect itself from default by the borrower is the mortgage.
The seller retains no connection with the property after sale. of mortgaged properties? Are there any options for a
However, if the property gains tax has not been secured in the
contract, the seller must make sure to pay the relevant taxes. mortgagor?
Otherwise, a liability may only arise from the warranties given as
described in question 7.4 above or from post-closing obligations
agreed upon in the sale contract. If the creditor’s debt is secured by a mortgage, the pledged
property is seized and sold at auction by the debt enforcement
office (the respective foreclosure proceedings are governed by
7.6 What (if any) are the liabilities of the buyer (in the Debt Enforcement and Bankruptcy Act and its respective
ordinances). In a security agreement, the lender and borrower
may, however, also agree on the private realisation of the
In addition to paying the purchase price, the buyer must pay the collateral. In the latter case, there are no court proceedings to
fees and taxes, as provided for by law and/or contract. be initiated to realise the mortgaged property.
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174 Switzerland
8.4 What minimum formalities are required for real 8.9 What is the process for enforcing security over
estate lending? shares? Does a lender have a right to appropriate shares
The establishment of a new mortgage certificate is to be entered another insolvency or reorganisation procedure?
notarised, and a respective application is to be filed with the
land register. At the same time, there are no formalities in place
regarding entering into a credit facility. Lending money is a risky business as the only obligation
of the borrower by law is the repayment of the money in the
same amount. In commercial relations, the borrower must pay
8.5 How is a real estate lender protected from claims interest as well. It is not common in Switzerland to give shares as
against the borrower or the real estate asset by other collateral, among others, for Lex Koller reasons; in connection
creditors?
with real estate, the credit is generally secured by a mortgage.
Mortgages have a certain assigned rank among each other. In 92 Tax

general, the claims based on mortgage certificates prevail over
unsecured or unprivileged claims.
The acquisition of real estate or the majority (in certain cantons
even a minority stake) of the shares in a Swiss real estate company
Under the Swiss Debt Enforcement and Bankruptcy Act, the may be subject to real estate transfer tax of between 1% and 3%,
following acts that disadvantage certain creditors, carried out by depending on the canton where the property is located. Certain
the debtor or security provider before the opening of bankruptcy cantons do not apply to a real estate transfer tax, such as Zurich,
proceedings, can be voidable (anfechtbar): which abolished real estate transfer tax a few years ago. The tax
■ The debtor or security provider disposes of assets against no is normally payable by the buyer. Often, the buyer and seller
consideration or against inadequate consideration in the year are jointly and severally liable for the real estate transfer tax.
before the adjudication of bankruptcy or an equivalent event. Contractual agreements are possible with respect to the internal
■ The debtor or security provider carries out certain acts within allocation of the tax burden between buyer and seller. In certain
one year from the opening of bankruptcy proceedings, cantons, tax laws may foresee a lien on the property to secure the
while it is over-indebted, including, inter alia, the granting of transfer taxes. Also, registration fees of the land register may
collateral for previously unsecured debt. depend on the value of the property.
■ The debtor or security provider carries out any act during the
five years before the opening of bankruptcy proceedings that
has the purpose of disadvantaging creditors or preferring
certain creditors to the detriment of others (that is, avoidance
is the intent). It depends on the regulations of the respective canton. In an
asset deal, the transfer tax is sometimes paid through the notary
public. In some cantons, the notary is personally liable for the
payment of the transfer tax.
According to Art. 17 of the Swiss Debt Enforcement and 9.3 Are transfers of real estate by individuals subject to
income tax?
Bankruptcy Act, an appeal on the grounds of incorrect
application of the law or inappropriate exercise of discretion
is, in principle, possible against any order made by a debt Yes, the gain realised through the real estate transfer is subject to
enforcement or a bankruptcy office. No court fees are charged tax either as a special real estate income tax or – in exceptional
for the respective appeal proceedings (Art. 20a of the Debt cases – as normal income tax. Each canton has adopted its
Enforcement Act). However, a party or its legal representative own legislation in this respect. Some apply a decreased tax rate
that appeals in temerity or in bad faith can be fined up to 1,500 depending on the length of the ownership period, in order to
Swiss francs. Some borrowers thus seek every opportunity to prevent speculation.
appeal (without taking a big financial risk) in order to hold up
the enforcement action by the lender. We have seen cases in 9.4 Are transfers of real estate subject to VAT? How
which it took the lender up to five years to enforce a mortgage. much? Who is liable? Are there any exemptions?
8.8 What is the impact of an insolvency process or a Transfers of real estate are, as a rule, exempt from VAT. However,
corporate rehabilitation process on the position of a real a waiver of exemption and option for VAT on the purchase price
estate lender? of the building(s) is possible, provided that the real estate is not
used for private purposes. As a result, the investor will be able
If insolvency proceedings are initiated, all debts become due to reclaim Swiss input VAT on the purchase price (the current
with the exception of those secured by the borrower’s real estate VAT rate is 7.7% and will be increased to 8.1% as of 1st January
by collateral. In addition to the principal debt, the creditor can 2024). A careful analysis regarding VAT in connection with
claim the interest up to the opening date of the bankruptcy and Swiss real estate transactions is required as VAT consequences
the collection costs. A real estate lender generally secures its can be very relevant in economic terms.
credit with a mortgage; those debts are paid in advance (hence
prior to all other creditors) and thus treated preferably.
Real Estate 2024

9.5 What other tax or taxes (if any) are payable by the (e)(i) Change of control of the tenant: in principle, change of
seller on the disposal of a property? control does not affect the commercial lease agreement.
(e)(ii) Transfer of lease as a result of corporate restructuring:
in a merger, a lease agreement is transferred to the new
There are no other taxes. It should be noted, however, that
(restructured) entity. The acquiring legal entity shall,
the buyer and seller are jointly liable for Swiss income tax on
however, secure claims of the creditors involved in the
brokerage fees paid to a foreign (non-Swiss) broker involved in
merger, if creditors so demand, within three months after
the transaction. The tax liability is limited to 3% of the purchase
the merger becomes legally effective.
price of the property.
(f) Repairs: generally speaking, and as a basic rule, the landlord
is responsible for major repairs; however, exceptions may
9.6 Is taxation different if ownership of a company (or apply with leases that come close to double and triple net
other entity) owning real estate is transferred? lease agreements (see question 10.2 above).
The real estate transfer tax, if any, is owed in case of an asset or 10.4 What taxes are payable on rent either by the
share deal (see the answer to question 9.1 above). It may, however, landlord or tenant of a business lease?
be possible to reduce or eliminate taxes on capital gains if a
company holding a property instead of the property itself is sold. Under certain circumstances, and if opted for VAT, the rent to be
paid for business leases may be subject to VAT (which is currently
9.7 Are there any tax issues that a buyer of real estate at 7.7% and will be increased to 8.1% as of 1st January 2024).
diligence on?
Real estate transactions regularly require an in-depth analysis party etc.)? Are there any special provisions allowing a
with regard to income tax, VAT and tax-optimised financing tenant to extend or renew the lease or for either party
and structuring. The relevant issues depend on the specific case. to be compensated by the other for any reason on
termination?

Depending on the circumstances of the case at hand, business
leases can indeed be terminated at expiry, on default or by either
leases of business premises. party giving notice. A termination may be challenged in front
of the courts (usually by the tenant) for several grounds. If the
challenge is successful, the termination is annulled. The tenant
The laws that regulate leases of business premises are, on one may also request the extension of a fixed-term or open-ended
hand, the Swiss Code of Obligations (Arts 253 to 301) and, on the lease where termination of the lease would cause a degree of
other hand, the Ordinance regarding the Lease of Residential and hardship for it that cannot be justified by the interests of the
Business Premises. There is no separate Swiss act that deals with landlord. A commercial lease may be extended by up to six years.
the leases of business premises only. It should be added that many
important issues pertaining to tenancy law are set out in case law.
10.2 What types of business lease exist? under the lease once they have sold their interest? Can
non-compliance?
In practice, various types of business leases exist, such as fixed-
term leases or leases that last for an indefinite period of time,
ordinary leases or leases that come close to double or triple As a basic rule, the lease passes to the acquirer together with
net lease agreements. The latter must, however, be used with ownership of the property sold. The new owner may, however,
caution because they have never been recognised as valid by the serve notice to terminate a lease on commercial premises for the
Swiss Federal Court. next legally admissible termination date if it claims an urgent need
to use the premises itself. If the new owner terminates sooner
than is permitted under the contract with the existing landlord,
10.3 What are the typical provisions for leases of the latter is liable for all resulting losses. In the case of a lease
business premises in your jurisdiction regarding: (a) transfer, the transferor remains jointly liable with the new tenant
until the end of the lease but up to a maximum of two years.
corporate restructuring (e.g. merger); and (f) repairs? 10.7 Green leases seek to impose obligations on
(a) Length of term: business leases typically last for five or 10 sustainable use of buildings and in the reduction of
years, possibly with an option of one additional five-year briefly describe any “green obligations” commonly
period. found in leases stating whether these are clearly
(b) Rent increases: the parties often agree on indexed rents. defined, enforceable legal obligations or something not
These must then be based on the Swiss consumer price amounting to enforceable legal obligations (for example
index. aspirational objectives).
(c) Tenant’s right to sell or sub-lease: subject to the landlord’s
approval, the tenant is entitled to sublet the premises. In Switzerland, there are commonly no such provisions in lease
(d) Insurance: we often see clauses according to which the agreements. However, we can see a trend picking up in this
tenant must provide liability insurance. respect (notably for single tenant buildings).
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176 Switzerland
10.8 Are there any trends in your market towards more 122 Public Law Permits and Obligations
spaces with greater levels of facilities/activities for 12.1 What are the main laws which govern zoning/
residents (co-living)? If so, please provide examples/ permitting and related matters concerning the use,
details. development and occupation of land? Please briefly
The trend towards co-working space has also arrived in

The Swiss system of zoning and planning is performed on four
Switzerland. There are increasingly more such places, especially
levels (federal, cantonal, regional and local). On each level,
in business cities like Zurich and Geneva. Such contracts must
respective laws exist. Environmental protection is mainly
be carefully worded so that they do not violate the ban on
addressed on a federal level.
coupled transactions.
112 Leases of Residential Premises 12.2 Can the state force land owners to sell land to it? If
mechanism.
If the rules of expropriation are followed, the state can force
landowners to sell land to it in order to achieve certain goals
The laws that regulate leases of business premises are, on one that are in the public’s interest. The basic rules of expropriation
hand, the Swiss Code of Obligations (Arts 253 to 301) and, on are as follows: the state needs to establish that: (i) there is a
the other hand, the Ordinance regarding the Lease of Residential sufficient legal basis for the expropriation; (ii) the expropriation
and Business Premises. There is no separate Swiss act that deals is in the public’s interest; (iii) the expropriation is in accordance
with the leases of residential premises only. with the principle of proportionality; (iv) the goal of the state
cannot be achieved by other reasonable measures; and (v) the
landowner is fully compensated.
No, they do not. or occupation and environmental regulation? How do

Land/building use and/or occupation and environmental
regulation are, in most cases, controlled by authorities determined
tenant’s rights to remain in the premises at the end of by the cantons and the communities. Some information is
the term; and (d) the tenant’s contribution/obligation to available online but in order to get reliable information on these
the property “costs”, e.g. insurance and repair? matters, it is recommended to contact the respective authorities.
The typical provisions are as follows: (a) an indefinite term with a 12.4 What main permits or licences are required for
notice period of three months; (b) an official benchmark interest building works and/or the use of real estate?
rate applies (specific laws can apply in the canton of Geneva); (c)
it is possible to extend the term for a maximum of four years; and In most cases, a permit is necessary to build, modify, demolish
(d) property costs such as the building related insurance policies or change the use of a building.
and (major) repairs must borne by the landlord according to the
law. On the other hand, energy and water consumption costs are
borne by the tenant. The parties usually agree that the tenant obtained in your jurisdiction? Can implied permission be
pays an additional amount as contribution to the ancillary costs, obtained in any way (e.g. by long use)?
which includes the maintenance of the building’s common areas
and installations.
It depends on the circumstances of the case at hand and on the
type of zoning. Implied permission is rarely seen.
achieve vacant possession if the circumstances existed 12.6 What is the typical cost of building/use permits and
for the right to be exercised? the time involved in obtaining them?
For valid reasons rendering the performance of the contract Time and costs vary from canton to canton and community to
intolerable, the landlord may terminate any residential lease community. They range (depending on the project) from several
observing a notice period of three months. In the case of hundred to several hundred thousand Swiss francs.
default, the notice period is of one month. The landlord must
take court action (eviction proceedings) in order to achieve 12.7 Are there any regulations on the protection of
vacant possession if the tenant refuses to vacate the premises. historic monuments in your jurisdiction? If any, when
There are regulations on the protection of historic monuments

on a federal, cantonal and community level. They do not
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directly affect the transfer of rights in real estate. The buyer note that specific details of these implications will depend on
should, however, be aware that certain modifications to a the final version of the law and any subsequent regulations or
building may be impossible and/or subject to negotiations policies that are developed to implement it. Property owners
with the authorities. Hence a change of use – provided that and developers should stay informed about these changes and
the change has been permitted – is only possible without any be prepared to adapt to new requirements for more sustainable
affection as long as the buyer does not make any modifications and energy-efficient buildings.
to the protected property, which is not common in practice. Switzerland has also been actively shaping its environmental
law landscape with a series of legislative changes in 2023, as
part of the implementation of the energy strategy 2050. Several
12.8 How can, e.g. a potential buyer obtain reliable
information on contamination and pollution of real legislative changes were proposed or introduced in 2023, aiming,
estate? Is there a public register of contaminated land in among others, to promote large-scale solar energy projects and
your jurisdiction? limit appeals against wind energy projects. Upcoming revisions
focus on incentivising the use of renewable energies and easing
authorisation processes for energy infrastructure. Further
Yes, each canton has a public register of contaminated real
proposals aim to address energy shortages, expedite approvals
estate. Increasingly more of such registers are available online.
and simplify grid expansion planning while also centralising
However, the fact that a property is not entered into such register
authorisation procedures, or define zones where aesthetic
does not necessarily mean that the property is not contaminated
considerations are less significant, allowing for exemptions
or polluted. Cleaning up may also be mandatory in connection
from authorisation for the installation of new solar and energy
with construction activities.
efficiency infrastructure.

clean-up ever mandatory? 13.2 Are there any national greenhouse gas emissions
reduction targets?
A property must, as a rule, be cleaned up if it is listed in the

Based on the Kyoto protocol, the CO2 Act aims to reduce
public register of contaminated real estate as being polluted.
greenhouse gas emissions by 2030 by 50% compared to 1990
When it comes to the sale or division of immovable property
levels. Over this period, the Federal Council intends to achieve
located on a site that is entered in the register of polluted sites,
a minimum of 30% in Switzerland and a maximum of 20%
an authorisation of the competent authorities is to be obtained.
abroad with various actions. Ultimately, by 2050, Switzerland
aims to have zero greenhouse gas emissions. This “net zero
12.10 Please briefly outline any regulatory emissions” target was decided by the Federal Council in 2019.
The assessment and management of the energy performance sustainability of both newly constructed and existing
is regulated on a cantonal level. Several cantons have recently buildings?
introduced an obligation for the owners to perform respective
tests. For the time being, no sanctions can be imposed if the
On 1st June 2023, the Swiss Federal Office of Energy’s (SFOE)
energy performance of the building is not satisfactory.
published its vision for the future of the Swiss building stock
as part of the energy strategy 2050. This document highlights
132 Climate Change the significance of reducing carbon emissions, aligning with
the Paris Agreement, and the role of the real estate sector in
13.1 Please briefly explain the nature and extent of achieving Switzerland’s net-zero emission goals.
any regulatory measures for reducing carbon dioxide The key points of the SFOE vision aim at: (i) reducing
emissions (including any mandatory emissions trading energy consumption (with an intended shift from 90 TWh to
scheme). approximately 65 TWh, and an average energy consumption per
square metre expected to decrease by around 55% compared
Under the heading “energy strategy 2050”, a comprehensive set with 2010 levels); (ii) optimising energy efficiency (with a
of documents has been produced in recent years. As part of requirement to know the energy performance of each building
the energy strategy 2050, the revised CO2 Act came into force. in Switzerland to enable effective strategies for energy efficiency
However, a further revision of the CO2 Act was rejected in June improvements. The optimisation of energy use in buildings is
2021 and, consequently, the existing CO2 Act was extended until set to become mandatory for all building types by 2030); (iii)
2024. A new CO2 Act for the period 2025–2030 is currently substituting fossil fuels (including the gradual elimination of
in discussion before the Swiss Parliament. A first version was direct fossil fuel usage, such as oil, gas, and electric resistance
approved by both Councils in September 2023. The new text heating, for heating purposes in buildings. These should be
aligns with the country’s commitment to the Paris Agreement replaced by renewable energy sources. Additionally, district
and aims to reduce emissions by half compared to 1990 levels. heating networks should rely on at least 80% renewable or
It secures funding for climate initiatives without introducing waste heat sources by 2025); (iv) renewable energy integration
new taxes and focuses on strengthening the country’s energy (buildings, neighbourhoods, and cities should produce as much
supply while reducing reliance on fossil fuels. The law addresses of their energy needs as possible from renewable sources – this
emissions from various sectors, including the building sector, includes generating electricity for electric mobility, and Energy
essentially focusing on reducing emissions related to buildings networks should allow for decentralised energy production
and aims to promote energy efficiency and sustainability in the and exchange); and (v) creating a legal framework promoting
construction and renovation of structures. It is important to sustainable development.
Real Estate 2024

178 Switzerland
The SFOE also defined key priorities for implementing its 2050
vision for Swiss real estate, which include continuing and enhancing
142 COVID-19
its “Programme Bâtiments / Gebäudeprogramm” to promote energy-
efficient building practices and renovations, emphasising energy 14.1 Please detail any laws that govern real estate in
optimisation, promoting exemplary energy and climate initiatives,
supporting research and development, encouraging financial which remain in place.
incentives for renewables, advancing energy performance contracts
(CPE), and improving energy consumption statistics.
Consequently, real estate owners will need to invest in energy- Various measures, restrictions and bans put in place due to the
efficient upgrades, transition from fossil fuel-based heating systems pandemic have affected the tenants and landlords of retail services
to renewable energy-based installations, and ensure transparent (especially restaurants). At the time, the Federal Council issued
energy performance data. It is to be hoped that the Swiss the COVID-19 Ordinance on Hardship Measures in order to be
Confederation will provide the means to support owners in this able to bridge COVID-19-related financial bottlenecks; federal
ambitious task. As it stands, there are few binding targets, but it hardship measures were granted in the form of loans, sureties
must be anticipated that more coercive measures will be taken in or guarantees, and non-repayable contributions, provided that
the future. certain conditions were met.
In the meantime, all nationwide restrictions and bans have
been lifted. The cantons can take measures again if required;
however, there are currently no laws in place governing real estate.
Real Estate 2024

Wolfgang Müller is a partner at MLL Legal and heads the real estate team. His practice focuses on real estate, in particular, real estate
M&A, and capital markets. Wolfgang Müller graduated from the University of Zurich in 1990, and in 1992 was conferred a doctoral degree
by the University of Zurich (Dr. iur.). He was admitted to the Bar in Switzerland in 1993. After having successfully completed his MBA at the
Australian School of Business in Sydney/Australia and the University of Michigan Business School in Ann Arbor/USA, he joined MLL in 1997
and has been a partner since 2004. Wolfgang Müller is, among others, recommended by The Legal 500 as a leading individual for real estate
and construction in Switzerland.
MLL Meyerlustenberger Lachenal Froriep AG Tel: +41 58 552 05 70

Schiffbaustrasse 2, Postfach Email: wolfgang.muller@mll-legal.com
8031 Zurich URL: www.mll-legal.com
Switzerland
Cosima Trabichet-Castan has been with MLL Legal since 2012 and became a partner in 2020. She specialises in real estate law, advising
clients on high-value real estate transactions and construction projects as well as on rental law and property development issues. She is
actively involved in the Swiss real estate industry, namely through her engagement with various associations. She obtained a Masters’
degree in real estate from the Geneva Institute for Real Estate Studies (IEI) in 2019, allowing her to strengthen her expertise in this practice
area. She became a Chartered Valuation Surveyor (MRICS) at the end of 2021.
Cosima Trabichet-Castan acted as an assistant judge at the Geneva first instance Court for landlord and tenant disputes from 2017 to 2022.
In 2023, she was appointed to the Court of appeal for landlord and tenant disputes, representing the lessor community, a position held by
only a handful of people in the canton.
As a litigator, Cosima Trabichet-Castan represents clients in civil and administrative litigation proceedings across all French speaking cantons
of Switzerland, mainly in the field of real estate law (construction, condominiums, land use planning), rental law and labour law, as well as in
the context of debt collection proceedings.
Cosima Trabichet-Castan has studied law both in Switzerland and in Canada. She is fluent in French, English, German and Spanish.
MLL Meyerlustenberger Lachenal Froriep AG Tel: +41 58 552 05 50

65 rue du Rhône Email: cosima.trabichet-castan@mll-legal.com
Case Postale 3199 URL: www.mll-legal.com
1211 Geneva 3
Switzerland
MLL Meyerlustenberger Lachenal Froriep AG is a leading Swiss law firm

with a history that dates back to 1885. As one of the largest commercial
law firms in Switzerland, MLL Legal has more than 150 lawyers in four
offices in Switzerland and two offices abroad, in London and Madrid.
Real estate is one of our core competencies, both in our Geneva and
Zurich offices. Our real estate department focuses on the acquisition and
sale of real estate (including dealing with Lex Koller constraints), project
development, financing, construction and renovation, as well as real estate
litigation, for example in landlord and tenant disputes.
Our Real Estate department is ranked Tier 1 in The Legal 500 EMEA, and
several of our lawyers are recognised for excellence in other leading
publications, including Chambers, Who’s Who Legal and Expert Guides. Twice a
year, we send out our MLL Legal Update Real Estate to selected contacts and
publish the relevant articles on our news portal https://www.mll-news.com.
www.mll-legal.com
Real Estate 2024

180 Chapter 18
Taiwan
Taiwan
Yi-Jiun Su
Lee and Li, Attorneys-at-Law Lily Kuo
to obtain title of real estate in Taiwan is generally granted on a

12 Real Estate Law reciprocal basis. In addition, a foreign company cannot own real
estate in Taiwan unless it is duly registered in Taiwan.
1.1 Please briefly describe the main laws that In addition, the Equalization of Land Rights Act was
amended in 2023 under which private entities that aim to acquire
residential buildings are required to submit a building-use plan
environmental should be listed in response to question and obtain the approval of the Ministry of the Interior (MOI),
12.1. Those relating to tax should be listed in response to unless any of the exemptions announced by the MOI applies.
The Land Act, the Building Act and the Housing Act are the
main laws that govern real estate in Taiwan, while real estate 3.1 What are the types of rights over land recognised
transactions (including sale and purchase as well as leases) are in your jurisdiction? Are any of them purely contractual
mainly governed by the Civil Code. The aforementioned laws between the parties?
are not all-inclusive, and other laws and regulations govern
various aspects of real estate, such as the Regulations on the The following are the major types of rights over land prescribed
Management of Apartment Buildings and the Real Estate under Taiwan law:
Broking Management Act, under which the provision of real ■ Ownership: A land owner has the right to freely use, enjoy
estate brokerage services requires a special licence. benefits (e.g., rental) from, and dispose of the land, subject to
applicable laws.
1.2 What is the impact (if any) on real estate of local ■ Superficies: Superficies can be created over land for
common law in your jurisdiction? constructing buildings and works thereon.
■ Easement: An easement allows the owner of the dominant
land to use the servient land for its convenience such as
Taiwan adopts a civil law system. Codified laws and regulations
using the servient land as a path or for water pipes or
are the main source of law, while judicial decisions generally serve
telecommunications pipelines.
as a secondary source of law; the Council of Grand Justices has
■ Mortgage: A mortgage can be created over land to secure the
the power to interpret the Constitution, and its interpretations
creditor’s rights under a contract, such as a loan agreement.
of laws and regulations are binding with the same legal effect as
■ The aforementioned rights must be registered with the
the Constitution.
land office in order to take effect, while a lease is purely a
contractual agreement between the landlord and the tenant.
in EU countries. 3.2 Are there any scenarios where the right to land
thereon?
In general, no international law is materially relevant to real
estate in Taiwan.
Yes, Taiwan law permits ownership by different persons of
the land and the building constructed thereon. If the building
22 Ownership owner does not own the title of the land, in practice, the building
owner would need to have a lease agreement or register a right of
2.1 Are there legal restrictions on ownership of real superficies in order to legally occupy and use the land.
persons)?
Foreigners (except for nationals and companies of the People’s consequences of any split? Are there any proposals to
Republic of China (PRC) who/which are subject to specific change this?
restrictions) are permitted to own real estate in Taiwan, subject to
the relevant government approvals. The approval for a foreigner Generally speaking, there is no split between legal title and
Real Estate 2024

Lee and Li, Attorneys-at-Law 181
beneficial title to real estate in Taiwan unless a trust is created 4.6 On a land sale, when is title (or ownership)
whereby the legal title is registered under the trustee in transferred to the buyer?
accordance with a trust agreement.
In practice, legal title and beneficial title are split between
Title to land is transferred to the buyer when it is duly registered
different persons based on contractual arrangements de facto;
under the name of the buyer with the land office.
however, the beneficial title owner may claim its rights against
the contract counterparty but not against any third party.
Currently, there is no proposal from the legislators to change 4.7 Please briefly describe how some rights obtain
the foregoing. priority over other rights. Do earlier rights defeat later
rights?
Generally speaking, the priority of the rights is determined
by the date of creation. However, special rules may apply; for
registered? What land (or rights) are unregistered? instance, for any lease of real estate for a term of more than five
years, the lease will not be affected by the title transfer only if the
lease agreement is notarised.
In general, all onshore land must be registered with the land
office in Taiwan, except for those otherwise provided by law,
e.g., the land used for transportation and water conservancy 52 The Registry / Registries
(such as roads, canals and ditches). Notwithstanding the above,
said unregistered land may still be registered due to the need for 5.1 How many land registries operate in your
cadastral management. jurisdiction? If more than one please specify their

There is only one nationwide real estate registration system
guarantee?
in Taiwan, while the registration works are handled by the
competent land offices in the relevant geographic areas.
Yes, generally speaking, a registered title is guaranteed by the
state. The land office is required to indemnify anyone who
suffers loss and damage caused by the land office’s error, 5.2 How do the owners of registered real estate prove
their title?
omission, or fraud in the land registration, unless the land office
can prove that the person injured is responsible for the cause of
such loss and damage. Title to registered real estate can be proved by a registration
transcript issued by the land office (for which anyone can apply
in general), or the title deed issued by the land office to the title
owner.
Any change in rights in rem of real estate (including title to and 5.3 Can any transaction relating to registered real
encumbrance on real estate) through any juridical act (such as sale
and purchase) will not take effect until such change is registered registration of ownership right? Can information
with the land office. For any rights in rem of real estate acquired on ownership of registered real estate be accessed
by means of inheritance, compulsory execution, expropriation, a electronically?
court judgment or any other non-juridical act, such rights in rem,
may be further changed only after the previous acquisition has
Transactions of registered real estate can partially be processed
been duly registered with the land office.
electronically, i.e., some of the documents must be submitted
in writing. Documents required for the registration of
4.4 What rights in land are not required to be ownership of the real estate vary depending on the nature of the
registered? transaction. For an ownership transfer pursuant to a sale and
purchase transaction, the required documents include, among
As a typical example, the lease of land need not be registered others: (i) an application form; (ii) a government-prescribed
with the land office. sale and purchase agreement; (iii) identification documents; (iv)
title deed of the real estate; and (v) tax payment receipts or tax
exemption approval.
4.5 Where there are both unregistered and registered The information on the ownership of registered real estate
can be accessed electronically.
details. First registration means the occasion upon 5.4 Can compensation be claimed from the registry/
which unregistered land or rights are first registered in registries if it/they make a mistake?
the registries.
Generally, yes. See our answer to question 4.2 above.

There is no probationary period following the first registration
or different class or quality of title on first registration.
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182 Taiwan
5.5 Are there restrictions on public access to the In terms of residential property transactions, in light of
register? Can a buyer obtain all the information he housing price hikes in certain rural areas of Taiwan, the Central
might reasonably need regarding encumbrances and Bank of the Republic of China (Taiwan) (CBC) has undertaken
other rights affecting real estate and is this achieved a series of targeted precautionary measures since June 2010 to
by a search of the register? If not, what additional safeguard financial stability, including promulgating regulations
information/process is required? on land collateralised loans and housing loans (such as the LTV
ceiling) in areas overheated with real estate transactions.
Registration transcripts (which show the title and any registered
encumbrances on the real estate) can be accessed by anyone
online, although some of the personal information would be developers to invest in your region compared to last year
redacted (e.g., the first name of an individual owner) for personal and what are the sectors/areas of most interest? Please
data protection. give examples.
The title search itself is not conclusive; for instance, leases
are not registered in Taiwan. Hence, the buyer would need
With the increasing demand for e-commerce owing to the
to conduct due diligence searches and enquiries, including
COVID-19 pandemic, logistics centres/fulfilment centres
litigation, environmental and other searches, make formal
continue to appeal to investors and developers. Some of the
enquiries to the seller and conduct an on-site survey (including
new logistics centres are equipped with automated storage and
boundary survey) of the real estate.
retrieval systems, with robots moving goods around.
In addition, tech giants like Microsoft and Google, as well
62 Real Estate Market as private equity (PE) funds, remain interested in developing
or investing in data centres in Taiwan. In addition, given
6.1 Which parties (in addition to the buyer and seller that the renewable energy market is booming in Taiwan and
and the buyer’s finance provider) would normally be sustainability has become one of the key objectives in the data
involved in a real estate transaction in your jurisdiction? centre operations, some data centres have set green energy goals.

Scriveners handle title transfer applications and land surveys. sub sectors slowing down in your jurisdiction in terms of
Real estate brokers assist the parties with site visits, their attractiveness to investors/developers? Please give
inspections (condition of the property) and contract negotiations examples.
(commercial terms).
Notaries public notarise, among others, lease agreements,
The increase in online shopping results in a diminishing demand
particularly for those with a term of over five years.
for retail real estate. Nonetheless, retailers attract consumers
Other consultants (lawyers, construction and environmental
with new and unique in-store experiences, which cannot be
consultants, architects, and so on) conduct due diligence,
entirely substituted by online shopping.
feasibility studies, environmental assessment and so on,
Owing to the entry restrictions for foreigners to Taiwan,
depending on the size and complexity of the transaction.
the hospitality sector like hotels went through a relatively
dark period during the COVID-19 pandemic. With the entry
6.2 How and on what basis are these persons restrictions being lifted and borders reopening by the Taiwan
remunerated? government since October 2022, commercial real estate for the
hospitality sector is recovering. Recently, we have seen more
Scrivener’s fees are usually charged based on the number of land international hotel brand managers looking for opportunities
and buildings in the transaction. for cooperation with local owners.
Brokerage fees are usually a percentage of the transaction price;
provided, however, that the total fee charged by a broker must not 72 Liabilities of Buyers and Sellers in Real
exceed 6% of the purchase price in a property sale transaction, or Estate Transactions
one-and-a-half months’ rental in a lease transaction.
Notary public’s fees are, by and large, calculated based on
the value of the lease contract according to the government- sale and purchase of real estate?
prescribed fee schedule.
Other consultants’ fees are usually on an-hourly or project basis,
depending on the engagement terms between such consultants As the title transfer of real estate will take effect only upon
and the relevant party. registration with the land office, the seller and the buyer need
to execute the documents (including a government-prescribed
sale and purchase agreement) required for the title transfer
6.3 Is there any change in the sources or the applications. In practice, the parties will also enter into a
availability of capital to finance real estate transactions private sale and purchase agreement, detailing the terms of the
transaction, although this is not mandatory.
For most commercial property transactions, foreign investors seek 7.2 Is the seller under a duty of disclosure? What
financing from commercial lenders such as banks or other financial
institutions; however, because of the higher risks associated with
commercial properties, the loan-to-value (LTV) ratios offered by In practice, the duty of disclosure is imposed indirectly through
commercial lenders in Taiwan are usually between 50% and 70%. the real estate broker on the seller if a broker is engaged in a
transaction. According to the Real Estate Broking Management
Real Estate 2024

Act and the “Mandatory and Prohibited Matters of a Real

Property Information Disclosure Statement”, the broker should
ensure that the seller discloses the required information on a
disclosure statement, which will be deemed a part of the real 8.1 Please briefly describe any regulations concerning
estate sale and purchase agreement. The information required different as between resident and non-resident persons
to be disclosed includes, among others: (i) land/building title; and/or between individual persons and corporate
(ii) current status and usage of property; (iii) zoning; (iv) defects; entities?
(v) surrounding environment and special facilities; and (vi)
whether any murder or suicide occurred in the building. While the lending of money to finance real estate is subject to
While the duty of disclosure is not directly imposed on the the Banking Act and its relevant regulations, which apply to
seller, if the seller concealed any defect of the property, the buyer all types of transactions, the CBC stipulated the Regulations
may seek indemnification from the seller or request for a price Governing the Loans Secured by Real Estate Mortgages
reduction, and in the event that the defect is material, may cancel Extended by Financial Institutions for regulating the financial
the transaction. institutions’ financing of real estate transaction. Under said
Regulations, loans to individuals and corporate entities are
7.3 Can the seller be liable to the buyer for subject to different requirements and restrictions. For instance,
misrepresentation? there is no grace period for repayment of corporate entities’
housing loans, while such rule does apply to individuals.
Yes, under the Civil Code, if an agreement is procured by
fraud or misrepresentation of the seller, the buyer may seek 8.2 What are the main methods by which a real
indemnification from the seller or request a price reduction, and estate lender seeks to protect itself from default by the
borrower?
in the worst-case scenario, also cancel the transaction.
Under Taiwan law, lenders can take a variety of measures to protect

7.4 Do sellers usually give any form of title “guarantee” themselves from default by borrowers, including an escrow/trust
or contractual warranties to the buyer? What would be arrangement, a real estate mortgage, chattel mortgage, movable
asset pledge and/or third-party guarantee. In terms of real estate
transactions, mortgages (general mortgages or maximum amount
act as a substitute for the buyer carrying out his own secured mortgages) over the subject real estate are commonly
diligence? created to secure the loans financing the transactions.
Real estate-related representations and warranties (R&Ws) from 8.3 What are the common proceedings for realisation
sellers are fairly common in commercial real estate transactions. of mortgaged properties? Are there any options for a
R&Ws are to apportion risks and give information (while the
carve-out matters are included in the schedule). Generally mortgagor?
speaking, R&Ws from sellers should not replace the buyer’s
own due diligence, no matter whether a warranty and indemnity
The foreclosure on a mortgage is commonly conducted
insurance is purchased or not.
through court proceedings. The mortgagee must apply for an
enforcement order from the court by submitting a mortgage
7.5 Does the seller retain any liabilities in respect of registration certificate issued by the competent land office and
the property post sale? Please give details. other relevant documents proving its claims.
On the other hand, the Civil Code permits the mortgagee
Yes, the seller may remain liable for a certain period of time for to enter into an agreement with the mortgagor stating that
any existing defect with the property before the sale, depending the ownership of a mortgaged real estate must be transferred
on the terms of the sale and purchase agreement (particularly, to the mortgagee if the mortgagor defaults; however, such
agreement may not be asserted as a defence against a bona fide
whether the property is sold on an “as-is” basis). In addition, if
third party unless such agreement has been registered with the
the property is contaminated, and the seller is the polluter, the
land office. If the mortgagor refuses to transfer the real estate
seller would still be liable for the contamination under Taiwan
to the mortgagee, the mortgagee must file a lawsuit against the
law, including the Soil and Groundwater Pollution Remediation mortgagor for such transfer in accordance with the agreement.
Act (SGPRA).

7.6 What (if any) are the liabilities of the buyer (in estate lending?
In practice, a loan agreement will be signed. If a mortgage is

Procedural-wise, the title transfer application should be jointly created as a security, the mortgage must be duly registered with
filed by the buyer and the seller, and the buyer should pay the land office.
the applicable taxes (as detailed in section 9 below) and fees.
In addition, for any contamination existing before the sale
but discovered after the sale, if the identity of the polluter is 8.5 How is a real estate lender protected from claims
unknown, the buyer may be exposed to potential liabilities under creditors?
the SGPRA (e.g., submitting and implementing a remediation
plan) if the purchased land is later declared by the competent
authority as a control or remediation site. Generally speaking, a registered mortgage has priority over
other claims/rights unless otherwise provided by law. In the
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184 Taiwan
event of a third-party claim against the mortgaged real estate, Taxes Amount Responsible
the court would notify the mortgagee of the court action; the Party
proceeds from the sale of the mortgaged real estate will be
distributed to unsecured creditors pari passu only after all the Land value LVIT rates range from 20% Seller
claims having priority over them are satisfied. increment to 40%, depending on the
tax (LVIT) amount of appreciation in the
government-assessed value
8.6 Under what circumstances can security taken by a of the land component of the
lender be avoided or rendered unenforceable? property during the ownership
period, and adjusted by the
Among others, the trustee in a bankruptcy proceeding may consumer price index.
revoke the provision of security over existing debts within Deed tax 6% of the government- Buyer
six months prior to the borrower’s declaration of bankruptcy, assessed value of the buildings.
unless such security was provided based on an agreement made
Stamp duty 0.1% of the purchase price Buyer
before said six-month period.
stated under the government-
prescribed sale and purchase
8.7 What actions, if any, can a borrower take to agreement.
Value-added 5% of the purchase price of the Seller
tax (VAT) buildings stated under the sale
A borrower may challenge an enforcement order pursuant to the and purchase agreement.
Compulsory Enforcement Act on certain grounds; for example,
Consolidated Taxable gains multiplied Seller
where the lender’s claim does not exist or an event extinguishing
housing and by the applicable tax rate
or preventing the lender’s claim arises. A borrower may also be
land tax depending on the seller’s
able to apply for suspension of the compulsory enforcement by
(CHLT) status (individual/corporate/
depositing adequate and full security with the court.
foreign/domestic) and length
of possession before sale
8.8 What is the impact of an insolvency process or a (please refer to our answer to
corporate rehabilitation process on the position of a real question 9.6 below for details).
estate lender?

If the borrower enters into a bankruptcy proceeding, a secured
lender (such as the mortgagee of the real estate) may exercise its
rights over the collateral without going through the bankruptcy LVIT, deed tax and stamp duty must be paid no later than the
proceeding. On the other hand, all unsecured lenders must title transfer application so as to allow the title transfer to be
follow the bankruptcy proceeding administered by the court in approved by the land office. On the other hand, VAT should
filing their claims against the bankrupt borrower. be reported and paid in accordance with the bi-monthly VAT
As for reorganisation, all enforcement actions against a debtor returns, while CHLT should be reported and paid within 30
that is subject to reorganisation will be stayed no matter whether days after the title transfer date.
the lender is a secured creditor or not. The lender must follow
the reorganisation proceeding administered by the court. 9.3 Are transfers of real estate by individuals subject to
income tax?
shares? Does a lender have a right to appropriate shares Yes, CHLT is a type of income tax. According to the Income Tax
in a borrower given as collateral? If so, can shares be Act, any seller who sells real estate (including: (i) a building; (ii) a
appropriated when a borrower is in administration or has building and the land on which said building is located; and (iii)
entered another insolvency or reorganisation procedure? a parcel of land eligible for a building permit) is subject to CHLT.
In the event of a borrower’s default, a lender may: (i) enforce

security over shares via a court proceeding; (ii) sell the shares much? Who is liable? Are there any exemptions?
by public auction; or (iii) appropriate shares if the lender and
the borrower had entered into an agreement for the lender to
acquire the title to the shares or disposal of the shares other than Yes, please see our answer to question 9.1 above.
by way of public auction; provided, however, that the agreement
may not be detrimental to other security interest holders, if 9.5 What other tax or taxes (if any) are payable by the
any. As for the cases in insolvency proceedings or corporate seller on the disposal of a property?
reorganisation, please see our answer to question 8.8 above.
For the possession of real estate in Taiwan, the seller, being the
92 Tax owner of the real estate, is also subject to land value tax (for
land) and house tax (for buildings). The seller must have settled
9.1 Are transfers of real estate subject to a transfer all land value tax and house tax payable before the title transfer
tax? How much? Who is liable? can be registered with the land office. For any tax not yet due,
the seller and the buyer should agree on the allocation of such
Yes, transfers of real estate are subject to the following transfer undue tax payment (usually using the title transfer date to cut
taxes: off ) under the sale and purchase agreement.
Real Estate 2024

9.6 Is taxation different if ownership of a company (or 10.3 What are the typical provisions for leases of
other entity) owning real estate is transferred? business premises in your jurisdiction regarding: (a)
Generally, yes, in respect of CHLT and VAT. Specifically, the of the tenant; and (ii) transfer of lease as a result of a
applicable CHLT rate depends on the status of the seller and the corporate restructuring (e.g. merger); and (f) repairs?
length of possession before sale:
(a) Length of term: The term usually depends on the

Seller Length of possession before sale Tax rate commercial needs of the tenant (office leases are usually
≤ Two years 45% two to three years, while industrial property leases are
Domestic Two to five years 35% usually five to 10 years or longer); in some cases, a tenant
private may be granted the option to renew or a preferential right to
individuals Five to 10 years 20%
negotiate a new lease upon expiration of the current lease.
> 10 years 15% (b) Rent increases: The rent adjustment depends on the
Foreign private ≤ Two years 45% nature and location of the leased property. In general, rent
individuals > Two years 35% is increased by 1% to 3% every two to three years or based
on the Consumer Price Index starting from the third year
≤ Two years 45% of the lease.
Domestic
Two to five years 35% (c) Tenant’s right to sell or sub-lease: A tenant is usually
corporations
> Five years 20% prohibited from assigning the lease agreement or
sub-leasing the leased premises to a third party (other
Foreign ≤ One year 45%
than the tenant’s affiliates, if agreed between the parties)
corporations > One year 35% without the landlord’s consent.
(d) Insurance: Typically, a landlord is responsible for the
VAT applies only when the seller is a company, or an individual insurance for the leased premises, while a tenant should
who is legally required to be registered as a statutory taxpayer of insure its own property on the leased premises.
VAT. (e)(i) Change of control of the tenant: Such provision is
subject to negotiation between the parties.
9.7 Are there any tax issues that a buyer of real estate (e)(ii) Transfer of lease as a result of a corporate restructuring
should always take into consideration/conduct due (e.g. merger): Such provision is subject to negotiation
diligence on? between the parties, and is required by a tenant within a
conglomerate.
A buyer must look into whether there is any real estate taxes (f) Repairs: Under the Civil Code, a landlord is responsible
underpayment (including land value tax and house tax), whether for the repairs on the leased premises unless otherwise
the real estate is subject to any tax exemption, and whether the agreed upon by the parties under the lease agreement.
buyer can enjoy any tax exemption for the buyer’s intended use.
102 Leases of Business Premises landlord or tenant of a business lease?
10.1 Please briefly describe the main laws that regulate In general, the landlord is responsible for the possession taxes (i.e.,
leases of business premises. land value tax and house tax) levied on the leased premises, and
the income tax and VAT levied on the rent, while the tenant pays
There is no specific law governing leases of business premises. the taxes payable for the business activities on the leased premises.
The Civil Code is the main law that regulates all types of leases
(including leases of business premises) in Taiwan. In addition,
certain clauses of the lease agreements may be governed by the usually terminated (e.g. at expiry, on default, by either
Land Act. The aforementioned laws are not all-inclusive, and party etc.)? Are there any special provisions allowing a
other laws and regulations may govern various aspects of leases tenant to extend or renew the lease or for either party
of business premises. to be compensated by the other for any reason on
termination?
Termination
A “business lease” is not a specific category under Taiwan law, A fixed-term lease agreement terminates upon the expiration
but more of a commercial concept. Nevertheless, the following date. In addition, a party may terminate the lease agreement
types of leases are prescribed under the Civil Code: if the counterparty defaults (e.g., non-payment of rent for two
Non-fixed term: If the lease term for real estate exceeds months or longer). Early termination for convenience (with
one year and no lease agreement is executed, it will be deemed or without an early termination fee) must be negotiated by the
a non-fixed term lease. Either party to a non-fixed term lease parties on a case-by-case basis.
may terminate the lease for convenience unless common market
practices favour the lessee. Renewal
Fixed term: A fixed term lease is not automatically renewable There is no statutory right of renewal. A lease renewal is
unless the conditions prescribed under the Civil Code are met therefore by agreement only, subject to the 20-year limit under
or the parties so stipulate in their lease agreements. In addition, the Civil Code as explained in our answer to question 10.2 above.
the term of the lease cannot exceed 20 years unless it is for the
lease of land for construction of buildings.
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186 Taiwan
10.6 Does the landlord and/or the tenant of a business 11.2 Do the laws differ if the premises are intended for
lease cease to be liable for their respective obligations multiple different residential occupiers?
non-compliance? The laws generally apply regardless of the number of residential
occupiers. Note that buildings with strata titles are subject to
the Condominium Management Act.
Unless otherwise agreed by the parties, a tenant is not allowed to
sell its interest in the leasehold to a third party. As for the landlord,
under Article 425 of the Civil Code, if the landlord transfers 11.3 What would typical provisions for a lease of
the ownership of the leased premises to a third party after the residential premises be in your jurisdiction regarding:
leased property is delivered to the tenant and the leased property
remains in the tenant’s possession, the lease should continue to the term; and (d) the tenant’s contribution/obligation to
exist between the transferee and the tenant; however, such rule the property “costs”, e.g. insurance and repair?
does not apply to a real estate lease for a term of more than five
years and where the lease agreement has not been notarised.
(a) Length of term: Residential leases are usually for one to
In general, the liabilities incurred prior to the sale of the
two years.
leased premises will not be automatically transferred to the new
(b) Rent increases/controls: A pre-agreed rent adjustment
owner of the leased premises unless the landlord, the tenant and
clause is less common in residential leases, and usually
the new owner agree to such transfer.
negotiated by the parties upon lease renewal.
(c) The tenant’s rights to remain at the premises upon
10.7 Green leases seek to impose obligations on the expiry of the lease term: In general, a tenant has no
landlords and tenants designed to promote greater right to remain at the premises upon the expiry of the lease
sustainable use of buildings and in the reduction of term. Nonetheless, if the tenant continues to occupy the
premises after the expiry of the lease term and the landlord
briefly describe any “green obligations” commonly
found in leases stating whether these are clearly fails to immediately express his intent to the contrary, the
defined, enforceable legal obligations or something not lease will be deemed to be continued for an indefinite
amounting to enforceable legal obligations (for example period. Hence, in the event that the tenant continues to
aspirational objectives). occupy the premises after the expiry of the lease term, the
landlord must immediately and explicitly express his intent
At present, green lease clauses are not typical but there is an to the contrary and obtain a court order to remove the
increasing focus on renewable energies. In this regard, the tenant from the premises.
Taiwan Ministry of Economic Affairs (MOEA) launched the (d) The tenant’s contribution to cost/obligation (e.g.,
“Green Leasing Program” to expand the use of renewable energy insurance and repair): For residential leases, a tenant is
and to achieve the 2050 net zero emissions target. The first usually not required to procure insurances while the repair
tier of buildings participating in the Green Leasing Program responsibility often falls on the landlord.
includes some commercial buildings; said Program aims to help
small and medium-sized enterprises access green electricity and 11.4 Would there be rights for a landlord to terminate
obtain the Taiwan Renewable Energy Certificate (T-REC). a residential lease and what steps would be needed to
term working spaces (co-working) or shared residential Under Article 10 of the Rental Housing Market Development
spaces with greater levels of facilities/activities for and Regulation Act, a landlord may prematurely terminate a
residents (co-living)? If so, please provide examples/ residential lease without indemnification to the tenant if: (i) the
details. tenant damages the premises or ancillary equipment and fails to
repair or compensate; (ii) the amount of rent arrears exceeds two
Working from home became more common in Taiwan during months and the tenant fails to settle the delinquent payment; (iii)
the pandemic and prompted small enterprises to re-think their the tenant sub-leases the premises without the landlord’s prior
strategy of leasing office spaces. While shared short-term consent; (iv) the landlord needs to reconstruct the building; or
working spaces are increasingly popular, shared residential (v) any of the other statutory causes for early termination occurs.
spaces remain rare, and are usually managed by companies in For such early termination, the landlord must serve the tenant
the cultural and creative industry. a three-month (in the event of (iv) above) or 30-day (in any of
the other events above) prior written notice, with supporting
112 Leases of Residential Premises documents/information. If the tenant refuses to leave the
premises, the landlord must file a lawsuit against the tenant
(particularly if there is no compulsory enforcement clause under
the lease agreement) and obtain a court order to remove the
tenant from the premises.
In addition to the Civil Code and the Land Act, the leases of
residential premises are also governed by the Rental Housing
Market Development and Regulation Act and its relevant
regulations.
Real Estate 2024


permitting and related matters concerning the use, Generally, a building permit must be obtained before
development and occupation of land? Please briefly constructing a building. After a building is constructed, the
describe them and include environmental laws. owner of the building must apply for an occupancy permit for
the use of the building. The permitted uses of each unit within
In Taiwan, the use of land is subject to zoning regulations. a building will be stated on the occupancy permit. Any change
Generally speaking, there are two types of land, namely those to such permitted uses requires prior written approval from
that are subject to urban planning (Urban Land) and those that the authorities unless the area/size of the building is below the
are not (Non-Urban Land). The use of Urban Land must be threshold stipulated by the relevant authorities. Furthermore,
compliant with the Urban Planning Act, its enforcement rules the remodelling or expansion of a building may also require
and the relevant detailed plan stipulated by the local government. prior written approval from the authorities.
The use of Non-Urban Land must be compliant with the Regional
Planning Act, its enforcement rules and the Rules Governing the 12.5 Are building/use permits and licences commonly
Use of Non-Urban Land. On the other hand, the Building Act obtained in your jurisdiction? Can implied permission be
and its relevant regulations govern the use of buildings. It should obtained in any way (e.g. by long use)?
be noted that an overhaul of the current zoning and land-use
control mechanism with regard to agriculture land is expected An occupancy permit must be obtained for the use of a building
with the Spatial Planning Act (which is the regulatory framework unless the building was constructed prior to the enactment of
for the central/local government to establish guidelines for the the Building Act (i.e., December 22, 1971) and is located on
conservation and utilisation of resources on the land under their Non-Urban Land for non-public use (Article 96 of the Building
respective jurisdiction) taking effect on May 1, 2025, upon which Act).
the Regional Planning Act will no longer apply. Currently, each
local government is in the process of revisiting and delineating the
various functional zones and aims to complete such task by then. 12.6 What is the typical cost of building/use permits and
Each type of pollution is subject to a different set of regulations, the time involved in obtaining them?
including the Air Pollution Control Act, Water Pollution Control
Act and Waste Disposal Act. In addition, soil pollution, together The cost and time involved depend on the scale and complexity
with associated groundwater pollution, is governed by the SGPRA. of the construction work and whether there is any environmental
issue involved. In practice, a developer needs to engage local
architecture firm(s) to prepare the application documentation
and it would take months or longer (particularly if the building
mechanism. is located in any environmental sensitive area in which case an
environmental assessment and additional procedure will be
required) to obtain a construction permit for constructing the
The Taiwan government may expropriate land for public building and an occupancy permit after the building is constructed.
interest and necessity by following the procedures prescribed
under the Land Expropriation Act, including holding a public
hearing to gather the landowners and the relevant parties’ 12.7 Are there any regulations on the protection of
comments, and negotiating with the landowners on obtaining historic monuments in your jurisdiction? If any, when
the land by purchase or any other means before commencing and how are they likely to affect the transfer of rights in
the expropriation process. In addition, the owners of the
expropriated land shall be compensated based on the current
market value of the land, which should be determined by the The Cultural Heritage Preservation Act is the main legislation on
Land Value Evaluation Committee. the protection of historic monuments in Taiwan. Under Articles
32 and 55 of said Act, any transfer of the ownership of a defined
monument, historic building or commemorative building or
the land on which such monument or building is located or the
transfer of the title to the land where an archaeological site is
located must be reported to the competent authority in advance.
Where said land belongs to a private individual, except for
The MOI (particularly its Department of Land Administration transfer to the legal heirs, the competent authority has the right
and Construction and Planning Agency) is the central authority of first refusal to purchase the same. In addition, such sites may
regulating land/building use and occupation, while the Ministry be designated as monument preservation land or zones or other
of Environment (MOE), formerly known as the Environmental functional land.
Protection Administration, is the central authority overseeing
environmental regulations. Each local government also has
a relevant department for regulating each of the foregoing 12.8 How can, e.g. a potential buyer obtain reliable
matters. Buyers may obtain reliable information by conducting information on contamination and pollution of real
various public searches on the relevant authorities’ online your jurisdiction?
systems (zoning search and occupancy permit search for land/
building use, and environmental search for remediation/control
sites designated under the SGPRA), although none of the public A potential land buyer can conduct public searches on the
searches should be considered exhaustive. website of the MOE to confirm whether the land is designated
as a control or remediation site of soil or groundwater pollution.
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188 Taiwan
However, the MOE’s website contains information on the 2025. As of October 20, 2023, a total of 3,294,079 T-RECs have
current control/remediation sites designated by the MOE as well been issued, and a total of 2,986,419 T-RECs (by a total of 16,709
as some from 2013; not all historical records have been uploaded transactions) have been traded via the T-REC Trading Platform.
onto the database. In addition, even if the MOE’s website The National Renewable Energy Certification Center launched
indicates that a site is not designated as a control/remediation the online Green Energy Matchmaking Market (Matchmaking
site, it simply means that there is no soil/groundwater pollution Platform) on November 3, 2022, which is a platform for buyers
known to the MOE and does not necessarily mean that and sellers of green energy.
there is no contamination at the site. Hence a potential land
buyer is advised to engage an environmental consultant to
conduct on-site sampling and look into whether there is any reduction targets?
contamination issue.
The Taiwan National Development Council published Taiwan’s
12.9 In what circumstances (if any) is environmental Pathway to Net-Zero Emissions in 2050 (Pathway) in March
clean-up ever mandatory? 2022, which aims to reduce Taiwan’s carbon emissions to net
zero by 2050. The Pathway not only sets forth the strategies for
If the land is designated by the competent authority as a control energy, industries, lifestyles and social transitions, but also includes
or remediation site under the SGPRA, the polluter or the owner measures to achieve the goal of 100% of new buildings and over
of the land would be ordered by the competent authority to 85% of existing buildings being near zero carbon buildings.
submit a remediation plan and carry out the remediation work.
However, even if the land is not yet designated as a control or
remediation site, the owner of the land is still advised to carry (not already mentioned) which aim to improve the
out the remediation work in order to prevent any potential sustainability of both newly constructed and existing
migration issue and from being exposed to liabilities under the buildings?
SGPRA if any relevant contamination issue is discovered by the
competent authority.
Considering the high temperature and high humidity subtropical
climate of Taiwan, the Architecture and Building Research
12.10 Please briefly outline any regulatory Institute, MOI, established a Green Building Labelling
requirements for the assessment and management of evaluation system with focuses on ecology, energy saving, waste
the energy performance of buildings in your jurisdiction. reduction and health. Two certifications are issued under this
system: the Green Building Label for existing buildings and
On February 15, 2023, the Climate Change Response Act newly constructed buildings; and the Green Building Candidate
(CCRA) was enacted. The CCRA stipulates that the structure of Certificate for buildings under construction. Generally
and installations in new buildings must meet the greenhouse gas speaking, to qualify as a green building, the water and electricity
(GHG) emission mitigation requirements. Said GHG emission consumption should be reduced by 30% and 20%, respectively.
mitigation regulations are being discussed by the MOEA and According to the Renewable Energy Development Act
the MOI. According to the legislator’s remarks, said installation amended in June 2023, in the event of new construction,
refers to the equipment installed in new buildings, such as green expansion or reconstruction of a building that reaches a certain
energy system, air-conditioning system, elevator and escalator level of scale, after taking into consideration the building’s
systems and so on. In addition, the MOI established the access to sunlight and the applicable exemptions, the builder is
Directives on Design and Technical Specifications for Buildings required to install a solar photovoltaic (PV) system with certain
Energy Conservation, which serve as guidelines on matters minimum installed capacity on the rooftop of the building. The
including the development of energy-efficient buildings. date of enforcement of the aforesaid requirement will be further
set by the Executive Yuan.
132 Climate Change
142 COVID-19
any regulatory measures for reducing carbon dioxide 14.1 Please detail any laws that govern real estate in
emissions (including any mandatory emissions trading your jurisdiction which were introduced in response to
scheme). the effect of the Coronavirus (COVID-19) pandemic and
The CCRA was enacted to replace the Greenhouse Gas
Reduction and Management Act (GGRMA), which was aimed No new laws specifically regulating the real estate sector were
at managing GHG emissions in response to the global climate introduced in response to the COVID-19 pandemic in Taiwan.
change. Taiwan currently has no carbon trading scheme; However, during the pandemic period, various local governments
however, a T-REC scheme has been adopted to achieve the goal announced ordinances to provide certain measures (e.g., rental
of generating 15.1% of electricity through renewable energy by deduction) in favour of the tenants of public real property.
Real Estate 2024

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8F, No. 555, Sec. 4, Zhongxiao E. Rd. Email: yijiunsu@leeandli.com
Taipei 11072 URL: www.leeandli.com
Taiwan
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8F, No. 555, Sec. 4, Zhongxiao E. Rd. Email: lilykuo@leeandli.com
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Real Estate 2024

190 Chapter 19
Ukraine
Ukraine
Taras Burhan
Zvenyslava Kit
Taras Burhan Law Office LLC Marian Tsap
12.1. Those relating to tax should be listed in response to Foreign ownership of agricultural land (direct or indirect) is
questions in Section 9. prohibited in Ukraine. Such prohibition may be lifted only via
referendum.
Foreign ownership of non-agricultural land is limited. The
The main laws that govern real estate in Ukraine include the
below table demonstrates conditions when non-resident persons
following:
may own non-agricultural land in Ukraine. Such conditions
■ Civil Code of Ukraine;
depend on whether land is located within or beyond the
■ Commercial Code of Ukraine;
boundaries of a settlement (i.e. city or village).
■ Land Code of Ukraine;
■ Law of Ukraine “On the Lease of Land”; and
■ Law of Ukraine “On State Registration of Property Rights Within the Beyond the boundaries
to Real Estate and their Encumbrances”. boundaries of a of a city/village
city/village
Foreign Yes, they may own They may only own
common law in your jurisdiction? individuals non-agricultural non-agricultural land
land (no if they own real estate
restrictions apply). objects (i.e. buildings or
Ukraine is a civil law country and the impact of local common
structures) located on such
law is therefore relevant only for the interpretation and
land.
application of the statutory law.
Foreign They may only own They may only own
legal non-agricultural non-agricultural land if
1.3 Are international laws relevant to real estate in your entities land for they purchase real estate
jurisdiction? Please ignore EU legislation enacted locally construction objects (i.e. buildings or
in EU countries.
purposes, or if they structures) located on such
purchase real estate land.
In Ukraine, real estate is mostly governed by local law. However, objects (i.e. buildings
Ukraine is party to a number of international treaties and bilateral or structures) located
agreements that may have an impact on real estate transactions on such land.
involving foreign nationals, in particular, bilateral investment
treaties that provide protection for real estate ownership rights State or municipal land may be sold to a foreign legal entity only if
against unlawful actions by governmental agencies such as its permanent establishment (with a right to carry out commercial
unjustified expropriation, as well as treaties on avoidance of activity on the territory of Ukraine) has been registered. Such
double taxation that may prescribe more a favourable taxation condition does not apply to the purchase of private land.
regime in contrast to local law. It is worth mentioning that the Land Code of Ukraine does
not specifically allow Ukrainian legal entities with 100% foreign
ownership to own any land in Ukraine. In practice, due to
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Taras Burhan Law Office LLC 191
this limitation, two-tier corporate structures are often used by 3.3 Is there a split between legal title and beneficial
foreign investors to hold property in Ukraine (i.e. foreign parent – title in your jurisdiction and what are the registration
Ukrainian subsidiary – Ukrainian property holding company). consequences of any split? Are there any proposals to
As of January 1, 2024, the total area of agricultural land in change this?
ownership of Ukrainian citizens and Ukrainian companies may
not exceed 10,000 hectares. For the purposes of this limitation, There is no split between legal title and beneficial title to real estate
both land owned directly and indirectly (i.e. through participating in the Ukrainian legal system. The legal and beneficial owner
in Ukrainian companies) is taken into consideration. is one person who is registered in the State Register of Property
Finally, due to Russian military aggression against Ukraine Rights to Real Estate (hereinafter – the “Rights Register”).
(hereinafter – the “Russia-Ukraine War”), Russian citizens We are not aware of any proposals to change this.
are precluded from entering into the vast majority of civil and However, in 2019, the Civil Code and the Land Code were
commercial transactions in Ukraine, including with respect to amended and a new concept of trust ownership was introduced
real estate. to the Ukrainian legal system as an alternative to collateral.
Under agreements of trust ownership, collateral property legally
32 Real Estate Rights belongs to the creditor until loan repayment.
3.1 What are the types of rights over land recognised 42 System of Registration
between the parties? 4.1 Is all land in your jurisdiction required to be
The following types of rights over land are recognised in
Ukraine: As a general rule, all land in Ukraine is required to be registered.
(i) ownership (private, municipal, state); Land plots should be registered with the State Land Cadastre.
(ii) use (term or perpetual); Rights to land plots should be registered with the Rights Register.
(iii) mortgage; In reality, however, a great number of land plots in Ukraine
(iv) trust ownership; and remain unregistered. Mostly, these are land plots acquired
(v) preferential right to purchase agricultural land plots. prior to launching mandatory registration procedures (i.e. prior
Save for a few exceptions (law, court order or will/inheritance), to January 1, 2013). Rights to such land plots are recognised
rights of term use are purely contractual between the parties. despite the absence of registration. However, any further legal
Such rights include: transaction with such unregistered land plot requires prior
■ Lease (sub-lease), i.e. a temporary contractual use right on a registration of both the land plot and rights thereto.
chargeable basis. Finally, due to the Russia-Ukraine War, certain leasehold
■ Servitude, i.e. a right to use a land plot belonging to another rights are exempt from registration requirements in periods
person for a specific purpose (for instance, passing by foot when the functioning of the State Land Cadastre is suspended.
or by vehicle, installing utilities and communications, Furthermore, in order to ensure the functioning of the energy
collecting water, locating building equipment, etc.). system of Ukraine, it is allowed to place electricity generating
■ Emphyteusis, i.e. a right to use a land plot belonging to units and related gas and electricity networks, metering nodes and
another person for farming. other related equipment, without state registration of ownership
■ Superficies, i.e. a right to use a land plot belonging to another or use rights to land plots under the specified objects and without
person for construction. entering relevant information into the State Land Cadastre.
A right of mortgage and trust ownership can also be classified
as purely contractual.
guarantee?
diverges from the right to a building constructed One of the principles of the state registration of rights in Ukraine,
thereon?
as illustrated by the Law of Ukraine “On State Registration
of Property Rights to Real Estate and their Encumbrances”,
One of the principles of Ukrainian property law is that rights to is guaranteeing by the state of objectivity, authenticity and
land should follow the right to a building constructed thereon. completeness of data on registered rights with respect to real
As illustrated under the Land Code, in the case of acquiring estate and encumbrances thereof. The law also requires that a
the ownership right to real estate (i.e. buildings or structures), notarial deed with respect to real estate and a state registration of
ownership rights with respect to the land plot under such real the corresponding right should be performed simultaneously. It
estate terminate and the new owner of the real estate acquires is not clear if expression of such principle in the law on its own
the rights to such land plot. is sufficient to conclude that there is a state guarantee of title in
However, in practice, there are a great number of privately Ukraine. No relevant court practice exists yet.
owned buildings and other real estate objects located on state or
municipal land (where rights to land are documented as lease, permanent
use, or not yet documented at all – so-called “actual use”). Since there What (if any) is the consequence of non-registration?
is no mandatory buy-out (privatisation) of state or municipal
land plots under privately owned buildings, the ownership of
buildings and underlying land split between different persons is All rights to land are subject to mandatory state registration. The
likely to continue for some time. The same refers to buildings consequence of non-registration is that the rights do not become
and other real estate objects that have been lawfully constructed effective. However, please note the temporary exceptions due
on private land plots leased for the purpose of construction (or to the Russia-Ukraine War, as stated in the last paragraph of the
used on terms of superficies). answer to question 4.1 above.
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192 Ukraine
4.4 What rights in land are not required to be 5.2 How do the owners of registered real estate prove
registered? their title?
Only rights that validly arose prior to January 1, 2013 are not Typically, the owners of registered real estate prove their title
required to be registered in the Rights Register. Also, please by two documents: (i) an extract and/or information certificate
note the temporary exceptions due to the Russia-Ukraine War, as from the Rights Register; and (ii) a relevant title document (i.e.
stated in the last paragraph of the answer to question 4.1 above. sale-purchase contract, gift granting agreement, property swap
agreement, inheritance certificate, privatisation/registration
certificate, ownership certificate, etc. as the case may be).
first registration or are there perhaps different classes 5.3 Can any transaction relating to registered real
or qualities of title on first registration? Please give estate be completed electronically? What documents
details. First registration means the occasion upon need to be provided to the land registry for the
which unregistered land or rights are first registered in registration of ownership right? Can information
the registries. on ownership of registered real estate be accessed
electronically?
There is neither a probationary period following the first
registration, nor different classes or qualities of title on the first Transactions that do not require notarisation (such as, for
registration. instance, land leases or sub-leases, servitude, emphyteusis,
superficies, real estate leases for a term up to three years, or leases
4.6 On a land sale, when is title (or ownership) of state or municipal property concluded based on the results
transferred to the buyer? of electronic auction for up to five years), can be completed
electronically (provided that the parties have electronic digital
signatures). Moreover, under the transitional provisions of the
The title (ownership) transfers from the seller to the buyer at
Land Code, short-term leases (up to one year) with respect to
the moment of state registration of such transfer (right) in the
agricultural land must be concluded in electronic form only
Rights Register.
(certified by qualified electronic signatures of the lessee and the
lessor) if entered into during periods of suspension of the State
4.7 Please briefly describe how some rights obtain Land Cadastre as a result of the Russia-Ukraine War.
priority over other rights. Do earlier rights defeat later Transactions that require notarisation (sale, mortgage, long-term
rights? lease of real estate) cannot be completed electronically at present.
The following documents must be provided for purposes of
Earlier registered rights defeat later rights (in practice, this is registration of the ownership right with the Rights Register:
mostly relevant to the rights of the mortgagee). (i) application;
(ii) applicant’s ID (i.e. passport);
52 The Registry / Registries (iii) applicant’s tax identification number;
(iv) document serving as a ground for origination, transfer or
termination of title (i.e. sale-purchase agreement, property
swap agreement, gift granting agreement, court order,
differing rules and requirements. etc.);
(v) extract from the State Land Cadastre (in case other
documents do not contain reference to the cadastre
Currently, there are two relevant registers operating in Ukraine, number of the land plot); and
namely: (i) the State Land Cadastre; and (ii) the Rights Register. (vi) payment confirmations (administrative fee).
The State Land Cadastre contains information on formed Online access to electronic information on ownership of
land plots. A land plot is deemed to be formed once a cadastral registered real estate is limited during the martial law in Ukraine
number has been assigned to it. Forming a land plot involves due to the Russia-Ukraine War.
determining its area and boundaries and entering certain other
details about the land plot in the State Land Cadastre. A land plot
can be the subject of civil law transactions only when it is formed. 5.4 Can compensation be claimed from the registry/
The Rights Register contains information about ownership and registries if it/they make a mistake?
other rights over real estate, including land plots. Encumbrances
and other property rights to a land plot may be registered only Compensation from the registries if they make a mistake can
after the registration of the ownership rights to such land plot. be claimed on general civil law grounds governing liability in
The two registers are interconnected. For instance, only if the case of infliction of damages/harm. No specific liability
information about a land plot has already been registered in the provision exists at present.
State Land Cadastre and the land plot has been assigned a cadastral
number, may the following occur: (i) ownership of such land plot
can be registered in the Rights Register; and (ii) transactions with register? Can a buyer obtain all the information he
such land plot (for example, leases) can be initiated. There is an might reasonably need regarding encumbrances and
exception to this rule for short-term leases (up to one year) for other rights affecting real estate and is this achieved
agricultural land entered into during periods of suspension of the by a search of the register? If not, what additional
State Land Cadastre as a result of the Russia-Ukraine War. information/process is required?
As a general rule, data from registries is publicly available and
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anyone can access it online for a small fee. However, since 6.4 What is the appetite for investors and/or
the introduction of martial law in Ukraine due to the Russia- developers to invest in your region compared to last year
Ukraine War, access to most registers has been restricted, and and what are the sectors/areas of most interest? Please
such information can only be obtained through a notary or upon give examples.
request to the relevant authorities.
The areas of current interest for investors and/or developers
62 Real Estate Market include the:
■ Development of facilities (including industrial parks,
6.1 Which parties (in addition to the buyer and seller warehouses, office centres, etc.) in safer regions (mostly
and the buyer’s finance provider) would normally be the western parts of Ukraine) suitable for the relocation of
involved in a real estate transaction in your jurisdiction? businesses from areas close to the war zone.
Please briefly describe their roles and/or duties. ■ Construction of budget housing for people relocating to
safer regions.
The following parties are normally involved in real estate ■ Construction of dry ports and the development of river
transactions in Ukraine: transport infrastructure needed due to Russia’s blocking of
■ Notary – verifies the compliance of the transaction document movement of goods through the Black Sea.
■ Consolidation of farmland.
with the requirements of the law, checks the validity of the
seller’s title and encumbrances, verifies the capacity of the
parties to enter into the transaction, certifies the contract, 6.5 Have you observed any trends in particular market
registers the ownership change in the Rights Register and sub sectors slowing down in your jurisdiction in terms of
issues an information certificate from the register naming their attractiveness to investors/developers? Please give
the buyer as the new owner of the real estate. examples.
■ Real estate appraiser (not always mandatory) – issues the valuation
report that serves as a ground for the application of state duty All construction in the areas close to the war zone has stopped
and other mandatory payments related to the transaction. (east and south of Ukraine). Construction of housing in the
■ Real estate agent (optional) – helps the parties to find a good deal. north and central part of Ukraine has slowed down significantly.
■ Parties’ lawyers (optional) – structures the transaction, conducts
legal due diligence and other relevant checks, assists parties 72 Liabilities of Buyers and Sellers in Real
with the signing and closing of the transaction. Estate Transactions
■ Interpreter – is involved in transactions with non-resident
parties, provides written and/or oral translation of
transaction documents and other materials to the parties sale and purchase of real estate?
that do not speak Ukrainian.
6.2 How and on what basis are these persons in Ukraine are as follows:
remunerated? (i) the validity of the seller’s ownership should be confirmed
(relevant checks are done at the Rights Register);
■ Notary – public notaries charge a state duty of 1% of the (ii) the sale-purchase agreement must be notarised and
contract price; fees of private notaries are negotiable, but, registered; and
in practice, are very close to what public notaries charge, (iii) the title change (i.e. ownership of the buyer) must be duly
i.e. 1%. registered in the Rights Register.
■ Real estate appraiser – fixed fee depending on the size of the Non-resident buyers may also need to complete some
object (typically in the range of EUR 50–5,000 per object, preliminary steps such as translating foreign documents into
depending on its type and size). Ukrainian (this may also involve legalisation or apostilisation
■ Real estate agent – success fee (typically in the range of 2–5% depending on country of documents’ origin), obtaining a
depending on the type and size of the object). Ukrainian tax identification number (in case of individuals),
■ Parties’ lawyers (optional) – hourly rate (typically EUR 50–500 opening an account at a local bank, etc.
per hour, depending on the type, size and complexity of
the deal; quite often the fees are capped). 7.2 Is the seller under a duty of disclosure? What
■ Interpreter – hourly rate (typically EUR 10–50 per hour, matters must be disclosed?
depending on the language of the parties/documents).
The seller’s duty of disclosure is rather limited in Ukraine. The
6.3 Is there any change in the sources or the seller must disclose all existing third-party rights to the property.
main sources of capital you see active in your market? 7.3 Can the seller be liable to the buyer for
misrepresentation?
Mostly domestic capital is used to finance real estate transactions

Under the general principles of the Civil Code, a transaction
in Ukraine during the Russia-Ukraine War. Non-resident
can be invalidated by a court in the case of one party purposely
owners of Ukrainian businesses or assets cannot repatriate their
deceiving the other with regard to circumstances that are of
profits during the martial law and must reinvest locally. The
significant importance.
availability of bank financing is still very limited.
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194 Ukraine
7.4 Do sellers usually give any form of title “guarantee” to any amount of the loan being disbursed; also, payments of
or contractual warranties to the buyer? What would be interest and other payments under cross-border loans are subject
the scope of these? What is the function of any such to monitoring, analysis and control by servicing banks of the
guarantee or warranties (e.g. to apportion risk, to give Ukrainian borrowers to make sure that the amounts of such
information)? Would any such guarantee or warranties payments correspond with the market conditions.
At present (during the martial law), the maximum permitted
diligence?
rate of interest under a loan agreement between a Ukrainian
borrower and a foreign lender is 12% per annum (taking into
Relying on the recently updated provisions of the Civil Code, account interest, fees, charges and other payments under the loan
it is common practice to include in the text of sale-purchase agreement). Furthermore, Ukrainian borrowers are currently
contracts certain assurances by the seller to the buyer regarding not allowed to purchase foreign currency to make payments to
the circumstances that are important for the conclusion, foreign lenders under loan agreements; thus, a borrower must
execution or termination of such contracts. Typically, such have its own foreign currency proceeds (in the relevant foreign
assurances cover the following: currency) in order to be able to serve the loan.
■ the seller’s capacity to enter into the contract;
■ the due title to the property;
■ the absence of encumbrances and other third-party rights 8.2 What are the main methods by which a real
(or disclosure thereof ); and estate lender seeks to protect itself from default by the
borrower?
■ the absence of technical defects (or disclosure thereof ).
A seller who intentionally or negligently makes false
assurances is obliged to compensate for damages, unless The most commonly used collateral is a mortgage, as well as,
otherwise stipulated by the contract. to lesser extent, sureties and bank guarantees. The pledge of
Taking into account that the underlying provisions of the shares/participatory interest in the project company, pledge of
Civil Code are relatively new and have not been tested in courts rights to funds at bank accounts, pledge of rights under leases,
extensively, the above-mentioned contractual assurances are not etc. are used as supplementary security instruments for more
yet regarded by the market participants as a substitute for the complex/sophisticated deals.
buyer’s due diligence.
7.5 Does the seller retain any liabilities in respect of of mortgaged properties? Are there any options for a
the property post sale? Please give details. mortgagee to realise a mortgaged property without
mortgagor?
The seller does not retain any liabilities in respect of the property
post-sale, except for situations when the transfer of title and transfer
The common proceedings for the realisation of mortgaged
of property does not happen simultaneously (i.e. the seller is given
property include the following steps:
the right to use the property for some time after the sale and to
■ sending a 30-day notice (optional for court proceedings);
physically transfer it to the buyer at a later date). In such case, the
■ obtaining an enforcement document (notarial writ or court
seller is under an obligation to continue paying for utilities and can
judgment);
also be held liable for accidental loss of the property.
■ engaging a bailiff (public or private);
In addition, after the sale, the seller remains liable for the
■ the seizure of mortgaged property;
assurances listed in the contract (see question 7.4 above).
■ the evaluation (if applicable) and sale of collateral on an
electronic auction; and
7.6 What (if any) are the liabilities of the buyer (in ■ transfer of money to the creditor.
addition to paying the sale price)? The Law of Ukraine “On Mortgage” provides for out-of-
court (extrajudicial) proceedings, namely the:
In addition to paying the sale price, the buyer pays a 1% ■ sale of mortgaged property by the mortgagee; or
contribution to the State Pension Fund of Ukraine (if ■ conveyance/transfer of ownership over the mortgaged
applicable). Unless otherwise agreed by the parties, the buyer property to the mortgagee.
will also pay the fees of the notary (including 1% state duty), and Such proceedings can be applied in case they are envisaged in
remuneration of the realtor. the respective mortgage agreement or in a separate agreement
on satisfaction of the mortgagee’s claims.
82 Finance and Banking During the martial law, provisions allowing creditors under
consumer loans to enforce mortgages of real estate belonging to
individuals out of court are suspended.
different as between resident and non-resident persons 8.4 What minimum formalities are required for real
and/or between individual persons and corporate estate lending?
entities?
The minimum formalities required for real estate lending include:

The Civil Code of Ukraine allows individuals or legal entities ■ signing a loan agreement (in a simple written form, unless
to grant loans, and only banks and other financial institutions one of the parties requests notarisation);
to grant credits. ■ notifying the NBU of the loan agreement (in the case
The rules with respect to residents and non-residents differ. of cross-border loans only; no notification is needed for
Loans from non-residents are subject to notification to the domestic loans);
National Bank of Ukraine (hereinafter, the “NBU”) prior ■ signing and notarising a mortgage agreement; and
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■ registering the mortgage as an encumbrance of real estate ■ sending a 30-day notice (optional for court proceedings;
with the Rights Register. may be reduced by contract in certain cases);
■ obtaining an enforcement document (notarial writ (if
pledge was notarised) or court judgment);
against the borrower or the real estate asset by other ■ engaging a bailiff (public or private);
creditors? ■ the seizure of pledged property (shares);
■ the evaluation and sale of collateral (shares) on public
auction; and
A real estate lender as the mortgagee has priority in satisfying
■ transfer of money to creditor.
its claims from the mortgaged property. If, in addition to the
The Law of Ukraine on Securing Creditors’ Claims and
mortgage, the real estate lender keeps pledges over movable
Registration of Encumbrances allows for out-of-court
property (including property rights), the lender has priority in
enforcement of pledges of movable assets, including by way of
satisfying its claims from the pledge property, provided that relevant
transfer of ownership of the collateral (shares) to the pledgee.
pledges have been registered with the Register of Encumbrances
Herewith, the shares can be appropriated when the borrower
over Movable Property (hereinafter the “Encumbrance Register”)
has entered the insolvency proceedings since the moratorium on
with a ranking higher than the encumbrances of other creditors.
the satisfaction of creditors’ claims (mentioned in question 8.8)
does not extend to shares in the debtor.
lender be avoided or rendered unenforceable? 92 Tax
Clawback in bankruptcy may be relevant: there are a number 9.1 Are transfers of real estate subject to a transfer
of grounds on which transactions entered into by a Ukrainian tax? How much? Who is liable?
debtor up to three years before commencement of the
bankruptcy may be challenged; inter alia, such challenges can Transfers of real estate in Ukraine are not subject to a transfer
be made where the debtor pledged its property to secure the tax. However, according to the Tax Code of Ukraine, other
fulfilment of pecuniary claims. taxes apply, depending on the identity of the seller and/or
buyer, and depending on the type of property (residential or
8.7 What actions, if any, can a borrower take to non-residential).

In practice, in order to frustrate enforcement actions by a lender,
borrowers quite often bring a court claim for the invalidation of
As mentioned above, transfer tax is not envisaged by Ukrainian
the loan agreement and/or the mortgage agreement. Generally
law.
speaking, in the case of properly executed contracts, this is
more like delay tactics, not a winning path. However, we have
seen situations where debtors managed to delay enforcement 9.3 Are transfers of real estate by individuals subject to
for five years. income tax?
8.8 What is the impact of an insolvency process or a Yes, transfers (disposals) of real estate by individuals (both
corporate rehabilitation process on the position of a real residents and non-residents of Ukraine) are subject to personal
estate lender? income tax at a rate of 18% of the property value, subject to a
few exceptions as specified below.
Simultaneously with the opening of proceedings in a bankruptcy
case, a moratorium on satisfaction of creditors’ claim is imposed, SALE Property Type
freezing all enforcement activities. A real estate lender will not during a 1) Residential property 3) All other
be allowed to enforce the mortgage (granted by the insolvent calendar (i.e. home (or its part), objects
debtor) other than as part of the insolvency case. However, if year apartment (or its part), room, (i.e. non-
relationships between a real estate lender and an insolvent debtor garden and country house, residential
were structured as a trust ownership (instead of mortgage or underlying land plot, or property,
pledge), the moratorium shall not extend to the actions of the household structures on such commercial land
real estate lender who is a beneficial owner with respect to the land plot) plots, etc.)
object of trust ownership established by the debtor.
2) Certain land plots
(i.e. privatised or inherited
agricultural land plots, other
in a borrower given as collateral? If so, can shares be land plots not exceeding the
appropriated when a borrower is in administration or has norms of a free-of-charge
entered another insolvency or reorganisation procedure? transfer/privatisation for
constructing a residential
home, dacha or garage, or
The process of enforcing security (pledge) over movable assets,
for individual farming or
including shares, typically involves the following steps: gardening)
■ registering information on enforcement in the Encumbrance
Register;
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196 Ukraine
0% 5% pension fund contributions and state duty may not apply, and tax
First rates (exemptions) and/or rules for calculating tax bases for the
object (provided that the object
that is being sold was purposes of personal income tax and corporate tax also differ).
owned for three+ years or
inherited) 9.7 Are there any tax issues that a buyer of real estate
5% 18% should always take into consideration/conduct due
Second
(or 5% if the diligence on?
object
property that is
being sold was It is always worth checking if there is no indebtedness for
inherited by the payment of land and/or property tax by the seller. Also, with
seller) respect to residential property, it is advisable to verify at the early
Third 18% 18% stage of price negotiations if the property has been owned for
object (but not applicable to the (or 5% if the more than three years and if this is the first property sale by the
(and each property that was inherited) property that is seller during the calendar year – this will give an indication if
next) being sold was relevant tax exemption would be applicable to the seller, as this
inherited by the may affect the final sale price.
seller)
The above tax rates are expressed as a percentage 102 Leases of Business Premises
of the object’s value
The laws that regulate leases of business premises include:
Transfers of real estate are subject to VAT if the seller is a VAT ■ Civil Code of Ukraine;
payer. ■ Commercial Code of Ukraine;
VAT is charged at the rate of 20% on the transfer value. ■ Law of Ukraine “On Lease of State and Municipal
VAT is collected from the buyer and is payable to the state Property”; and
budget by the seller. ■ Law of Ukraine “On State Registration of Property Rights
The sale/transfer of land plots and land shares (except for land to Real Estate and their Encumbrances”.
plots located under VAT-able real estate and included in the sale
value of such real estate) is exempt from VAT. 10.2 What types of business lease exist?
In real life, not all sellers are VAT payers, which also makes
transactions VAT-exempt. For instance, the following categories
of persons may not be or may not necessarily opt to be VAT payers: In practice, various types of business leases exist, such as fixed-
■ individuals – never; term leases or leases that last for an indefinite period of time.
■ users of a so-called simplified tax system (private It is worth mentioning that long-term leases (i.e. concluded for
entrepreneurs or resident legal entities) – if they opt as more than five years based on the result of an electronic auction
such; and with respect to state or municipal property, or concluded for
■ users of the general tax system (private entrepreneurs or three years and more with respect to all other properties) require
legal entities) – until the threshold for mandatory VAT notarisation and state registration in the Rights Register.
registration is met.
9.5 What other tax or taxes (if any) are payable by the business premises in your jurisdiction regarding: (a)
seller on the disposal of a property? length of term; (b) rent increases; (c) tenant’s right to
For corporate sellers, proceeds from the sale of a property are corporate restructuring (e.g. merger); and (f) repairs?
subject to corporate income tax at the rate of 18% (or, if they
opted to be users of a simplified tax system, 3% or 5% – as the
The typical provisions for leases of business premises in Ukraine
case may be – of the sale revenues).
are as follows:
Individual sellers pay a so-called “military contribution” at
the amount of 1.5% of the transfer value (however, it is waived if (a) length of term: either one year with automatic extension or
an exemption for payment of personal income tax applies – see five to seven years;
question 9.3 above). (b) rent increases: typically, rent is expressed with reference
Individual buyers of real property (other than land) pay a 1% to the equivalent in hard currencies such as USD or
contribution to the State Pension Fund of Ukraine. EUR; however, if expressed in the local currency (UAH),
Finally, although it is not a plain tax, 1% of the transfer value is parties often agree on monthly indexation by the official
payable as state duty (or its equivalent). This payment is negotiable inflation rate;
in the sense that it can be split between the buyer and seller). (c) tenant’s right to sell or sub-lease: typically, subject to the
prior written consent of the landlord;
(d) insurance: practice is not uniform; quite often, tenants
9.6 Is taxation different if ownership of a company (or are not under an obligation to insure property or provide
liability insurance;
(e) change of control/corporate restructuring:
Yes, taxation is different if the ownership of a company (or other (i) in principle, change of control of the tenant does not
entity) owning real estate is transferred (in particular, VAT, affect the commercial lease agreement; and
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(ii) typically, corporate restructuring (merger) also does

not affect the commercial lease agreement; and
(f) repairs: generally speaking, and as a basic rule, the landlord
is responsible for major (capital) repairs; however, this 11.1 Please briefly describe the main laws that regulate
approach is sometimes modified by the parties if the lease leases of residential premises.
term is more than five years.
The laws that regulate leases of residential premises include the:
■ Civil Code of Ukraine;
landlord or tenant of a business lease? ■ Housing Code of Ukraine; and
■ Law of Ukraine “On State Registration of Property Rights
to Real Estate and their Encumbrances”.
If VAT is opted for (i.e. if the landlord is VAT payer), the rent to
be paid for business leases is subject to VAT (20%).
party etc.)? Are there any special provisions allowing a No, they do not.
termination?
Depending on the circumstance of the case at hand, business tenant’s rights to remain in the premises at the end of
leases may indeed be terminated at expiry, on default, or by either the term; and (d) the tenant’s contribution/obligation to
party giving notice. If a tenant uses the premises after the lease the property “costs”, e.g. insurance and repair?
expiration and the landlord has no objection, the lease agreement
is deemed renewed for the same term and on the same conditions. The typical provisions for a lease of residential premises in
Ukraine are as follows:
(a) length of term: one year or for an indefinite period (which
basically means that the agreement is entered into for five
under the lease once they have sold their interest? Can years);
they be responsible after the sale in respect of pre-sale (b) rent increases/controls: typically, rent is expressed with
non-compliance? reference to the equivalent in hard currencies such as USD
or EUR;
(c) the tenant’s right to remain in the premises at the end
The general principles of the Civil Code and Commercial Code
of the term: the tenant has a pre-emptive right for entry
allow the conclusion that the landlord and/or the tenant remain
into the lease agreement for another term; if, no later than
liable to each other in respect of pre-sale non-compliance, even
three months prior to the expiry of the lease agreement,
after the sale of their interest (i.e. sale of property in the case of
the landlord did not notify the tenant about his/her
landlord, and the assignment of lease right in the case of tenant).
rejection to enter into the new lease agreement, and the
tenant uses the premises after the lease expiration, the
10.7 Green leases seek to impose obligations on lease agreement is deemed renewed for the same term
landlords and tenants designed to promote greater and on the same conditions; if the landlord has rejected
sustainable use of buildings and in the reduction of to enter into a new lease agreement with the tenant but,
the “environmental footprint” of a building. Please within one year enters into a lease agreement with another
briefly describe any “green obligations” commonly
person, the tenant has a right to demand the rights under
such new agreement be assigned/transferred to him/her,
amounting to enforceable legal obligations (for example or to demand compensation for damages; and
aspirational objectives). (d) the tenant’s contribution/obligation to the property
“costs”: in most of the cases, the tenant’s contribution is
limited by payment/compensation of costs of utilities only.
In Ukraine, there are normally no such provisions in lease
agreements yet.
10.8 Are there any trends in your market towards more achieve vacant possession if the circumstances existed
flexible space for occupiers, such as shared short- for the right to be exercised?
residents (co-living)? If so, please provide examples/ A landlord has a right to terminate a residential lease under the
details. following circumstances:
(i) non-payment of rent for six months (or, in the case of a
Shared short-term working spaces (co-working) are gaining shorter term lease, twice); and
popularity in Ukraine in recent years, especially in the IT and (ii) damage of premises by the tenant (or by other persons for
consulting industries. whom the tenant is responsible).
The lease agreement can also be terminated, subject to a
two-month notice, in case the owner needs the premises (part of
a house, flat or room (part thereof )) for his/her own living and
living of his/her family members.
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The required steps to achieve vacant possession may include: 12.2 Can the state force land owners to sell land to it? If
giving notice; obtaining court judgment on termination of so please briefly describe including price/compensation
a residential lease agreement and eviction of the tenant; and mechanism.
enforcement through the bailiffs.
Yes, the state can force landowners to sell land to it for social
122 Public Law Permits and Obligations needs (such as the construction of transport and energy
infrastructure, extraction of minerals, creation of city parks to
12.1 What are the main laws which govern zoning/ name a few). Landowners who disagree with the alienation of
permitting and related matters concerning the use, their land plots for public needs can be forced to sell the land
development and occupation of land? Please briefly by court order. The land plot price is determined based on
describe them and include environmental laws. the expert monetary valuation of the land plot, calculated in
accordance with methodology approved by the government. In
The main laws governing zoning/permitting and related matters practice, the price so determined is quite often lower than the
concerning the use, development and occupation of land in market price. If the owner of land disagrees with the proposed
Ukraine are the: land plot price, the matter should be decided by the court.
■ Land Code of Ukraine; Furthermore, during the martial law, the military command
■ Law of Ukraine “On Lease of Land”; by its decision may expropriate privately owned real estate,
■ Law of Ukraine “On Land Management”; subject to further compensation for its value, as determined
■ Law of Ukraine “On State Control over Use and Protection by an appraiser in accordance with the applicable Ukrainian
of Lands”; laws. After the martial law is lifted, the property owner may
■ Law of Ukraine “On Environmental Protection”; claim in court the return of expropriated real estate instead of
■ Law of Ukraine “On Environmental Impact Assessment”; compensation.
and Finally, the Law of Ukraine “On the Basic Principles of Forced
■ Law of Ukraine “On Regulation of Town-Planning Expropriation in Ukraine of Property of the Russian Federation
Activity”. and Its Residents” (2022) is enabling Ukrainian authorities to
The Land Code divides all Ukrainian land according to its main expropriate, for reasons of public necessity, the property (including
designated purpose into the following categories: 1) agricultural real estate) owned by the Russian Federation and its residents,
land; 2) land for residential and public development; 3) lands of without any compensation paid for such expropriated property.
nature reserve and other nature conservation purposes; 4) land for
recreational purposes; 5) recreational land; 6) lands of historical 12.3 Which bodies control land/building use and/
and cultural purpose; 7) land for forestry purposes; 8) lands of or occupation and environmental regulation? How do
the water fund; and 9) land for industry, transport, electronic buyers obtain reliable information on these matters?
communications, energy, defence and other purposes. Within
each category of land, separate types of designated purpose of
The following bodies can be listed as such that have certain
land plots are provided. This information is visible from each
authority to control or influence land/building use and/or
land plot’s documentation.
occupation and environmental compliance:
The Law of Ukraine “On Regulation of Town-Planning
■ Ministry for Development of Communities, Territories
Activity” establishes the principal framework for planning and
and Infrastructure of Ukraine;
development in Ukraine. The law introduces the concept of
■ Ministry of Ecology and Natural Resources of Ukraine;
the functional purpose of the land plot, i.e. the type of use of
■ State Inspection for Architecture and Urban Planning of
the land plot determined by the urban planning documentation.
Ukraine;
Such information is not visible from the documents of a particular
■ State Service of Geodesy, Cartography and Cadastre of
land plot. Instead, it should be established by a zoning plan or a
Ukraine;
detailed plan of the territory. However, since such plans have
■ local self-government authorities; and
not been developed and approved in all settlements, often the
■ public prosecution authorities.
functional purpose of the land plot is determined according to the
During the martial law, online access to most public registers
master plan. Taking into account the possible functional purpose,
is restricted. Therefore, in order to attain reliable information
the territories are divided into the following types (zones): 1)
on these matters, the respective authorities must be contacted
public; 2) residential; 3) recreational; 4) resort; 5) transport
by a written request.
infrastructure zone; 6) zone of engineering infrastructure; 7)
communal-warehouse; 8) production; 9) special; 10) zone of lands
of historical and cultural purpose; and 11) the zone of lands of 12.4 What main permits or licences are required for
the natural reserve fund. For each zone, a list of permitted and building works and/or the use of real estate?
permissible types of construction and use of land plots within
such territorial zone is established: predominant; ancillary; or In most cases, an authorisation is needed to build, modify,
permissible type of use. demolish or change the use of the building. Depending on
Construction on a plot of land is permitted only if the the complexity of construction, such authorisation can take the
planned construction complies with both the land category (i.e. form of (i) a permit for commencement of construction works
designated purpose) and urban planning documentation (i.e. issued by a competent authority (for more complex buildings
functional purpose). with significant consequences (CC2/CC3)), or (ii) a notification
Finally, the Laws of Ukraine “On Environmental Protection” on commencement of construction works filed by the developer
and “On Environmental Impact Assessment” provide the with a relevant authority and registered by the latter (for less
legislative framework for environmental protection in the context complex buildings with insignificant consequences (CC1), or for
of construction. objects, the construction of which is carried out on the basis
of a construction passport). Likewise, once the building is
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finished by construction, its commissioning can be evidenced In the case of the sale of an object that is listed as a historical
by a certificate on readiness for operation (for more complex monument, prior written consent shall be obtained from the
buildings, CC2/CC3), or by a registered declaration of readiness relevant cultural heritage protection authority, depending on
for operation (for less complex buildings, CC1). whether the monument is classified as one of national or local
According to the resolution of the Cabinet of Ministers of importance. Such consents are issued to the sellers; herewith,
Ukraine No. 772, dated 12 July 2022, as amended, for the duration the identity of the prospective buyer must be disclosed.
of the martial law in Ukraine (and within one year after it ends or Within one month upon completion of the purchase, the
is cancelled), permit procedures for certain construction works buyer (new owner) shall enter into a contract on the protection
are simplified. In particular, the construction of individual of the respective cultural heritage with the relevant cultural
residential, garden and country houses up to two storeys high heritage protection authority, and should protect the monument
(not including the attic floor) with an area of up to 500 square in compliance with the law and the contract (for instance, to
metres, as well as utility buildings and structures, garages and preserve the façade, wooden windows and doors, historic
landscape design elements of the land plot, can be carried out by stoves, parquet, and to obtain all the necessary permits prior to
the customer without obtaining a construction passport for the any renovation works, etc.).
land plot development. In this case, the customer must indicate It is worth mentioning that transactions involving land
the registration number of the land development intentions plots designated for historical-cultural use (or having historical
layout in his/her notification on commencement of construction monuments located there) have a number of limitations and
works. The land development intentions layout can be prepared nuances (for instance, more strict and complex authorisation
by an architect or a design engineer and must be uploaded to the procedures).
Unified State Electronic System In the Field of Construction. Finally, Ukraine is a member of United Nations Educational,
Construction activity is subject to licensing in Ukraine. A Scientific and Cultural Organization (UNESCO) and there are
contractor/sub-contractor hired to perform construction works a number of Ukrainian properties inscribed on the UNESCO
must possess the relevant licence. However, during the martial World Heritage List – https://whc.unesco.org/en/statesparties/
law, business entities may acquire the right to perform construction ua . Ukraine follows Guidelines for the Implementation of
works (as well as to conduct certain other types of economic the World Heritage Convention, and it shall inform the World
activities) based on the free submission of a declaration on the Heritage Committee of its intention to undertake or to authorise,
conduct of economic activity to the relevant licensing authority. in an area protected under the convention, major restorations
or new constructions that may affect the outstanding universal
value of the property.
obtained in any way (e.g. by long use)? 12.8 How can, e.g. a potential buyer obtain reliable
Authorisations for construction and the use of more complex estate? Is there a public register of contaminated land in
your jurisdiction?
objects (industrial, commercial, residential) are usually obtained.
Private developers of smaller objects (individual houses and
small buildings) quite often proceed to construction without Since the beginning of the Russia-Ukraine War, the State
proper authorisation, expecting to have their building legalised Emergency Service of Ukraine has started granting public
under so-called “construction amnesty”, which has been access to the interactive map of areas that could potentially
announced by the government on several occasions over the past be contaminated by explosive objects (https://mine.dsns.gov.
few years. However, in our opinion, such practice is on decline as ua/ ). Besides that, there is no specific public database or other
the procedure for obtaining the relevant authorisations became register of contaminated lands or polluted properties in Ukraine.
more transparent, less complex and less expensive in recent years. Relevant information requests may be filed with the State Ecology
Inspection of Ukraine, as well as departments/units responsible
for ecology and natural resources at the regional military (state)
administrations and/or local self-governmental authorities. Also,
independent research (environmental due diligence) is strongly
advisable before transactions in land or other real estate.
Time and costs vary depending on the complexity of the building.
For complex objects, the entire authorisation circle (including
various consents for design documentation, verifications, etc.) may 12.9 In what circumstances (if any) is environmental
take up to six months (provided that the developer’s rights to land
have been properly obtained and documented). The entire costs
related to obtaining relevant authorisations (including official fees Environmental clean-up is mandatory in case the soil is damaged
as well as document production and filing expenses) may vary as a result of construction or other works.
from several hundred to several hundred-thousand Euros.
12.7 Are there any regulations on the protection of requirements for the assessment and management of
historic monuments in your jurisdiction? If any, when the energy performance of buildings in your jurisdiction.
real estate or development/change of use? The Law of Ukraine “On Energy Efficiency of Buildings” sets
certain minimum requirements for the energy performance
There are regulations on the protection of historical monuments of the buildings, both newly built as well as existing. The law
in Ukraine (the Law of Ukraine “On Protection of Cultural also introduces so-called energy certificates, which contain
Heritage” is a core piece of legislation in this area). information on the energy performance of the building and
recommendations for improvement. The energy certificates are
Real Estate 2024

200 Ukraine
mandatory. Save for a few exceptions, an energy certificate must 13.3 Are there any other regulatory measures
be obtained, inter alia, for any complex object of construction (so (not already mentioned) which aim to improve the
called CC2 and CC3), be it new construction, reconstruction or sustainability of both newly constructed and existing
capital repairs. Energy certificates are valid for 10 years. buildings?
In the case of concluding contracts for the sale or lease of a
building (or residential or non-residential premises of a building), The Law of Ukraine “On Alternative Energy Sources” provides
the seller or lessor (landlord) must provide the potential buyer for certain incentives for the operation and development of
or lessee (tenant) with a copy of the energy certificate (if the renewable energy sources (hereinafter – the “RES”), including a
building has a valid energy certificate). Also, the expected class so-called “green” tariff. The types of eligible RES vary; however,
of energy efficiency of the building, determined by the project solar installations (roof/housetop) seem to be the most appropriate
documentation for the construction of the object, is an essential in the context of newly constructed and existing buildings.
condition of transactions for the acquisition of rights to premises
in objects of new construction.
142 COVID-19
132 Climate Change 14.1 Please detail any laws that govern real estate in
13.1 Please briefly explain the nature and extent of the effect of the Coronavirus (COVID-19) pandemic and
any regulatory measures for reducing carbon dioxide which remain in place.
scheme).
On 13 April 2020, the Ukrainian parliament amended a number
of laws, including the Civil Code, in order to help decrease
Since 2004, Ukraine has been a party to the international Kyoto financial pressure on businesses suffering from the COVID-19
Protocol, which extends the 1992 United Nations Framework pandemic. It was established in the transitional provisions of
Convention on Climate Change. Since 2016, Ukraine has also the Civil Code that measures introduced by authorities that
been a party to the 2015 Paris Agreement. Accordingly, in 2016, prohibit certain types of economic activity using leased property,
the government of Ukraine adopted the Concept for State Policy or measures that prohibit access to such property by third
in the Area of Climate Change for the Period until Year 2030 parties, shall be classified as “circumstances for which the tenant is
(hereinafter – the “Climate Change Policy Concept”), which is not responsible”. As a result, the tenants received an opportunity
the first document on the state level aimed at the reduction of to be released from rental payments or demand rent reduction,
gas emissions. In July 2021, Ukraine’s government updated the applying Art. 762 (clauses 4 and 6) of the Civil Code or Art. 286
Nationally Determined Contribution to the Paris Agreement, (clause 2) of the Commercial Code (which define the tenants’
setting out new targets for reduction in greenhouse gas emissions. rights in circumstances for which the tenants are not responsible).
Detailed regulatory measures are still expected to be introduced. The said rule was temporary and is no longer applicable.
One of them shall be the creation and implementation of an internal
emissions trading scheme in compliance with the European Union
Directive 2003/87/EU establishing a scheme for greenhouse gas
emission allowance trading within the community.

reduction targets?
Yes, according to the updated Nationally Determined

Contribution to the Paris Agreement, Ukraine is targeting a
reduction in greenhouse gas emissions of 65% by 2030, compared
to the levels of 1990 (note: the total volume of Ukraine’s emissions
in 1990 was 618 million tons).
Real Estate 2024

Taras Burhan, partner, concentrates his practice in the areas of banking and real estate law. He offers over 20 years of legal experience in
banking, mergers and acquisitions, real estate and litigation matters.
Taras graduated cum laude from the Lviv National University Law Faculty in 1997. He then expanded his education abroad. Taras holds a
Master of Laws degree from the University of Cambridge and a Master of Laws degree from the Columbia University School of Law.
Originally from Lviv, Taras spent more than 10 years in Kyiv practising law as a lawyer at well-known international law firms, representing
global and regional clients on a number of complex multi-million-dollar deals.
In 2012, Taras Burhan, a seasoned Ukrainian lawyer who is also admitted to practise as an attorney and counselor-at-law in the state of New
York, founded his own law firm in Lviv. Taras speaks English, Russian, Polish and Ukrainian.
Taras Burhan Law Office LLC Tel: +38 032 253 1000
3/3 Katedral’na Sq. Email: tb@burhan.ua
Lviv, 79008 URL: www.burhan.ua
Ukraine
Zvenyslava Kit, associate, concentrates her practice in the areas of real estate, corporate and inheritance law. She often conducts due
diligence of real estate objects for purposes of acquisition or leasing transactions by local and foreign clients. Zvenyslava regularly drafts and
negotiates real estate contracts, carries out research of Ukrainian law, and represents clients vis-à-vis state authorities, notaries, registrars,
appraisers, banks, translation agencies. She also assists the clients of the firm with registering/establishing their legal presence in Ukraine
(either in a form of an SPV for the purposes of a particular real estate deal, or in a form of subsidiary or joint venture for the purposes of
conducting general business activities in Ukraine).
Zvenyslava graduated from the Lviv National University Law Faculty with a Master of Laws degree in 2013. The same year, she joined Taras
Burhan Law Office LLC as a trainee, and was promoted to the position of associate in 2014. Zvenyslava speaks English, Russian and Ukrainian.
3/3 Katedral’na Sq. Email: zk@burhan.ua
Ukraine
Marian Tsap, of counsel, concentrates his practice on the areas of real estate litigation. He often represents parties in court proceedings or
advises clients regarding various aspects of family and inheritance law as applicable to real estate.
Marian is also an experienced and duly qualified independent appraiser. For many years, Marian has been offering his clients property and
business valuation services in Western and Central Ukraine.
Marian graduated from the Lviv National University Law Faculty with a Bachelor of Laws degree in 2008. In 2018, Marian passed the bar and
was admitted as an attorney in Ukraine. The following year, he joined Taras Burhan Law Office LLC as of counsel.
Marian speaks English, Russian and Ukrainian.
3/3 Katedral’na Sq. Email: mt@burhan.ua
Ukraine
Taras Burhan Law Office LLC is a boutique law firm based in Lviv and drafting and negotiating Ukrainian law governed sale-purchase/
servicing clients in Western and Central Ukraine. The firm concentrates its transfer/leasing agreements;
practice in the areas of banking, corporate and real estate law. organising signings, including notarisation;
The firm represents: assisting clients with closing of transactions, including collection of
banks and financial institutions in lending transactions with conditions precedent; and
corporate clients; assisting parties with recordation of real estate transactions and
foreign and local investors in acquisitions or disposals of existing dealing with authorities (including local administrations, the land
businesses; and cadastre, bureaus of technical inventory, etc.).
investment funds, developers, and wealthy individuals in real estate www.burhan.ua
transactions.
The firm offers the following services related to real estate:
structuring sale or leasing transactions, including off-shore
structures;
drafting and negotiating term sheets;
conducting legal due diligence of real estate objects and their
owners;
advising clients regarding Ukrainian law requirements with respect
to acquisition, maintenance, use and transfer of real estate;
Real Estate 2024

202 Chapter 20
USA
USA
Richard L. Leonard S.
Rosen Salis
Dennison D. Jeffrey S.
Rosen Karol Salis, PLLC Marzocco Mailman
with the issue of attorney review (the period for which is three
12 Real Estate Law days under New Jersey law). In Romano v. Chapman, 816 A. 2d
1080 (2003), the Court determined that the parties may agree
1.1 Please briefly describe the main laws that to shorten the three-day attorney review period. In Gordon
Development Group v. Bradley, 827 A.2d 341 (2003), the Appellate
Court held on appeal that there is only one attorney review
environmental should be listed in response to question period, and that it applies to both parties. It begins to run when
12.1. Those relating to tax should be listed in response to the fully executed contract has been delivered to buyer and
questions in Section 9. seller. The buyer had argued that there are two separate attorney
review periods, but the court ruled otherwise.
Each of the states and the District of Columbia follow a mix of During the COVID-19 pandemic, many retail businesses
statutory and common law. Louisiana stands alone in employing were forced to close due to government related regulations and,
a civil law system, which is, in part, influenced by the Napoleonic consequently, they suffered significant losses. Throughout the
Code, a carryover from its days as a French colony. There are U.S., these businesses claimed coverage from their insurers for
three levels of law in the U.S.: federal; state; and local. In certain business interruption losses. However, the vast majority of U.S.
states, local law may include additional levels of governmental state (and federal) courts, when addressing the issue of whether
oversight. For example, in New York State, certain residents business interruption losses caused by the COVID-19 pandemic
of Nassau County who reside in incorporated villages, will be are covered under first-party property insurance policies, have
under the jurisdiction of not only the county, but the town and ruled in favour of insurers.
village as well.
Under common law, changes in the law arise by the way of 1.3 Are international laws relevant to real estate in your
case law (so-called “judge-made” law) and legislative action. jurisdiction? Please ignore EU legislation enacted locally
Real estate contracts, including leases, are required to be in in EU countries.
writing under the statute of frauds. All U.S. states have a form
of the statute of frauds in place. The “parole evidence rule” bars International laws do not govern real estate assets in the U.S.
extrinsic evidence, including prior or contemporaneous oral However, foreign laws may be relevant under certain limited
agreements and prior or contemporaneous written agreements circumstances, such as a U.S.-based party’s ability to sue foreign
that contradict or vary the terms of an agreement in writing. investors and to enforce judgments against assets that are
Consequently, the courts will rely on the express terms of a real located overseas (with respect to the enforcement of judgments
estate contract, unless the intent of the parties is unclear, in against overseas assets, U.S. judgments must be recognised by
which case, the courts may consider the conduct of the parties. treaty with the country in which the asset(s) are located in order
to be enforceable). International law is also relevant with respect
1.2 What is the impact (if any) on real estate of local to foreign investors in the tax context. Foreign capital may be
common law in your jurisdiction? subject to the tax law of the investors’ home country, and in the
case of tax treaties, the tax laws of both the investors’ home
country and the laws of the U.S. In the case of debt and equity
Common law has a significant impact on real estate throughout
investment, foreign financial institutions will be governed by
the U.S. through the decisions of state and federal courts. Below
their respective home country’s laws and founding charters.
are a few examples of how case law has had an impact on real
estate transactions and the real estate industry in general.
Following the Florida Supreme Court case Johnson v. Davis, 22 Ownership
480 So.2d 625 (Fla. 1986), a seller of real estate must disclose
any latent defects if the seller had knowledge of conditions 2.1 Are there legal restrictions on ownership of real
materially affecting the value of the property that are not readily estate by particular classes of persons (e.g. non-resident
observable or known by the buyer. Previous to the Johnson persons)?
decision, the Florida courts applied the “caveat emptor” (“let the
buyer beware”) doctrine across the state. There are no blanket restrictions in the U.S. regarding
In 2003, two separate decisions of the New Jersey courts ownership of real estate by foreigners (e.g., non-resident
affected the respective rights of buyers and sellers in connection persons). However, it should be noted that various federal
Real Estate 2024

Rosen Karol Salis, PLLC 203
laws impose restrictions and requirements on foreign real estate the District of Columbia in the U.S. have legalised cannabis
investors, primarily in the form of reporting requirements. For (recreational marijuana) and are beginning to permit licensed
example, under the Agricultural Foreign Investment Disclosure cannabis-related businesses to operate, many commercial
Act of 1978, foreign investors who purchase or transfer U.S. landlords are still either unwilling or unable to lease their
agricultural land must file a public report within 90 days properties to tenants looking to open cannabis businesses.
following the transaction. The Bureau of Economic Analysis Cannabis remains illegal under federal law (marijuana is still
of the U.S. Department of Commerce imposes reporting listed as a Schedule I controlled substance), and existing
requirements on foreigners who seek to purchase 10% or more mortgage loan agreements typically contain restrictions
of a U.S. business entity or enterprise (which may include real prohibiting federally listed controlled substances from being
estate-owning entities), although exemptions may be available sold at the property. Also, because cannabis is a Schedule I
in certain instances. Under the U.S. Patriot Act, the federal controlled substance, cannabis businesses cannot claim the
government regulates investments in the U.S. through disclosure same business deductions as non-cannabis businesses on their
and other laws designed to identify terrorists or terrorist federal taxes. On August 29, 2023, the U.S. Department of
organisations. The Foreign Investment in Real Estate Property Health and Human Services recommended to the U.S. Drug
Tax Act of 1980 requires that foreign persons who hold a direct Enforcement Administration that marijuana be reclassified to
real estate investment in the U.S that was valued at more than a Schedule III controlled substance. If such a reclassification
$50,000 in the prior year file an information return, which occurred, cannabis businesses could then claim normal business
subjects any income generated from real estate transactions to deductions on their federal taxes. The reclassification could
federal income tax. The Internal Revenue Service (under the Tax also have far-reaching impacts on banking and finance for the
Equity and Fiscal Responsibility Act of 1982) requires a domestic cannabis industry, making bankruptcy protection available, and
or foreign corporation that is controlled by a foreign person to potentially allowing foreign companies to sell their cannabis
file an information return annually. The Committee on Foreign products in the U.S.
Investments in the United States (“CFIUS”), which oversees
enforcement of certain “covered transactions”, has the power to 32 Real Estate Rights
block foreign investment transactions if they could affect U.S.
national security, and under certain circumstances, may require
the divestiture of completed investments. T he Foreign Investment in your jurisdiction? Are any of them purely contractual
Risk Review Modernization Act of 2018 expanded the scope of between the parties?
CFIUS reviews to include transactions involving real estate that
is near military or sensitive national security facilities, as well as
Land in the U.S. is owned by fee title (title to the land). A
foreign “non-controlling” investments in U.S. businesses. In
landowner having fee title may use the land in any manner that
addition, there are various other laws that may have applicable
is consistent with federal, state and local laws and ordinances.
reporting requirements for foreign investors including the Hart-
Real property is conveyed by the recording of a deed in the
Scott-Rodino Antitrust Improvement Act of 1976, the Foreign
local recording office. Legal title to land may be held by legal
Investment in Real Property Tax Act (“FIRTPA”), export control
entities (such as corporations and limited liability companies),
rules and regulations, U.S. immigration laws, tax laws and various
individuals or by multiple parties or partnerships. When the
state and local laws. With respect to the states (as compared to
parties owning the land are individuals, the land may be held
the federal government), Iowa, Minnesota, Mississippi, North
by the parties as tenants in common, of which the individuals’
Dakota, Oklahoma and Hawaii have enacted outright bans
respective interests in the land are divisible, or as joint tenants,
prohibiting foreigners from owning land in their state. In fact,
which provides for an undivided interest with rights of
over half of the states have some form of restriction (including
survivorship (spouses typically, but not always, own land as
reporting requirements) with respect to the ability of foreigners
“tenants by the entireties”, which is similar to a joint tenancy).
to own real property. In Kansas and Wyoming, non-residents
Third parties may acquire an interest in real property by
who are not eligible for U.S. citizenship cannot own or acquire
contract. For example, if the landowner seeks to arrange
real estate unless that right is granted by treaty with a foreign
financing for the real property, the lender will typically obtain a
country. In Missouri, non-residents are not permitted to own
security interest in it through the recording of a mortgage or deed
more than five acres of non-agricultural land. Further, 14 states
of trust. The mortgage contract will restrict the landowner’s
currently have some form of restriction regarding the ownership
ability to restrict the land without first paying off the debt.
of agricultural or natural resources, including limitations on the
Another type of right recognised in real property is a
amount of acreage that can be owned, although some states have
leasehold. In a leasehold, a tenant receives a contractual interest
eliminated or scaled back such restrictions in recent years. Since
in real property by the signing of a lease. This may or may not
these various state non-resident restrictions change from time to
constitute an actual interest in the real property, depending upon
time, it is advisable for foreigners to check state and local laws
the length of the lease term and applicable state law. Parties
carefully before acquiring real estate in the U.S. For example,
may also obtain an occupancy interest in real property under a
state lawmakers have recently shown a continuing interest
licence agreement, which provides fewer rights than a lease and
in addressing potential national security and the economic
may be easily terminated based upon the terms of the licence
implications of foreign ownership of land in the U.S. Between
agreement. A licence gives a party limited rights to access and/
January and June 2023, 15 states (Alabama, Arkansas, Florida,
or use real property.
Idaho, Indiana, Louisiana, Mississippi, Montana, North Dakota,
Parties may obtain the right to have access to or over real
Oklahoma, South Dakota, Tennessee, Utah, West Virginia, and
property for various purposes, such as parking, ingress or egress,
Virginia) enacted legislation regulating foreign ownership of real
by obtaining an “easement”. An easement is a right across the
property. During this six-month period, state lawmakers also
real property of another, but it must be recorded in most states
introduced bills in more than 20 other states that, if enacted,
in order to be enforceable.
would regulate or restrict foreign ownership of real property.
Valid title to property may also be obtained under the
The emerging cannabis industry in the U.S. also poses
common law principle of adverse possession, which is sometimes
new issues regarding real estate. Even though 23 states plus
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204 USA
colloquially known as “squatters rights”. Although the elements as recording systems now serve this function. While there is no
of adverse possession vary from state to state, at a minimum, requirement to record a deed to real property, doing so serves as
the party seeking title must be occupying the real property in an a public declaration of ownership and provides a mechanism to
“open and notorious” manner, continuously and for a defined preserve property rights. For example, in some jurisdictions, a
period of time (sometimes as much as 20 years), and use it as if it conveyance that is not recorded is deemed to be void against a
was his, her or their own property in a manner expected for the subsequent bona fide purchaser for value.
type of property. Some states impose additional requirements
such as the party seeking ownership to meet other requirements
before obtaining an interest. guarantee?
3.2 Are there any scenarios where the right to land No, local jurisdictions do not provide a guarantee that the
diverges from the right to a building constructed individual or entity listed on a recorded deed is, in fact, the true
thereon?
owner of such property. Rather, purchasers of real estate most
often obtain a title insurance policy from a title company that
A right to the land diverges from the right to a building insures the purchaser against any monetary loss if the seller did
constructed thereon in the case of a ground lease. A tenant not, in fact, have marketable title.
in a ground lease will typically have an extended lease for the
underlying land, but will own rather than lease the improvements
on the land. At the end of the lease term, the ownership of the
improvement on the land will revert to the landowner. Parties
also may enter into a so-called “sale/leaseback” transaction
where the owner of a property on which a business is located, As stated previously, there is no requirement to record title.
may sell the land and building to a purchaser and then “lease However, mortgages and other liens must be recorded in order
back” the building in which the seller’s business was (and is) for lenders and lienholders to perfect their respective security
conducted, in order to continue its operations. interests and to enable them to enforce their interests against
Similarly, air rights represent rights to develop or occupy the property. Recording also protects owners and benefitted
space above the land. Air rights are common in densely parties from previously unknown and subsequently filed third-
populated urban areas to enable developers to build taller party claims.
buildings, including in the space over existing developments.
Perhaps most famously, the air rights over historic structures 4.4 What rights in land are not required to be
in New York City have been sold to developers to enable the registered?
construction of large buildings that would otherwise be too
close to the existing structures.
As previously noted, there is no requirement to record title, but
recording is necessary to protect property rights and to perfect
3.3 Is there a split between legal title and beneficial certain security interests, such as mortgages and liens.
change this? 4.5 Where there are both unregistered and registered
The split between legal title and beneficial title arises under the or qualities of title on first registration? Please give
circumstances where the legal title to real property is held by details. First registration means the occasion upon
the trustee of a trust, but the beneficiary of the trust holds a which unregistered land or rights are first registered in
beneficial interest in the trust property and receives the benefits the registries.
of ownership. The trust’s ownership of the real property would
be recorded by deed in a similar manner as a typical deed. This is not applicable as there is no probationary period following
Currently, there are no proposals in any jurisdiction to change the recording of an ownership right or interest in real property.
this requirement. Rather, title insurance policies may provide “gap” coverage in
If the real property is owned indirectly through an entity and which a title company protects a purchaser from any liens that
ownership of the entity is transferred (the “beneficial interest”), may be recorded between the time that a real estate transaction
there is no effect upon the legal title to the real property. is completed and the time that it takes to record a deed and other
However, there may be federal and state tax implications. For documents. Lastly, there are different types of deeds that can be
example, if more than 50% of the beneficial interest is transferred conveyed, such as a general warranty deed or a quitclaim deed,
by way of a transfer of ownership in the entity, then New York but the representations associated with a specific type of deed
State may impose a transfer tax with respect to the transaction. are independent of when such deed is recorded.
42 System of Registration 4.6 On a land sale, when is title (or ownership)

When there is mutual intent to pass title, a transfer of ownership
is completed upon the delivery of the deed and acceptance of the
No, the Torrens system of property registration that was once same by the buyer. The execution and recording of a deed gives
used by many states has been replaced, in most states, with rise to the presumption of delivery and acceptance.
a property recording system. It is no longer necessary to
commence an in rem judicial proceeding in order to claim title
Real Estate 2024

4.7 Please briefly describe how some rights obtain Many localities have established electronic recording systems
priority over other rights. Do earlier rights defeat later that are searchable and accessible to the public.
rights?
Common law prescribes that the priority of property rights registries if it/they make a mistake?
and liens is that the first in time is the first in right. In most
jurisdictions, recording establishes priority and serves to protect No. The states have uniformly protected real property registries
such rights. Statutes may expressly alter the priority of liens from liability even if they make recording errors or omissions.
under common law. Certain recordings, such as property tax Accordingly, it is prudent for a purchaser and/or a lender to
liens, take priority and supersede other rights that may have obtain title insurance that ensures against claims of prior
been filed earlier. For example, pursuant to New York Real ownership and liens.
Property Law, a condominium association’s lien for unpaid
common charges is subordinate to any real estate tax liens, even
if the condominium association’s lien was recorded first. 5.5 Are there restrictions on public access to the
52 The Registry / Registries other rights affecting real estate and is this achieved
differing rules and requirements. There are no restrictions on access to county recording offices.
Prospective buyers, or more commonly title insurance agents
Recording offices are established at the county levels within each or attorneys, can search county records to examine the chain of
state, so there are literally thousands of such offices in the U.S. title to learn of any liens, easements, or mortgages on a particular
There are two types of registries, namely a grantor-grantee index property. Other pertinent information that would not be found
and a tract-based, block-and-lot index, one or both of which are in a county recording office, but that may be obtained through
maintained by county recording offices. The grantor-grantee other government agency websites, includes property zoning
index may be used when the names of the parties who owned violations and building code violations. Additionally, due
or transferred the property are known and the tract-based index diligence may lead to a buyer obtaining a survey of the property
may be used when looking up a property by its address. The and conducting on-site inspections.
recording requirements vary by state, but all states require that
conveyances of real property be duly acknowledged and each 62 Real Estate Market
county office requires payment of its specified recording fees.
5.2 How do the owners of registered real estate prove involved in a real estate transaction in your jurisdiction?
their title? Please briefly describe their roles and/or duties.
Recording a deed serves as both a public declaration of Real estate transactions typically involve a number of parties, the
ownership and a protection of one’s priority of ownership. In inclusion of which varies depending upon the type of asset being
addition, it is customary for attorneys to order a title search purchased and the nature of the deal. Real estate brokers represent
or, in some jurisdictions, conduct a title search themselves, on the seller in most real estate transactions. The purchaser may also
behalf of prospective purchasers in order to determine whether be represented by a real estate broker, although in some instances,
a prospective seller has good and marketable title. Purchasers of both parties may be represented by the same broker.
real property may use such title documentation to support their A purchaser will engage various experts to evaluate the
claims of ownership rights. property; usually, at a minimum, a structural engineer will evaluate
the property as well as any improvements and their compliance
with local ordinances. An environmental consultant may be hired
estate be completed electronically? What documents in some circumstances to evaluate conditions on the land that may
need to be provided to the land registry for the effect (or violate) environmental regulations.
registration of ownership right? Can information The purchaser will also hire a title agent to verify that the seller
on ownership of registered real estate be accessed has the legal right to sell the property (through a title and various
electronically? types of record searches). The purchaser’s title agent will also
secure title insurance on the purchaser’s behalf to protect against
The Uniform Real Property Electronic Recording Act, which future claims relating to unknown defects on title relating to title
allows local recording offices to accept documents and to the property.
signatures in electronic form, has been enacted by a majority of If the purchaser intends to renovate or develop the
the states. Documents pertaining to real estate transactions can improvements, the purchaser may also seek to hire an architect
therefore be executed and recorded electronically in counties and/or contractor to evaluate the potential for the property to
that have elected to implement electronic recording systems. be improved.
States and local jurisdictions establish the procedures and the
required documentation needed to properly file deeds and other 6.2 How and on what basis are these persons
instruments affecting real property. Generally, all documents remunerated?
must be properly executed, witnessed, and acknowledged by
a notary public. Some counties require property transfer tax Real estate brokers receive commissions, which are usually paid
returns and certain affidavits to be filed along with a deed. at the closing. If the parties are each represented by their own
Real Estate 2024

206 USA
real estate broker, the brokers will then split the commission. triggered a flight of migration from higher cost of living cities
Broker commissions are typically based upon a percentage of such as New York, Los Angeles and Chicago to suburban areas
the total sales price, although the rate varies from market to as well as to more affordable mid-sized cities such as Atlanta,
market and will depend upon the type of asset being sold. For Nashville and Charlotte. However, the outflow has subsided
example, in New York City, a commission rate equal to 5–6% of (somewhat) due to the prices in once affordable mid-sized cities
the total purchase price is typical. However, in areas outside of increasing by double digits. This factor, coupled with high
New York City such as Long Island, a lower rate of 4% may be inflation and declining real wages as well as increasing interest
customary in residential transactions. rates (in part due to the Federal Reserve’s efforts to combat
The other persons involved in the real estate transaction inflation), have resulted in housing affordability plummeting
may be paid at the closing, in advance, or as dictated by local almost everywhere. Investors in residential properties – ranging
custom or other arrangements made prior to the transaction. from private equity titans such as Blackrock down to “mom and
(For example, in New York, it is typical for attorneys to charge pop” investors flipping single-family homes – are also facing
a flat fee for residential real estate transactions, which is paid tough competition and low inventory.
at closing. On the other hand, work on complex commercial
transactions may be billed by counsel on an hourly basis.)
6.3 Is there any change in the sources or the their attractiveness to investors/developers? Please give
availability of capital to finance real estate transactions examples.
main sources of capital you see active in your market? Even with the subsiding of the COVID-19 pandemic, landlords
are still sitting on millions of square feet of vacant office
In the U.S., capital is readily available for real estate investment. space. Large tenants have realised significant cost savings by
Two primary sources for capital are private investors and downsizing office space and blending hybrid and remote work.
traditional lenders, such as large financial institutions. These factors have not been lost on them. As of November
Commercial mortgage-backed securities also provide an 2022, office vacancy rates across the U.S. stood at approximately
important source of funds for a broad range of real estate 19.1%, with cities such as Chicago, Houston and San Francisco
investment projects. Ever since the 2008 financial crisis, having commercial vacancy rates of 20% and above. In cities
traditional lenders have faced increased regulatory scrutiny, like New York, new, amenity-rich developments, such as
leading investors to look toward alternative sources of capital. Hudson Yards in particular, are drawing residents from older
Foreign investment capital is a significant source of investment neighbourhoods burdened by older buildings, such as the
money in large markets, particularly from major institutions, financial district. The flight of commercial tenants to newer
sovereign wealth funds and individual investors. Private debt developments has left areas such as downtown with commercial
funds and real estate investment trusts (“REITs”) raise funds vacancy rates exceeding 20%. While commercial landlords
through the sale of securities to investors (and in many cases are seem to be “hanging on” and making debt payments, rising
sold like stock on a major exchange) but are typically expensive interest rates and ripples in the securities market continue to be
to administer and can be sensitive to market fluctuations. a concern to investors. It seems that the decreased demand for
Private equity funds have also become a significant source of office space will be permanent and the “trickle down” effect is
investment capital over the past decade, during the time that certain to be felt in real estate markets, generally. It is a virtual
interest rates remained at historically low levels and prospective certainty that New York City is not the only market that is, and
returns on investments have been high due to continuously will be, facing these challenges.
appreciating real estate prices.
Lately, real estate investments are becoming less attractive 72 Liabilities of Buyers and Sellers in Real
for several reasons. High inflation together with the federal
Estate Transactions
reserve’s efforts to combat inflation through ongoing interest
rate hikes makes equity financing less profitable. The shift away
from in-person work to remote and hybrid arrangements has 7.1 What (if any) are the minimum formalities for the
also dealt a potentially permanent blow to office space demand.
For example, in major urban areas, in-person work attendance is
between 50–60%, whereas office space vacancy rates are still as Real estate transactions are governed by a combination of
high as 20% in traditional commercial zones such as downtown federal and state statutes and common law. While laws vary
Manhattan. The facts on the ground suggest that, at the very from state to state, an agreement between a buyer and seller for
least, office space investment is likely to remain stagnant for the the purchase of real estate (commonly called a Contract of Sale)
foreseeable future. is typically in writing, as most states have a “statute of frauds”,
which requires that agreements relating to real property be must
be in writing and “signed” by the parties, to be enforceable.
Litigation over what constitutes a valid “signature” over the
last 30 years has led to various federal and state laws regarding
give examples. electronic signatures. In most cases, they are binding. Among
other things, the contract of sale sets forth the terms and
conditions of the transaction, the various representations and
The falling demand for office space, rising inflation, rising warranties being made by the parties, and any contingencies
interest rates and major geopolitical events that are affecting that must be satisfied prior to a party being obligated to close
energy prices, including the war in Ukraine, have created the transaction. Depending on state jurisdiction, the seller
difficult market conditions for real estate investment, generally. will be required to make certain disclosures in connection with
The residential real estate market, in particular, has reached residential real estate transactions (see question 7.2 below).
a crescendo. The COVID-19 pandemic, among other factors,
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The Contract of Sale will typically provide the buyer with a in the contract the period of time that representations shall
“due diligence” period to inspect the property and to make survive after the closing. Sometimes, sellers seek to negotiate a
sure that conditions have been met, leading to the prospective “cap” on the seller’s maximum liability for any damages caused
purchaser wanting to move forward with the transaction. In by misrepresentations, but buyers often resist such provisions
order to pass title to the property to the buyer at the closing, a as they want no limitations on seller’s liability. A buyer who
deed containing the legal description of the property must be discovers that the seller made a misrepresentation may demand
properly executed, delivered to the buyer and officially recorded, rescission of the contract (where the contract is deemed to be
so that evidence of ownership is established, and third parties a nullity), and that the parties are returned to their original
are deemed to be “on notice” of the transfer. Typically, the positions before the contract was entered into. However, buyers
purchaser hires a title insurance company to investigate whether cannot delay when seeking this rescission. They must demand
title is “marketable” and free of liens and encumbrances, and rescission as soon as the facts surrounding the misrepresentation
the title insurance company issues a title insurance policy that are reasonably discovered. If a misrepresentation is discovered
insures the buyer against losses caused by a defective title. The after the closing has occurred, damages are typically sought
federal Fair Housing Act, which was passed as part of the Civil rather than rescission. However, in limited circumstances,
Rights Act of 1968, prohibits discrimination in housing-related for example, in the case of fraud, and depending on state
transactions for individuals who are members of a protected jurisdiction, the buyer may be entitled to seek rescission even
class – these include race, colour, national origin, religion, sex, after the closing, although achieving this outcome often requires
familial status, and disability. Forty-nine states and the District litigation. With respect to the New York Property Condition
of Columbia have adopted their own fair housing laws in order to Disclosure Act, while many, if not most, sellers choose to pay
expand these federal protections. These may include prohibiting the $500 credit to the buyer rather than providing the buyer with
discrimination based on an individual’s sexual orientation, the disclosure statement, doing so does not protect the seller
gender identity, or source of income. Nineteen states in the U.S. from liability under case law exceptions to “caveat emptor” (“let
do not presently have laws protecting LGBTQ+ residents against the buyer beware”). Sellers should think twice about not failing
housing discrimination. Housing discrimination still remains a to disclose a material defect regarding the property. If a seller
significant issue in the U.S. According to the 2022 Fair Housing does provide the Property Condition Disclosure Statement to
Trends Report, 31,216 housing discrimination reports were filed the purchaser, the seller will only be liable to the purchaser
in 2021, with one-third of them alleging discrimination based with respect to a “willful failure to perform” (which New York
on sexual orientation or gender identity. courts have interpreted narrowly), meaning that if the Property
Condition Disclosure Statement provided by seller contains a
misrepresentation, it is unlikely that the seller will be held liable
matters must be disclosed? to the buyer (i.e., required to pay buyer’s actual damages caused
by the defect), unless the misrepresentation actually prevents
the buyer from learning about the defect through the buyer’s
Generally, sellers do not have disclosure obligations with normal inspections, or if the defect could not reasonably have
respect to commercial real estate transactions. Rather, “caveat been discovered through an inspection.
emptor” (“let the buyer beware”) applies. Of course, the
contract between the parties may provide for and require that
certain issues be disclosed. Federal law requires that sellers 7.4 Do sellers usually give any form of title “guarantee”
provide potential buyers and renters of housing built prior to or contractual warranties to the buyer? What would be
1978 with a pamphlet containing information approved by the
Environmental Protection Agency regarding lead paint hazards information)? Would any such guarantee or warranties
in the residence, and provides the prospective buyer or renter act as a substitute for the buyer carrying out his own
with an opportunity to conduct an independent lead paint diligence?
inspection. Many states and localities have distinct disclosure
requirements regarding residential transactions. For example,
In terms of the condition of the property, sellers seek to sell the
New York City requires that sellers of residential properties
property “as is” and without making any contractual warranties
must disclose the presence of lead paint as well as asbestos.
at all. While buyers often agree to take the property “as is”, they
New York City residential sellers are also required to represent
typically wish to apportion risk to a limited extent by negotiating
(by signing an affidavit under penalties of perjury) that the
to include certain warranties regarding specific aspects affecting
property has a working smoke detector and carbon monoxide
the property. In residential transactions, these may include
detector. Under the New York Property Condition Disclosure
warranties that the appliances and that the property’s various
Act, sellers of residential property located in New York State
systems such as plumbing, heating, air conditioning, electrical
(but excluding cooperative and condominium apartments),
and septic system (if applicable) will be in good working order
are required to provide the buyer with a Property Condition
at the time of closing, and with respect to single-family homes,
Disclosure Statement, which consists of 48 questions regarding
may include warranties that the roof and basement are free from
the condition of the property being sold (ranging from general
any water leaks at the time of closing. In addition to negotiating
information, environmental, structural and mechanical systems
which specific warranties will be included in the contract, the
and services), or in the alternative, provide the buyer with a $500
parties also frequently negotiate with respect to what, if any,
credit at the closing.
limitations on seller’s liability (i.e., having a financial “cap”)
will apply, as well as the duration of the warranty period. In
7.3 Can the seller be liable to the buyer for the context of a proposed sale of property with tenants (either
misrepresentation? residential or commercial), the seller of the property typically
seeks to have the purchaser rely on “estoppel certificates”
Yes. The Contract of Sale will provide for remedies for the provided by the tenants, rather than making representations to
seller’s misrepresentations. The parties negotiate and include buyer regarding the status of existing leases.
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The type of deed that is to be provided to the purchaser will vary 7.6 What (if any) are the liabilities of the buyer (in
based on several factors, including, the extent and nature of the addition to paying the sale price)?
warranty of title that buyer is receiving, applicable state statute, and
what the parties negotiate. Warranty deeds are typically used for
The buyer’s primary obligation is to close the transaction, which,
transfers of real property. When using a “general” warranty deed,
as a practical matter, means to attend the closing (either in
the grantor makes the following warranties to the grantee: that the
person or remotely), execute all required documents (including,
grantor is the lawful owner of the property and has full rights to
for example, state and local transfer tax related documents), and
convey it; that the property is free from liens and encumbrances;
to pay the purchase price (in accordance with the terms of the
that the grantee will “quietly enjoy” the property; and that the
contract). In the event the buyer defaults under the terms of the
grantor will defend and warrant title to the property. However,
contract, the buyer would be liable to the seller for damages.
when a “special warranty” deed is used, the grantor covenants that
However, such damages are often contractually limited to the
there has been no encumbrance placed on the property while the
earnest money or good faith deposit (or a percentage thereof ),
grantor has owned the property, but does not guarantee against
which is typically 10% of the purchase price but also negotiable,
defects in clear title that may have existed before the grantor owned
especially in commercial transactions. Where the buyer has
the property. In certain states including, for example, New York
performed under the contract and is ready and willing to
and New Jersey, a “bargain and sale” deed is often used to transfer
proceed to the closing, and the seller tries to “back out” of the
real property. This type of deed sometimes includes “covenants
transaction and refuses to proceed to closing, the buyer can sue
against grantor’s acts”, where the seller warrants to the buyer that
the seller and insist upon specific performance (assuming that
the seller has not committed any act that would encumber title to
the seller is capable of delivering clean title) and, if successful,
the property, except as may be stated in the deed. A “quitclaim”
the seller will be required to close the transaction in accordance
deed includes no covenants or warranties of any kind and therefore,
with the terms of the contract. As the general rule is that each
offers the least amount of protection to the buyer. Quitclaim
parcel of real estate is unique and that money damages alone
deeds merely convey whatever interest the grantor (seller) has in
will not compensate for the loss of the property for which the
the property, which could be nothing. In many instances, title
buyer contracted, buyers are often granted an order of specific
insurance may not be issued to the buyer where a quitclaim deed
performance when the seller defaults under the contract.
is used, as title insurance companies may resist providing a new
However, granting an order for specific performance is in the
title insurance policy where the seller is not willing to provide any
court’s discretion, and the court could deny the request if, for
warranties as to ownership and encumbrances. In summary, a
example, the property at issue was not deemed to be unique
buyer’s best “guarantee” of “good title” rests in the title insurance
(i.e., undeveloped land, where similar parcels are available), it
policy that it obtains, rather than in the type of deed that is used or
would result in “undue hardship” on the breaching party, or the
the scope of warranties that are included therein.
agreement was illegal, unconscionable, or the result of fraud or
mistake. The allocation of closing related costs and expenses,
7.5 Does the seller retain any liabilities in respect of including transfer taxes, are usually informed by local practice
the property post sale? Please give details. and are often negotiated by the parties.
In real property law, the “merger doctrine” is a common law 82 Finance and Banking
doctrine that stands for the proposition that the contract for
the conveyance of property merges into the deed of conveyance. 8.1 Please briefly describe any regulations concerning
Under this doctrine, all discussions, negotiations and the lending of money to finance real estate. Are the rules
agreements, between the buyer and seller, including the contract different as between resident and non-resident persons
itself, are “merged” into the deed, and following the closing and/or between individual persons and corporate
(where the deed is delivered to, and accepted by, the buyer), the entities?
deed is the only remaining legal instrument between the parties.
As a consequence, whatever covenants and warranties are not The scope of regulations that a lender will face will depend on
included in the deed are extinguished at the closing and no whether the loan is for a residential or commercial property and
cause of action can be brought to enforce them. The doctrine whether or not the collateral is real property. Consumer loans
is intended to bring closure to real estate transactions and to that are secured by real estate are the most heavily regulated
secure the protection of land titles. However, notwithstanding on both the federal and state level, while unsecured commercial
this common law doctrine, the parties often choose to negotiate loans are the least regulated. The federal government oversees
and include contractual provisions that provide for the survival mortgages through a variety of statutes and regulations. For
of certain provisions set forth in the contact, with buyers seeking example, the Truth in Lending Act (“TILA”), which is
to negotiate for as long a survival period as possible and sellers implemented under Regulation Z, was enacted to protect
seeking to negotiate for as short a survival period (if any) as consumers from unfair practices by lenders and other creditors
possible. Examples of provisions that are commonly negotiated and to allow consumers to make meaningful comparisons
to survive the closing include, among others, providing for post- between loan products. Under the TILA and Regulation Z,
closing reconciliations of adjustments (e.g., utilities and taxes) lenders are required to make full disclosure regarding interest
once actual numbers are known, representations and warranties rates, terms of credit, fees, etc. In July 2008, Regulation Z was
relating to the condition of the property, representations with amended to protect mortgage consumers from unfair, abusive
respect to ownership and authority to convey the property, or deceptive lending and servicing practices. The Real Estate
covenants of confidentiality and indemnification provisions Settlement Procedures Act of 1974 (“RESPA”) and Regulation
whereby the parties indemnify each other with respect to X, which implements it, was enacted to provide borrowers with
losses, damages, expenses (including attorneys’ fees) or claims relevant and timely disclosure regarding the various costs of the
(including claims by tenants of the property, if applicable), real estate borrowing and settlement process. This act regulates
based upon which party owned the property at the time the loss, the relationships between mortgage lenders and other real estate
damage, expense or claim occurred or arose. professionals, such as real estate agents, in order to prevent the
Real Estate 2024

use of kickbacks in exchange for encouraging consumers to use Because of economic conditions (including the significantly
certain services, and also prevents lenders from requiring that higher interest rates than have been experienced in the U.S.
borrowers use a preferred title insurer. Following the financial in more than 20 years), lenders are more closely monitoring
crisis in 2007–2008, then President Obama signed the Dodd- their borrowers, and the asset that is the subject of the loan.
Frank Wall Street Reform and Consumer Protection Act (“Dodd- It is important for lenders to include in the loan agreement
Frank Act”), which was enacted to prevent the excessive financial (and to enforce), certain standard covenants (both affirmative
risk-taking by financial institutions that led to the financial and negative), together with specific financial covenants (e.g.,
crises, but which also provides American families with common- relating to debt service coverage ratios (“DSCR”), debt yield,
sense protections against unfair and abusive financial practices. and interest reserve balance requirements). Lenders also often
However, in 2018, Congress relaxed certain provisions of the impose cash management and/or lockbox provisions that require
Dodd-Frank Act, including easing certain escrow requirements the borrower to open a lender-controlled account, and that give
for depository institutions or credit unions. The Fair Housing the lender a measure of control over the property’s cash flow.
Act, which applies to residential real estate transactions, prohibits Lenders should also ensure that their loan documents clarify
discrimination on the basis of race, colour, national origin, religion, lien positions, subordination agreements and the rights and
sex, familial status or disability. Federal and state usury laws priorities of all lenders, where applicable. Standard provisions
prohibit lenders from charging unreasonably high interest rates that lenders typically use to help protect their interests include
or other unreasonable fees. Lenders who violate such usury laws requiring an acceleration clause (which calls immediately due
may incur civil or even criminal penalties. The cannabis industry the outstanding balance on the loan), which is triggered upon
is an emerging industry in the U.S., as many states have recently default, and by requiring “default interest” provisions that, upon
legalised the sale and use of cannabis products (i.e., marijuana). default, enable the lender to recover additional interest, or a late
However, since the federal government has not removed charge (which at times is as much as 5% of the unpaid amount).
marijuana as a Schedule I drug under the Controlled Substances
Act, lending institutions (including banks) are generally unwilling
to lend directly to new cannabis businesses, and when the lending of mortgaged properties? Are there any options for a
institutions are mortgagees with respect to real property, they mortgagee to realise a mortgaged property without
are unwilling to permit their mortgagors to lease or sublease involving court proceedings or the contribution of the
the collateral real property to cannabis businesses. On August mortgagor?
29, 2023, the U.S. Department of Health and Human Services
recommended to the U.S. Drug Enforcement Administration that When a real estate borrower defaults on the loan (e.g., fails
marijuana be reclassified to a Schedule III controlled substance. to make mortgage payments, fails to pay real estate taxes or
If such a reclassification occurred, it could have far-reaching otherwise breaches the terms of the mortgage agreement
impacts on banking and finance for the cannabis industry, making or promissory note), the lender has the right to recover the
bankruptcy protection available, and potentially allowing foreign balance of the defaulted loan by forcing the sale of the property
companies to sell their cannabis products in the U.S. (foreclosure). In some states, foreclosures are always judicial
which means that that they are processed through the courts.
8.2 What are the main methods by which a real Approximately 30 states and the District of Columbia permit
estate lender seeks to protect itself from default by the nonjudicial foreclosures in addition to judicial foreclosures. With
borrower? either process, the final step is typically the sale of the property
at a foreclosure sale. If the property is not sold or if the high bid
Borrowers of real estate loans seek “non-recourse” loans where, does not meet the asking price, then the property is sold back
upon the borrower’s default, the lender can only pursue the to the lender and the lender takes title to the property. While
collateral of the loan but cannot pursue any deficiency from the specific practices and procedures of a judicial foreclosure
the borrower. However, commercial lenders typically structure will vary from state to state, generally, the lender commences
loans as being non-recourse with “carve-outs”, which means the action by filing a complaint and serving the borrower with
that while the loan is generally without recourse, there are a copy. The borrower files an answer to the complaint and
certain “bad acts” by the borrower (e.g., fraud, misappropriation raises whatever potential defences that it may have, including
or bankruptcy) that upon their occurrence, will trigger recourse the lender’s failing to comply with state foreclosure procedural
liability on the borrower’s part. Lenders often seek a broad requirements or notice provisions, failure to prove who owns
guaranty from the sponsor (i.e., the individual or company the mortgage and the note, inaccuracies or mistakes in the
that effectively “quarterbacks” the project from conception filings, or equitable defences such as equitable estoppel, laches
through completion, although, generally speaking, obtaining or unclean hands. The borrower will have an opportunity to tell
the guaranty from an individual is preferable over an entity), his or her side of the story and usually has ample time to try to
which covers the full amount of the loan, together with any negotiate with the lender to try to reach a settlement that will
costs and expenses that are incurred in enforcing the lender’s end the foreclosure proceeding and would enable the borrower
rights. Or, at a minimum, the lender will require a guarantee to remain in possession of the property. If the foreclosure is
for only the borrower’s non-recourse carve-outs relating to bad contested, there will be a trial to determine if proper grounds
acts. In the current post-COVID-19 lending environment, exist for the court to grant an order of foreclosure. If the lender
real estate lenders are likely to proceed with caution and may obtains a judgment of foreclosure, the court will order the
“double down” with respect to risk mitigation techniques when property to be sold at a public auction, which is conducted by
underwriting loans for commercial or multi-family properties. a court officer. While the timeframe for judicial foreclosures
Borrowers, on the other hand, are becoming more conservative to run their respective courses varies significantly from state
and are avoiding (or should be) undertaking poorly structured to state and depends on whether the property sought to be
or aggressively underwritten loans. For more risky properties, foreclosed is a residence or a commercial property (residential
lenders may require more equity, which may take the form foreclosures usually take longer), it is not uncommon for both
of upfront capital, letters of credit or payment guaranties. residential and commercial judicial proceedings to last between
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one to three years. This is especially true in the current post- such personal property assets, the lender is required to record
COVID-19 environment, where government moratoriums on a Uniform Commercial Code (“UCC”) financing statement
evictions and foreclosures were enacted during the pandemic with the proper office in the jurisdiction and in the manner
and have led to a backlog of cases. In recent years, some states required. The financing statement should be filed where the
have taken steps to ensure the accuracy and integrity of residential debtor (borrower) is located. For example, if the borrower is
foreclosure proceedings by imposing additional restrictions and an individual, it should be filed in the state where the borrower
requirements on foreclosing lenders and their attorneys. In states resides; whereas, if the borrower is a business entity, it should be
that permit nonjudicial foreclosures, a deed of trust, rather than a filed in the state in which the entity was organised.
mortgage, is used in real estate transactions. In a deed of trust, the
borrower and lender empower a third party (called the trustee),
usually a title company, to hold the legal rights securing the against the borrower or the real estate asset by other
loan. If the borrower defaults on the loan, the trustee forecloses creditors?
on the property by selling it at auction and allocating the funds
recovered. Since nonjudicial foreclosures do not go through the
Please see question 8.4 above relating to how a real estate lender
court system, they can be completed much more quickly, typically
can protect its security interests. Again, lenders seek to protect
within several months. States that use a judicial process often give
their interest from claims of other creditors (against the borrower)
homeowners the right to buy back or “redeem” their home after
by perfecting their security interests in the collateral, whether it
the foreclosure auction has occurred. However, some mortgage
be the real property or personal property (assets) related to the
documents provide for a shorter redemption period than would
real property. For real property as well as for personal property,
otherwise apply. Generally, if a foreclosure is nonjudicial, the
the general rule of “priority” (when there are multiple creditors
homeowner will not be permitted to redeem their home after the
of the borrower) is that the first party to give notice of its security
sale occurs, although there are exceptions (e.g., Minnesota permits
interest (by recording the mortgage or the UCC financing
post-sale redemption up to six months after the sale).
statement with respect to personal property) is given priority.
Regarding commercial leases, the rights of the tenant following
This principle is referred to as “first in time, first in right”. For
a foreclosure will often depend on the terms of the lease and,
example, while a mortgage (or deed of trust) is valid between
to a lesser extent, on whether the lease or the mortgage was
the lender and the borrower, whether or not it is recorded, the
first entered into. Many commercial tenants negotiate to add a
mortgagee might lose out against another creditor (for example,
“non-disturbance” provision to the lease, which should give the
a good-faith purchaser for value with no knowledge of the
tenant some reasonable assurance that it will have the ability to
mortgage/deed of trust), unless the mortgage has been recorded.
remain in possession of the leased premises if the lender forecloses
Essentially, an unrecorded mortgage becomes subordinate
on the property. A non-disturbance provision typically provides
to subsequent interests in the property that are filed prior to
that the landlord will use its best efforts (or reasonable best efforts)
the mortgage. Title insurance, which is a type of indemnity
to enter into a non-disturbance agreement with its lender whereby,
insurance that protects the commercial investment in the real
following a foreclosure of the property, the lender agrees that it
property from financial loss due to issues with the title, plays
will not “disturb” the tenant’s possession of the leased premises,
an essential role in the lender’s ability to protect its first priority
provided that the tenant continues to be in compliance with the
lien status in connection with the property. In transactions
terms of the lease. Some knowledgeable tenants will not enter into
involving mezzanine financing (which is used for acquisitions or
a lease without such a non-disturbance provision being included.
development projects, where the loan is secured by the pledge of
the equity ownership interests of the first mortgage borrowing
8.4 What minimum formalities are required for real entity, rather than by real property), the mezzanine lender is able
estate lending? to perfect its security interest in the equity collateral. By causing
the issuer to “opt-in” to Article 8 of the UCC (thereby converting
Please see question 10.1 below relating to the various the pledge of equity interests, which is a “general intangible”, into
government regulations concerning the lending of money to a “security” under Article 8 and “investment property” under
finance real estate. In order for contracts relating to real estate Article 9), the mezzanine lender can perfect its security interest
to be enforceable, they must be in writing and signed by the in investment property under Article 9 of the UCC, and it can
parties (the “Statute of Frauds”). Every state has a Statute of then obtain “UCC insurance”, which is a title insurance product.
Frauds that will apply, and while these laws vary from state By purchasing UCC insurance, the mezzanine lender can shift
to state, they generally cover agreements for the sale of real to the title company the risk of proper attachment, perfection
property, lease agreements for a period longer than one year, and priority of lender’s security interests. In sum, it is essential
and agreements relating to an “interest” in real property (e.g., for real estate lenders to be conscientious in perfecting their
easements, mineral rights and gas/oil use agreements, as well security interests and maintaining them over time, by being in
as listing agreements by a real estate agent or broker). Lenders strict compliance with all local laws and UCC requirements. As
such as mortgagees, want to ensure that they have first claim on discussed in question 8.2 above, lenders often use covenants
the real property in the event that the borrower defaults on the (both affirmative and negative), as well as guarantees, in their
loan. In order for a lender to have a “perfected” security interest loan documents in order to ensure that the borrower is not
in the property, it must timely record the mortgage or deed of engaging in activities that could negatively impact the lender’s
trust in the appropriate records office or “lands record” office security in the transaction.
in accordance with state recording laws. As record mortgage
security interests are publicly available, they are deemed to 8.6 Under what circumstances can security taken by a
provide “constructive notice” of the property interest to the lender be avoided or rendered unenforceable?
public at large. Lenders also often seek to have a security
interest in personal property that affects real estate, such as
If real estate lenders fail to conscientiously comply with various
furniture, fixtures and equipment, inventory, chattel paper and
aspects of state law or UCC requirements, fail to engage
accounts receivable. In order to perfect its security interest in
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in proper due diligence regarding the transaction (ensuring or damage, declining fair market values, failure to insure or
that appropriate insurance including liability, title and UCC maintain the property), during the bankruptcy case. When the
insurance, if applicable, is in place), or fail to remain vigilant borrower/debtor is unable or unwilling to provide adequate
in monitoring their borrowers’ activities and the status of their protection against diminution, the real estate lender can move
security interests, they run the risk that their security interests the court “for cause” to “lift” (remove) the automatic stay with
can be rendered unenforceable. In addition, any one or more respect to their collateral or to afford it relief, including the right
of the following could lead to a lender’s security interest being to proceed with a foreclosure action in accordance with applicable
ultimately rendered unenforceable: neglect; or failing to properly state law. Generally, a real estate lender’s secured claim will be
investigate/poor due diligence (e.g., investigating the borrower, protected in accordance with the priority of the lender’s security
sponsor or guarantors, and their assets as well as their credit interest in the real property collateral. The lender will submit its
history and character/integrity). Also, mistakes, sloppiness, valuation of the collateral to the court, which may be contested
receiving poor legal advice or exercising poor judgment can by the borrower (and which may be litigated in the bankruptcy
each lead to serious negative consequences for the lender. In court), and if the collateral was disposed of (e.g., sold at auction),
addition, bankruptcy laws or fraud, either by the borrower or by the lender usually receives an amount of money equal to the
third parties (such as criminals who engage in identity theft or determined valuation. Single asset real estate debtors are subject
forgery), can have serious, negative results for the unwary lender. to special provisions of the Bankruptcy Code. For example,
where the debtor’s bankrupt estate contains only a “single asset”
of real property (other than residential property with fewer
frustrate enforcement action by a lender? than four residential units), the court may, after a hearing has
taken place, grant the secured lender’s motion for relief from
the automatic stay unless the borrower/debtor (if a business
In the U.S., a borrower that is experiencing financial difficulties entity) files a “feasible” plan of reorganisation (under Chapter
can file for federal bankruptcy protection. Bankruptcy filings 11), which is deemed to have a long-term view and not will not
under Chapter 11, Chapter 7 and Chapter 13 of the U.S. merely result in short-term survival. The debtor may also begin
Bankruptcy Code may affect mortgage foreclosures in different paying interest to the creditor (equal to the non-default contract
ways. Chapter 11 and Chapter 13 are more likely to be used to try interest rate on the value of the creditor’s interest in the real
to frustrate enforcement actions by the lender while not losing the estate) within 90 days from the date of the filing of the case,
property. The borrower’s filing for bankruptcy protection, will, at or within 30 days of the court’s determination that the case is
a minimum, significantly delay, and could significantly frustrate, a single asset real estate case. Insolvency proceedings do not
the lender’s ability to enforce its rights, and may “force the lender’s vitiate the real estate lender’s hopes, but they do put “road
hand” in agreeing to a favourable forbearance arrangement. In blocks” and “slow-down” signs in its path.
judicial foreclosure proceedings, the borrower will have a greater
opportunity to delay and frustrate the enforcement actions taken
by the lender. Lenders should “plan for the worst” and secure 8.9 What is the process for enforcing security over
sufficient collateral (preferably, collateral that is wholly owned shares? Does a lender have a right to appropriate shares
by the borrower, and not jointly owned with a spouse). Lenders
should also require meaningful guaranties where the guarantor entered another insolvency or reorganisation procedure?
has sufficient assets and is unlikely to file for bankruptcy
protection. In addition, a “bad-actor” borrower who is looking
to defraud the lender by engaging in illegal conduct can severely A “mezzanine” loan is a type of subordinate loan that is often
impact the lender’s ability to recover the amount loaned and/or used for acquisitions or development projects, and which is
the collateral that it has secured (personal property collateral). indirectly, rather than directly, secured by real property. In
Lenders would be well served to proceed cautiously at each step mezzanine financing, the loan is secured by the pledge of the
of the loan underwriting process, and carefully investigate and equity ownership interests of the first mortgage borrowing
perform comprehensive due diligence in order to better protect entity, rather than by the real property itself. However, the
their interests. mezzanine lender is able to perfect its security interest in the
equity collateral by causing the issuer to “opt-in” to Article 8
of the UCC (thereby converting the pledge of equity interests,
8.8 What is the impact of an insolvency process or a which is a “general intangible”, into a “security” under Article 8
corporate rehabilitation process on the position of a real and into an “investment property” under Article 9). Therefore,
estate lender?
the mezzanine lender can perfect its security interest in an
investment property under Article 9 of the UCC, and can then
When a borrower files for bankruptcy protection in a federal obtain “UCC insurance”, which is a title insurance product. By
bankruptcy court, an “automatic stay” goes into effect. This purchasing UCC insurance, the mezzanine lender can shift the
automatic stay is essentially an order by the court directing all risk of proper attachment, perfection and priority of the lender’s
creditors (including lenders) to immediately stop all collection or security interests, to the title company. In sum, it is essential
enforcement efforts against the borrower (who is referred to as for real estate lenders to be conscientious in perfecting their
the “debtor” in bankruptcy), and any actions taken in violation security interests and maintaining them over time, by being in
of the automatic stay are void as a matter of law. Bankruptcy strict compliance with all local laws and UCC requirements. If
courts usually impose severe sanctions against wilful violators of the borrower defaults, the lender can foreclose on the parent
the automatic stay. Debtors who are injured may recover actual company’s equity interest, thereby taking control of the
damages, including costs, attorneys’ fees and, if appropriate, borrower and the property that is owned by the borrower. As
punitive damages, against creditors who violate the automatic mezzanine lenders can foreclose through a UCC foreclosure,
stay. Secured creditors, such as real estate lenders, are entitled to they have specific and limited “self-help” remedies under the
“adequate protection” against actual or threatened diminution UCC that permit a secured lender to pursue remedies against its
in the value of their collateral (e.g., depreciation, physical loss collateral without the need for (and the cost and delay involved
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in) a judicial foreclosure proceeding. The requirements that are the fair market value of the consideration received for the real
set forth in the UCC often override contrary provisions in the property asset (less any liabilities assumed, or to which the real
mezzanine loan documents. However, if the real property owned property is subject) less the tax basis that the individual had in
by the borrower is also mortgaged as collateral for a senior loan the real property.
(the mezzanine loan is subordinate loan), then the lender’s ability The gain or loss relating to the sale of the real property will
to foreclose on the borrower’s equity interest is usually limited by be treated differently based upon how long it was held. If the
the terms of the intercreditor agreement made between the senior real property was owned for more than 12 months, then it will
mortgage lender and the mezzanine (subordinate) lender. As be treated as a capital asset and the profit (or loss) on the sale
discussed in question 8.8 above, once a bankruptcy proceeding will be taxed as a long-term capital gain or loss, where the gain
is filed by the borrower (regardless of which “chapter” of the generally receives better tax treatment than ordinary income (if
Bankruptcy Code the filing is made pursuant to), the automatic the property was held for a shorter timeframe).
stay will immediately take effect and the mezzanine lender The Code provides an exclusion from the taxable income
will initially be prohibited from pursuing any collection or in connection with the transfer of an individual(s)’ principal
enforcement action against the borrower, including initiating a residence. This exclusion is currently $250,000 if the transferor
UCC foreclosure, until such time as it is granted an order from is an individual and $500,000 if the transferors are spouses.
the bankruptcy court “lifting” the automatic stay. Section 1031 of the Code also provides for the deferral of
paying tax on capital gains on the transfer of real property, if the
92 Tax proceeds from the transfer are reinvested in a similar property,
within a certain timeframe, as part of a “like-kind” exchange.
tax? How much? Who is liable? 9.4 Are transfers of real estate subject to VAT? How
Transfers of real property are subject to state and sometimes local
transfer taxes on a deed transfer. These are usually calculated The U.S. does not impose a Value Added Tax. However, most
as a percentage of the purchase price paid. Some jurisdictions, states do impose a transfer tax on the transfer of real estate. The
including New York State and New York City, impose transfer rate varies from state to state and may also be imposed at the
taxes on transfers of leaseholds (with respect to the applicability county and municipal level (e.g., New York City). Many states
of the New York State tax, the sum of the lease term, including will require out-of-state resident transferors to withhold a certain
any renewals, must be for 49 years or more). Some states, also portion of the proceeds of the transfer, or if the transferor is an
including New York State, impose a transfer tax when there is a entity with out-of-state resident owners, the state may require
transfer or acquisition of a controlling interest in a partnership, the transferor entity to pay estimated taxes on their behalf.
corporation, or other entity having an interest in real property. Many states provide transfer tax exemptions for transfers
Many states also impose mortgage (or intangible) taxes in between certain types of parties, and under certain circumstances
connection with the recording of a mortgage. (for example, transfers in New York State made in connection
The party responsible for paying transfer taxes is usually with a bankruptcy, or for the purposes of securing a debt are
dictated by custom. For example, in some states, such as New exempt from the payment of New York State transfer taxes).
York State, the seller pays transfer taxes. The obligation to pay
transfer taxes can be allocated by the parties by agreement.
However, in other states such as Pennsylvania, this obligation seller on the disposal of a property?
is joint and several between the parties, and even if one party
agrees to pay the taxes, the state in question may have the right
to seek payment of the taxes from either of the parties, in spite The Foreign Investment in Real Property Tax Act of 1980
of the agreement. Mortgage recording taxes are usually paid by (“FIRPTA”) is a federal tax law that imposes income tax on
the buyer before the recording of (and as a pre-condition to) the the sale of real property by foreign sellers. FIRPTA is due on
mortgage and note. the sale of an interest in real property, including fee ownership
interests, leasehold, co-ownership (where one or more of the
sellers, but not all of the sellers, are foreign) and fractional or
9.2 When is the transfer tax paid? “timeshare” interests.
Foreign individuals or a foreign trust or estate must pay U.S.
Transfer and/or mortgage recording taxes are typically paid federal income taxes on gains at a maximum rate of 20% if the
prior to the recording of a deed and/or mortgage. In states that real property was sold after a holding period of at least 12 months
impose a transfer tax on the transfer of a controlling interest (the long-term capital gains rate) or a maximum rate of 37% (the
in an entity having ownership of real property, a tax return for top individual income tax rate) if the real property was held for
the transferor must be filed within a certain time period (for less than 12 months. Foreign sellers that are corporations are
example, in New York State, Form TP-584 must be filed and the subject to federal corporate income taxes equal to 21% of the
tax due (if any) must be paid within 15 days of the effective date gain from the sale of real property (whether the ownership was
of each transfer). “long-term” or “short-term”). “Branch taxes” at the rate of
30% (or less, if provided in an applicable treaty) may also be
imposed on a foreign corporation’s U.S. branch’s earnings that
are effectively connected with a U.S. business to the extent that
income tax?
they are not reinvested in the U.S. branch assets.
FIRPTA is enforced by imposing an obligation on the buyer
The transfer of real estate by a U.S. resident is a taxable to collect and pay the FIRPTA tax. Under FIRPTA, the buyer is
transaction under the United States Internal Revenue Code regarded as a “withholding agent” for the purposes of collection
(the “Code”), unless an exemption applies. The individual will of the FIRPTA tax and is required to hold 15% of the sales price
have a taxable “gain” or “loss” equal to the difference between
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(and not the net proceeds) paid to the seller. In practice, the obligation is not included in the lease, it likely does not exist.
withheld funds are collected from the seller’s proceeds at closing Commercial leases are contracts that are governed by applicable
and are remitted by the closing agent (usually the title agency) on state law. Unlike other contracts that may call for the contract to
behalf of the parties. be governed by the law of a state that has little to no nexus to the
FIRPTA provides several exemptions. The withholding tax subject matter of the contract, commercial leases are governed by
is not required if the seller certifies to the buyer that the seller the law of the state where the property is located. Local law, and to
is not a foreign person or entity, or the foreign person realises a limited extent state law, usually dictates the procedures by which
no financial gain from the transfer of U.S. property. Either no a landlord may evict a tenant in default of its lease and recover
withholding tax or a reduced 10% rate will be held if the buyer is legal possession of the premises. Such laws and procedures usually
an individual and the purchase price falls within certain limits. remain consistent over time. However, during the COVID-19
FIRPTA taxes are payable by the 20th day after the date of pandemic, many states and local governments enacted laws and
the closing, but as referenced above, the collection and payment issued executive orders that impacted the relationship between
of FIRPTA taxes is typically handled by the closing agent on landlords and commercial tenants. For example, in New York, a
behalf of the parties. state-wide moratorium on evictions and foreclosure proceedings
that applied to both commercial and residential tenancies was
enacted. While local law may dictate whether or not a lease is
other entity) owning real estate is transferred? subordinate to a mortgage, landlords typically require commercial
tenants to agree to a subordination provision in the lease, which
provides that the tenant agrees that the lease is subordinate to
If equity interests in a pass-through entity (such as a limited liability the rights provided in the lender’s mortgage. Tenants typically
company or partnership) holding U.S. real property are sold by negotiate to include a “non-disturbance” clause that provides
a foreign party, the foreign seller must pay U.S. income taxes that the lender agrees that the tenant may remain in possession
on any gain, as referenced in question 9.5 above. If the foreign of the premises after foreclosure so long as the tenant is not in
seller is a corporation and the sale in question is a sale of shares default of its lease. When either a tenant or landlord files for
in the corporation, then the “branch profits” referenced above in bankruptcy protection, the parties’ rights and obligations will
question 9.5 will not be applied. There are also exemptions from be governed by the federal Bankruptcy Code, which pre-empts
U.S. federal taxes for the sale of shares of a publicly traded entity state law. Commercial leases typically provide that when a tenant
holding U.S. real property if the seller owns less than 5% of the constructs and builds out its business location, it must comply with
shares in the entity, or if the entity is a REIT, then less than 10% all federal, state and local laws. This would include, among other
of the shares of the entity. If the entity owned by a foreign seller things, obtaining or updating a valid certificate of occupancy and
had disposed of its U.S. real property in a taxable transaction complying with local zoning laws, environmental laws, and the
before the sale of the shares or membership interests, then the federal Americans with Disabilities Act.
transaction would be exempt from tax. Furthermore, the sale of
stock of a foreign corporation is not subject to FIRPTA.
should always take into consideration/conduct due Commercial leases generally fall into four major categories:
diligence on? gross leases; net leases; percentage leases; and variable leases.
Gross leases are commonly used for offices and retail spaces.
In a gross lease, the tenant pays the landlord a single, flat fee
The buyer should take into consideration ad valorem property taxes
that comprises the fixed rent together with all of the various
applicable to the transaction (taxes based upon the assessed value of
costs, including those related to operations and maintenance,
the real property), including the amount of such taxes, the schedule
such as utilities, property taxes, insurance, and common area
for payment, proration of the taxes with the seller and potential
maintenance (“CAM”), if applicable. The landlord pays the
for reassessment or application of “rollback” taxes as a result of
various operating expenses to the appropriate third parties out
the transfer or change in use or ownership of the real property.
of the single rent payment made by the tenant. In a so-called
With respect to certain assets related to a business, sales taxes may
“modified gross” lease, the landlord and tenant negotiate and
be an issue and the buyer should obtain a letter of clearance from
agree on which utilities will be covered by each party. For
the state taxing authority to confirm there are no outstanding tax
example, the tenant may be responsible for paying for electricity
liabilities that would transfer with the asset. It is advisable to hold
directly to the provider and the landlord may be responsible for
an appropriate amount of funds in escrow until a tax clearance
paying for waste removal. The landlord and tenant also agree on
letter is received. Some states have so-called “bulk sales” laws in
the tenant’s “percentage share” (which is typically a fraction, the
place, that require the buyer to notify the seller’s creditors if it is
numerator of which is usually the total square footage of tenant’s
acquiring a significant portion of seller’s business or assets.
leased premises, and the denominator of which is usually the
total square footage of the entire rentable space in the building).
102 Leases of Business Premises A “Base Year” is specified in the lease, which is often negotiated
by the landlord and tenant, to establish a “baseline” to provide
10.1 Please briefly describe the main laws that regulate the means by which the tenant is responsible for paying its
leases of business premises. percentage share of annual increases in operating expenses and
utilities above the amounts calculated for the Base Year of the
All 50 states have some form of a “statute of frauds”, which lease. In a fully net lease (e.g., a triple net lease (“Triple Net
requires that real estate agreements be in writing. Leases fall Lease lease”)), which is commonly used for long-term tenancies
into this category. There are not many laws that “regulate” for freestanding commercial buildings, warehouses or industrial
commercial leases. Unlike residential tenancies, where many states spaces and for some retail spaces, the lease terms are frequently
provide tenants with various rights guaranteed by law, commercial most favourable to the landlord. Most, if not all, of the costs
tenants generally have few statutory rights, and if a right or
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associated with the operation and maintenance of the building, (d) Insurance
including non-structural repairs, are the tenant’s responsibility. While leases typically provide that landlords will obtain
In a single net lease, the tenant pays fixed rent and real property and maintain liability insurance for the building, the
taxes to the landlord, and all other operating expenses directly to lease will also require the tenant to obtain and maintain
the appropriate third party. In a double net lease, the tenant pays several specified amounts of liability insurance, and
real property taxes and insurance to the landlord, and tenant pays to include the landlord (and perhaps its management
all other operating expenses directly to the appropriate third party. company) as additional insureds on the tenant’s insurance
In a percentage lease, which is sometimes used in connection policy. If the tenant has taken out financing as part of its
with retail businesses, the tenant pays a lower, fixed rent plus a business operations, the tenant’s lender may also require
percentage of the property’s monthly gross sales or, less typically, that the tenant (borrower) satisfy additional insurance
profits. A variable lease has a rental rate that changes over time. requirements. Commercial leases expressly require the
Neither percentage leases nor variable leases are commonly used tenant to be responsible for obtaining and maintaining
in commercial tenancies. Typically, in commercial leases, the property insurance for the tenant’s contents located
landlord is responsible for making structural repairs (i.e., to the at the leased premises and with respect to any tenant
foundation, walls and roof of the building) and replacing various improvements that tenant makes.
systems of the building, including the electrical, sprinkler, and (e)(i) Change of control of tenant
heating, ventilation and air conditioning systems. A ground Many commercial leases provide that the tenant (if
lease is a long-term lease (sometimes up to 99 years) between a the tenant is a business entity) may not sell, transfer or
landlord and tenant in which the tenant is allowed to develop the assign a majority of its voting interests without the prior
leased property during the term, and upon the expiration of the written consent of the landlord, and that doing so would
lease, the landlord retains ownership of all improvements that constitute a material default of the lease that would provide
tenant made to the property. the landlord with a right of termination. The tenant may
want to negotiate an exception where the transfer would
technically constitute a change in the majority of the voting
business premises in your jurisdiction regarding: (a) interests of the tenant, but where the new majority owners
length of term; (b) rent increases; (c) tenant’s right to were prior (named) principals of tenant, even though they
sell or sub-lease; (d) insurance; (e) (i) change of control were not majority owners.
of the tenant; and (ii) transfer of lease as a result of a (e)(ii) Transfer of lease as a result of a corporate restructuring
corporate restructuring (e.g. merger); and (f) repairs? (e.g., merger)
See question 10.6 below regarding the tenant’s right to sell,
(a) Length of term transfer or assign the lease, generally (including the tenant
While the length of term for commercial leases varies, negotiating for itself, and its guarantor(s) to be released
other than with respect to retail businesses, an initial from liability for obligations (and potential claims) accruing
term of three to five years is fairly common. Tenants after the transfer occurs, when the assignee, and assignee’s
who are operating a retail business, especially franchised guarantor, has in each instance, a net worth that is either
businesses, usually require an initial term of 10 years not less than the party being released by the landlord or a
(so as to be consistent with a likely term of a franchise defined minimum amount). Indeed, all lease provisions
agreement). Tenants will often seek to negotiate for one regarding transfers (under a variety of circumstances) are
or more options to renew the lease at rental amounts that typically heavily negotiated by the parties. That having
are negotiated, and set forth, in the initial lease agreement. been said, a tenant that has affiliates and/or subsidiaries
Commercial tenants have no right to renew the lease, as part of its corporate structure, may seek to negotiate
except as may be negotiated and included in the lease. specific provisions to give it flexibility to be permitted to
(b) Length of term Rent increases engage in certain transfers with related entities while not
The amount and frequency of rent increases will vary needing to obtain the landlord’s prior written consent.
depending on the type of commercial property and lease, (f) Repairs
the type of business the tenant is operating, the local real Commercial leases typically provide that the tenant is
estate market and the general economic environment responsible for maintaining the various systems in the
at the time the lease is being negotiated. However, it is leased premises and making repairs to the interior of
fairly common for the base rent to increase each year by the premises, whereas the landlord is responsible for
between 3% and 5%. Some landlords tie rent increases making any necessary repairs to the building’s exterior
to an objective standard, such as the Consumer Price and structure, replacing the building’s various systems (if
Index. Some landlords are unwilling to state the base rent, necessary) and maintaining the building’s common areas.
or include a formula for calculating the base rent, for a However, in some instances, the landlord may pass the
renewal term, and instead provide that the rent will be costs of maintaining the common areas of the building
the “fair market rental”. If this is the case, the means to to the tenant(s) of the building, as an operating expense,
determine this amount are frequently included in the lease, based upon the proportion that the square footage of each
together with a dispute resolution provision(s) in order to tenant’s premises bears with respect to the total rentable
provide for the determination of this issue. square footage of the building.
(c) Tenant’s right to sell or sub-lease
See question 10.6 below regarding the tenant’s right to 10.4 What taxes are payable on rent either by the
sell, transfer or assign the lease. Regarding tenant’s right landlord or tenant of a business lease?
to sublease, some landlords provide that they have a right
to a percentage of the “profits” generated by its tenant’s
Florida appears to be the only state in the U.S. that imposes a
sublease. The percentage will, of course, vary, but upwards
sales tax on commercial rent that is payable by the tenant. Florida
of 50% is not unusual.
imposes a sales tax on the “total rent” charges the tenant pays
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to the landlord. This includes base rent together with any other pay rental obligations more than a specified number of times
payments that the tenant is required to make on behalf of the during the term of the lease (or during a shorter period of time,
landlord (such as with a net lease). Florida’s sales tax has been such as one year). In addition, the lease may provide that the
5.5% of the total rent charges, but effective from December 1, landlord and/or tenant may terminate the lease where a casualty
2023, the tax rate will be reduced to 4.5% (where the reduced rate event (fire, flood, etc.) causing substantial damage occurs, or if
will apply only to periods of occupancy on or after December 1). a condemnation or eminent domain “taking” of the premises
In addition to the state sales tax, many counties in Florida also takes place, and tenant is unable to use all or a major portion of
require a small “discretionary” sales tax of the total rent charges, the leased premises.
which currently varies from 0.5–1.5%. The party responsible for Commercial leases often contain one or more renewal options
paying the sales taxes is usually provided for in the lease, but if where the tenant may renew the lease for a specified renewal
the lease is silent on this issue, the tenant is responsible for paying term, provided that it gives landlord timely written notice that
the sales taxes and the landlord is responsible for collecting and the tenant is exercising its option to renew. If the tenant fails to
remitting the sales taxes. If the landlord fails to remit the sales vacate the leased premises on or before the lease expiration date,
taxes when it receives the rental payments from the tenant, then the landlord may bring a proceeding to evict the tenant and,
the landlord is liable for the sales taxes that are due. New York based upon customary lease provisions, it can seek to recover a
City, specifically, the borough of Manhattan, imposes a similar significantly higher rent (technically, “use and occupancy” since
tax, which is called the “Commercial Rent Tax”, on tenants the lease has actually expired) for the period that the tenant
who lease commercial space in Manhattan below 96th Street and remains in the leased premises beyond the lease expiration date.
pay annual or annualised gross rent of at least $250,000. The This “overage” or “holdover rate” typically varies between 125%
tax rate is 6%; however, all taxpayers are granted a 35% base and 200% of base rent. Many commercial leases provide that if
rent reduction, which reduces the effective tax rate to 3.9%. the lease is terminated prior to its stated expiration date, the
Unlike the above examples, the state of Arizona, and various landlord has several remedies, including the right to “accelerate”
cities within Arizona, including Phoenix, impose a “transaction all remaining rental obligations for the unexpired term of the
privilege (sales) and use tax” which is payable by the lessors (as lease, and to demand that the tenant immediately pay such
opposed to tenants) of commercial property. Notwithstanding amount, properly discounted to such amount’s present value.
the above, landlords are responsible for paying income tax on
all rental income they receive. Real estate taxes are typically
allocated between the tenant(s) in the building and the landlord lease cease to be liable for their respective obligations
as provided for in the applicable lease(s). under the lease once they have sold their interest? Can
non-compliance?
party etc.)? Are there any special provisions allowing a Commercial leases should provide that if the landlord sells,
tenant to extend or renew the lease or for either party assigns or transfers the building where the leased premises is
to be compensated by the other for any reason on located, the purchaser or assignee will assume all of the landlord’s
termination?
rights and obligations under the lease that accrue through the
date of the transfer. Tenants may also want to negotiate that
Business (commercial) leases, like other contracts, terminate at the lease provides that the net worth of the assignee is not less
the end of their terms. Commercial leases are usually lengthy, than the net worth of the current landlord, or a specific, defined
sophisticated agreements that are negotiated at arms-length by minimum amount. However, the landlord may not agree to
experienced businesspeople, through their respective counsel. such a provision. Provisions relating to the right to transfer,
Such leases typically include a comprehensive “termination” especially the tenant’s (rather than the landlord’s) right to
provision, which is often heavily negotiated by the parties, and transfer, are typically heavily negotiated by the parties. When a
which usually grants the landlord the right (but not the obligation) tenant sells, assigns or transfers its business (of which the lease is
to terminate the lease if certain events of default occur. Typically, a part), the assignee should assume the rights and obligations of
the termination provision sets forth two types of defaults, those the existing tenant. However, the transfer does not automatically
that may be cured after receipt of written notice, and other relieve the tenant of its obligations under the lease, unless this
“non-curable” defaults. Examples of curable defaults by tenants is agreed to by the landlord and included in the lease. Tenants
would typically include some or all of the following: failure to often seek to be released from any liability that accrues under
pay the rent (or other additional rent obligations) when due; the lease after the date of transfer, provided that the assignee has
failure to provide required documentation (e.g., financial and/ a net worth that is at least as high as that of the tenant, or which
or tax related information) to the landlord; failure to maintain meets a specified minimum amount. Similarly, the tenant may
proper insurance; failure to open the business when required also seek to have its guarantor(s) (which is typically, the tenant’s
by the lease; failure to continuously operate the business; principal(s)) released from any liability that accrues under the
permitting a lien to be filed against the property (arising out lease after the date of transfer, provided that the assignee’s
of the tenant’s failure to pay a financial obligation); and the guarantor has a net worth that is at least as high as the existing
tenant filing a bankruptcy petition or permitting an involuntary guarantor, or (again) a defined minimum amount. Also, leases
bankruptcy petition to be filed against it, and the proceeding not should contain mutual indemnification clauses that provide
being dismissed within a specified time period. Examples of that: (i) the tenant (assignor) will indemnify, defend and hold
so-called “non-curable’ defaults may include the: tenant making the assignee harmless with respect to any obligations, losses,
a transfer in violation of the lease’s transfer requirements; claims, damages, expenses, etc., that accrue after the transfer of
tenant or guarantor making a material misrepresentation to the the business and the lease’s assignment; and (ii) the assignee will
landlord in the lease application process; tenant’s principal being indemnify, defend and hold the tenant (assignor) harmless with
convicted or pleading no contest to a felony; and tenant’s being respect to any obligations, losses, claims, damages, expenses,
deemed to be a “habitual non-payer” where they fail to timely etc., that accrue prior to the transfer of the business and the
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lease’s assignment. The landlord’s proposed leases typically of any green lease provisions in commercial leases. While green
provide that the landlord’s liability for any potential claims by lease provisions are becoming more commonplace, they have
the tenant is limited to the landlord’s interest in the property. not yet reached widespread adoption. A major cause as to why
While the tenant may object to this provision because the green lease provisions have not become more commonplace in
landlord may have a limited amount of equity in the property, it commercial leases is the so-called “split incentives” problem. This
is unlikely that the landlord will agree to change this provision. refers to the fact that typical leasing arrangements do not encourage
Regarding the tenant’s security deposit, leases typically provide the parties to embrace green practices, as neither the landlord nor
that upon an approved transfer of the lease, the landlord, or its tenant has a strong financial incentive to make energy efficiency
successor, will either return the security deposit to the tenant if or other environmental investments in the building. For example,
the landlord receives a new security deposit from the assignee, or landlords are usually responsible for paying for capital expenses,
alternatively, the landlord may assign the tenant’s security deposit and under typical lease arrangements, they are usually unable to
to the assignee, in which case the tenant will need to negotiate an pass the costs of making green investments in the building along
adjustment with its transferee when entering into an agreement. to their tenants. Similarly, tenants usually have little incentive
to significantly reduce their energy usage because their monthly
utilities expenses often make up a relatively small percentage of
landlords and tenants designed to promote greater their total lease obligations.
the “environmental footprint” of a building. Please 10.8 Are there any trends in your market towards more
briefly describe any “green obligations” commonly flexible space for occupiers, such as shared short-
found in leases stating whether these are clearly term working spaces (co-working) or shared residential
defined, enforceable legal obligations or something not spaces with greater levels of facilities/activities for
amounting to enforceable legal obligations (for example residents (co-living)? If so, please provide examples/
aspirational objectives). details.
So-called “green building” requirements often relate to the Prior to the COVID-19 pandemic, there was a popular trend
practice of designing, constructing, operating, maintaining of employers seeking to lease more flexible and shared working
and replacing buildings in order to reduce energy use, conserve spaces for their employees. With employees and companies
natural resources and reduce greenhouse emissions. A number realising the benefits of flexible work schedules through remote
of private consensus standards systems have developed work, coworking spaces were gaining popularity. Coworking
since the mid-1990s, including the Leadership in Energy and spaces offer benefits such as flexibility and convenience at
Environmental Design (“LEED”) rating system, which was affordable prices, and also offer the opportunity of connecting
created by the U.S. Green Building Council, to help create with other individuals who may be in the same field or profession.
“green buildings”. Many federal, state and local governments While co-working spaces suffered during the pandemic, many
have developed green building programmes and they usually real estate professionals expect (hope) that co-working spaces will
reference one or more of the consensus standards. In addition, again become popular. However, going forward, providers of
many states have imposed energy efficiency requirements in coworking spaces will need to incorporate various safety measures,
their building codes, or they have adopted energy codes in including more “spread-out” layouts, in a more “contact-free”
order to reduce energy consumption. This is typically done by environment, with increased cleaning protocols, in order to guard
addressing wall and ceiling insulation requirements, window against the transmission of viruses such as COVID-19. In recent
and door specifications, lighting fixtures and controls, as well as years, developers of upscale rental buildings or buildings to house
heating, ventilation and air-conditioning (“HVAC”) equipment cooperative or condominium apartments were being designed
efficiency. Many state and local governments now grant certain with an increased number of amenities, which offered residents
financial incentives to property owners such as property tax greater opportunities for interactions with their neighbours,
abatements and other tax credits, deductions and exemptions to whether it be a bar or lounge area, a fitness facility, a pool, a game
encourage the use of energy-efficient equipment and renewable room, or flex-working spaces. These amenities grew in popularity
energy technologies. as more employees began to work remotely from their homes.
There is no standardised criteria or commonly accepted While many of these amenities were shuttered or limited during
language for what constitutes a “green lease”. Green leases often the pandemic, such shared residential spaces have reopened across
seek to address a wide range of issues that affect the environmental the country as restrictions associated with the pandemic have
impact and sustainability of the building, including energy been eliminated. Going forward, it is expected that the demand
efficiency, water management, waste management and sourcing for these social-based amenities will be strong again, especially
sustainable materials to be used for making repairs or alterations. as people continue to work more from home than had previously
The term “green lease” may be described as a commercial lease been the case. Law “suites” where sole practitioners or small law
that has been modified by the parties to accomplish some or all firms share space with individual offices and shared facilities,
of the following: to help align the parties’ interests with respect such as conference rooms and libraries, are not uncommon and
to making investments in energy efficiency; to set forth specific are helpful for attorneys who, for whatever reason, prefer not
green building requirements that are to be achieved; to allocate to make commitments that require them to provide all of the
the obligations and rights between the parties for achieving operational aspects of their spaces and leases. This type of “suite”
the green building requirements; and to identify remedies is often used for general business purposes as well. Common
or consequences for failing to comply with the requirements. usage and sharing of workspaces, such as “WeWork”, enjoyed
Green lease provisions may incorporate a number of private great popularity but recently suffered the challenges of over-
consensus standards and they may call for the parties to work expansion and COVID-19’s effect on the real estate market. We
cooperatively, over the duration of the lease, in order to obtain note that WeWork filed for bankruptcy protection under Chapter
the certification of one or more of the standards. Currently, 11 of the U.S. Bankruptcy Code in November 2023, and it will
there are no government requirements that mandate the inclusion seek to implement a plan of reorganisation.
Real Estate 2024

landlord can terminate the tenancy by giving appropriate notice.

112 Leases of Residential Premises Examples of other typical provisions in a residential lease include
a listing of the occupants, the amount of the security deposit,
11.1 Please briefly describe the main laws that regulate the terms of any right to sublet or assign, and default and remedy
provisions. Almost all property owners obtain casualty and
liability insurance and residential leases often require tenants to
Residential leases are contracts and the enforceability of their obtain renter’s insurance, which covers loss of personal property
terms are governed by applicable contract law. The federal and protects tenants from liability claims for injuries sustained
Fair Housing Act prohibits the inconsistent application of lease in the unit.
terms to tenants based on enumerated protected categories. For
example, an owner cannot retain larger security deposits from
tenants based on their race or gender. Leases must also comply
with the many state and local laws that establish residential achieve vacant possession if the circumstances existed
tenant protections, such as limits on security deposits, grace for the right to be exercised?
periods for late rent payments, and the requirement that
landlords mitigate damages when a tenant breaks a lease. Some
Yes, residential leases provide landlords with eviction rights and
leases may be governed by rent regulations that either impose
the extent of those rights are determined, in large part, by the
caps on rent increases or establish rent boards that meet annually
type of housing. Market-rate rental leases often provide landlords
to determine permissible increases. For example, in New
with the broadest authority to evict based upon a tenant’s default
York City, approximately one million apartments are covered
of a material obligation. Examples of a material default include
under rent stabilisation laws whereby a Rent Guidelines Board
non-payment of rent, impermissible sublet or assignment, and
determines allowable rent increases. Additional state and local
use of the premises for an illegal purpose. Having the ability to
laws obligate certain landlords to comply with safety measures,
evict tenants is typically limited under rent-regulated leases and
such as installing window guards and smoke alarms. Renters
for leases of public housing units. Under some circumstances,
of condominium or cooperative apartments must also comply
tenants in government-financed housing are entitled to an
with the rules established by the respective board of managers
administrative grievance process before their tenancies may
or board of directors of such condominium associations or
be terminated. For all categories of housing, landlords must
cooperative corporations. Lastly, local laws govern eviction
precisely follow the requirements stated in the lease or applicable
procedures for defaulting tenants.
law in order to exercise their eviction rights. It is illegal in most
jurisdictions for residential landlords to utilise “self-help”
11.2 Do the laws differ if the premises are intended for measures, such as changing the locks, to regain possession of
multiple different residential occupiers? the premises. Rather, if a tenant fails to vacate after the landlord
has taken the requisite steps, then a landlord may commence an
Yes, applicable laws generally exempt owners leasing fewer than eviction proceeding in order to obtain a judgment of possession
a specified number of units. The federal Fair Housing Act and and, potentially, seek the tenant’s eviction and regain possession
state rent regulation laws generally provide for such exemptions. of the premises.
Additionally, many state and local governments have enacted
laws that apply only to multiple dwellings in order to protect the 122 Public Law Permits and Obligations
health and safety of occupants living in dense quarters. Such
laws may provide for maximum occupancy levels to prevent 12.1 What are the main laws which govern zoning/
overcrowding, a safe means of egress in the event of a fire, permitting and related matters concerning the use,
and frequent garbage removal to maintain healthy and sanitary development and occupation of land? Please briefly
living environments. describe them and include environmental laws.
11.3 What would typical provisions for a lease of Zoning, permitting and other laws concerning the use,
residential premises be in your jurisdiction regarding: development and occupation of land are reserved to the states
(a) length of term; (b) rent increases/controls; (c) the by the 10th Amendment of the United States Constitution. The
tenant’s rights to remain in the premises at the end of states have, in turn, delegated most of the functions related to
the term; and (d) the tenant’s contribution/obligation to enacting real property ordinances, rules and regulations to local
the property “costs”, e.g. insurance and repair? authorities and municipalities. Matters effecting real property
have ultimately become a local affair.
The length of term provision varies by jurisdiction and market However, not all real property governance has been swept
conditions. However, residential leases are typically for one under the local authority rug. For example, New Jersey law
year, although this may vary depending on the state and location. dictates that all lands located within the State of New Jersey on
There is no standard provision pertaining to rent increases. For the banks of a natural body of water (so-called “riparian” lands)
localities that have adopted rent regulation laws, rent increases are owned in fee simple by the state. Therefore, a property
are either capped at a certain percentage increase over the prior owner in New Jersey wishing to make use of riparian lands, such
term or determined by a rent board. There are no restrictions as by building a dock or a boat mooring, must obtain a tidelands
on rent increases for market-rate apartments. Should an owner’s licence from the state’s Bureau of Tidelands Management or by
acquiescence to a holdover tenant establish a month-to-month purchasing the land from the state by a riparian grant.
tenancy, the owner may increase the rent if the tenant consents Notwithstanding the broad powers over real property that
and if proper notice is given. Some jurisdictions have graduated are left to the states, the federal government still has significant
notice periods, which provide for extended notice based upon powers to make laws that affect the environment and other
the amount of the increase and the duration of the tenant’s aspects of real property. For example, in the state of Florida,
occupancy. If a tenant does not agree to an increase, then a a 7,800 square mile wetlands region known as the Everglades
Real Estate 2024

218 USA
is subject to unique federal laws that limit real property 12.5 Are building/use permits and licences commonly
development. In addition, approximately 25% of all of the land obtained in your jurisdiction? Can implied permission be
in the U.S. is directly owned by the federal government. obtained in any way (e.g. by long use)?
12.2 Can the state force land owners to sell land to it? If Permits are obtained locally and at the municipal level.
so please briefly describe including price/compensation Generally, a certificate of occupancy (or comparable instrument)
mechanism. must be obtained before buildings can be occupied and/or used
for a particular purpose. The implied permission to maintain a
particular structure or use (i.e., the so-called “grandfathering”
The 5th Amendment of the United States Constitution contains
of otherwise non-conforming structures or uses) has a tenuous
a provision known as the “Takings Clause”, which provides that
relationship with the law, that varies from jurisdiction to
“private property [shall not] be taken for public use, without
jurisdiction. However, as a general principal, to the extent that
just compensation”. Generally speaking, the state has the
a prior “lawful” use is rendered unlawful by a change in the
power to force an owner of private property to sell land to the
law, the law will generally not be applied retroactively unless a
state, provided that there is a public use (the power of “eminent condition, such as ownership, changes.
domain”). However, the nature of the economic development
that would constitute a public use varies among the courts, and
the formula for compensation varies from state to state. 12.6 What is the typical cost of building/use permits and
For example, the New York State Court of Appeals has the time involved in obtaining them?
defined “public use” broadly to include almost any project that
benefits the public (including scenarios where the property will The cost of obtaining permits and the time involved depends upon
be transferred to another private party); provided that the owner local requirements and accordingly, varies greatly. For example,
of the property receives compensation equal to the property’s the typical cost to obtain a building permit (excluding construction
fair market value (“Just Compensation”). Contrast New York’s and professional fees) may range from a low of $100 to a high of
expansive eminent domain power with the state of Delaware, $2,000 and the timing for a building permit to be issued may range
which has restricted permissible “public uses” to traditional from several weeks to in excess of several months.
public projects – roads, schools, parks and police stations; in
each case, the owner must also receive Just Compensation. 12.7 Are there any regulations on the protection of
The National Historic Preservation Act of 1966 created a
process for the preservation and protection of historic and
The U.S. federal government and each of the individual state
archaeological sites in the U.S. The federal government, through
governments have authority over environmental matters.
the department of the interior, maintains a National Register
The federal government and numerous states each maintain
of Historic Places and administers various grant programmes
databases pertaining to violations of environmental laws.
and other financial incentives to encourage the preservation of
Buyers can obtain information regarding specific real property
these sites. A historic designation on real property may affect
by utilising such databases. Customarily, as part of a “Phase I the permitted uses of the property but will generally not affect
Environmental Site Assessment”, buyers hire experts to review transfer rights. The IRS tax code provides for tax credits to
relevant databases and records and conduct interviews with developers who rehabilitate certain historical buildings, and
people knowledgeable about the subject property. If additional such credits may be passed on from the developer to investors
detail is required concerning the environmental conditions in the property. Recently (and controversially), monuments and
at a site, buyers can obtain a “Phase II Environmental Site statues relating to the Confederacy or Southern Civil War heroes
Assessment”. In addition to the study of databases and have been removed by government fiat.
interviews, experts hired to complete a “Phase II” assessment
will take soil and groundwater samples in order to test for
certain conditions on the site. 12.8 How can, e.g. a potential buyer obtain reliable
12.4 What main permits or licences are required for your jurisdiction?
As referenced above, contamination and pollution of real estate can
Building permits must be obtained for construction and significant be ascertained through a Phase I Environmental Site Assessment
exterior and interior renovations. The owner of a building and the search of various federal and state databases, provided
generally cannot occupy or begin using space in a building without that the contamination or pollution was previously logged.
first obtaining a certificate of occupancy, which typically involves However, if a “Phase I” is insufficient or the contamination was
the payment of fees and the conduct of an inspection by local not recorded, then a “Phase II” will be warranted to provide the
authorities to ensure that the construction and/or renovations most reliable and comprehensive information regarding existing
meet local regulatory requirements. In addition, local and state environmental conditions on a property.
ordinances may impose other specific requirements related to the
construction and/or use of certain types of real property. For 12.9 In what circumstances (if any) is environmental
example, it is common for certain types of businesses (e.g., liquor clean-up ever mandatory?
stores) to be prohibited from being operated within a certain
distance from schools or places of worship. The newly developing Certain federal and state laws impose liability on parties to
cannabis industry also typically imposes similar restrictions. remediate property that has been contaminated outside of
Real Estate 2024

allowable standards. For example, New Jersey’s Industrial 13.2 Are there any national greenhouse gas emissions
Site Recovery Act requires the owners of facilities with reduction targets?
certain industrial classifications to investigate and conduct
environmental remediation prior to transfers when the business
Shortly after rejoining the Paris Climate Agreement in February
ceases operations or is sold.
2021, President Biden announced a new target for the U.S. to
achieve a 50–52% reduction from 2005 levels in economy-wide
12.10 Please briefly outline any regulatory net greenhouse gas pollution by 2030, with the goal of net-zero
requirements for the assessment and management of emissions economy-wide by no later than 2050.

Currently, there are no required standards, although Congress has (not already mentioned) which aim to improve the
been exploring the possibility of implementing such restrictions. sustainability of both newly constructed and existing
buildings?
132 Climate Change
In an effort to achieve the national goal of carbon neutrality
13.1 Please briefly explain the nature and extent of by 2050, some local jurisdictions have adopted strict emissions
any regulatory measures for reducing carbon dioxide standards for newly constructed and existing buildings. For
emissions (including any mandatory emissions trading example, New York City enacted Local Law 97 of 2019, which
scheme). requires residential and commercial buildings larger than
25,000 square feet to meet strict greenhouse gas emissions limits
There are various regulations that seek to reduce carbon beginning in 2024.
dioxide emissions from residential real estate. With respect
to new construction, many state and local jurisdictions have 142 COVID-19
incorporated environmentally friendly building requirements
into their respective building codes, many of which are modelled 14.1 Please detail any laws that govern real estate in
after the LEED standards. Some cities have enacted bans on your jurisdiction which were introduced in response to
the use of fossil fuels to heat certain newly constructed buildings the effect of the Coronavirus (COVID-19) pandemic and
in an effort to promote building decarbonisation. Measures which remain in place.
have also been adopted to retrofit existing buildings in order
to reduce greenhouse gas emissions. For example, the U.S. The COVID-19 pandemic has had a major impact on all aspects
Department of Housing and Urban Development (“HUD”) of the U.S. economy over the last few years, and real estate is
plans to reduce greenhouse gas emissions among its portfolio of no exception. In response to the pandemic, new legislation was
approximately 4.5 million residential housing units by increasing enacted in 2020, in an effort to provide temporary relief for
investments in climate and energy retrofits of existing housing. individuals as well as for small businesses. In a rare showing of
HUD is also exploring land use changes that incentivise the bipartisan support, Congress enacted the federal Coronavirus
construction of denser, transit-oriented housing developments Aid, Relief and Economic Security Act of 2020 (“CARES Act”),
in order to reduce reliance on cars, which are a significant source which sought to provide relief to consumers in a number of
of greenhouse gas emissions. ways. For example, the CARES Act imposed a 120-day eviction
With respect to commercial real estate, the U.S. Environmental moratorium on properties that participated in federal assistance
Protection Agency (“EPA”) and state governments have taken programs or were secured by federally backed mortgage loans.
actions to reduce greenhouse gas emissions generated by power When the moratorium expired near the end of July 2020, the
plants, which is by far the largest category of stationary sources federal agency Center for Disease Control and Prevention
of greenhouse gases in the U.S. In addition to EPA regulations, (“CDC”), stepped in, ordering a nationwide federal moratorium
states may act individually or collectively to pursue the same on residential evictions for non-payment of rent and related fees.
goal. For example, the Regional Greenhouse Gas Initiative This order, which was extended several times (until October 3,
(“RGGI”) is a cooperative consisting of 11 states along the east 2021), was primarily aimed at providing relief to low-income
coast that seeks to reduce carbon dioxide emissions generated by adults with families who would otherwise be at risk of eviction
power plants within their respective states. The RGGI utilises a or foreclosure, as a result, at least in part, of the COVID-19
market-based cap-and-invest framework in which power plants pandemic. Among other things, the CARES Act provided
save money by reducing carbon dioxide emissions. for the forbearance of mortgage payments for single-family
It is also important to note how real estate in the form of residences and for certain multi-family borrowers with federally
forestland may be used to reduce atmospheric carbon dioxide backed loans. In addition, the CARES Act created a new Small
levels. Trees absorb carbon dioxide in the air and convert it Business Administration loan programme called the Paycheck
into carbon, which is then stored in tree trunks, leaves, and Protection Program (“PPP”), which provided forgivable
the forest floor. According to the U.S. Forest Service, this loans for small businesses to help support their payroll and
process, known as carbon sequestration, plays a major role in operations during the pandemic, provided that certain spending
reducing the nation’s carbon footprint. Therefore, any policies requirements were complied with. While these loans were not
or regulations seeking to preserve forestland, indirectly impact provided directly to landlords, many small business tenants
carbon dioxide levels in the atmosphere. Notably, at the United that received PPP funds used the funds to pay rent and other
Nations’ Climate Change Conference (COP 27) in November lease obligations (together with payroll and other operating
2022, a Forest and Climate Leaders’ Partnership was created to expenses), and by doing so were able to remain in business when
further advance an international effort to reduce deforestation. they otherwise might not have been able to survive during the
pandemic. On the state level, a patchwork of state laws was
enacted that sought to address some of the negative financial
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220 USA
impacts of the pandemic. For example, many state governors On May 11, 2023, U.S. President Joe Biden officially rescinded
and city mayors helped to enact laws or orders providing for the executive order that declared COVID-19 a public health
moratoriums against eviction for residential and commercial emergency. As a result of the rescission of this order, COVID-19
tenants, along with the commencement of foreclosure actions. is no longer regarded as a “pandemic”. Rather, it is said to
New York City, for example, went further by also enacting a have shifted to being in an “endemic” phase or chapter. This
“Guaranty Law”, which prohibited landlords from enforcing means that while the infection is still present in the population
personal guarantees for rental obligations under commercial to a significant degree, the number of infections and deaths
leases (for defaults occurring between March 7, 2020 and June 30, from COVID-19 is no longer growing exponentially, and
2021) where the guarantor was a natural person who was not the healthcare systems are no longer overwhelmed. That being said,
tenant, and the tenant was either required to stop serving food or COVID-19 still remains a significant health threat, as more than
beverages to be consumed on premises or was required to cease 100 people per day in the U.S. are still dying from COVID-19.
operations or close its doors pursuant to state or local applicable Regarding laws that govern real estate, as of the writing of this
law. During the pandemic, force majeure provisions in commercial article (in the fall of 2023), most widespread eviction bans and
leases came under scrutiny, and consideration was given to tenant protections relating to COVID-19 have ended. Further,
whether laws or regulations should be enacted to require insurers while many states had programmes offering assistance and other
to cover COVID-19-related losses during the period that tenants resources to help tenants pay rent and other bills during the
were required to close their businesses. Laws were enacted, both COVID-19 pandemic, many of these programmes have ended or
on the federal level and in many states, which provided for the are no longer accepting applications.
use of electronic and remote notarisations to facilitate real estate
transactions being conducted remotely during the pandemic.
Richard L. Rosen, the founding member of Rosen Karol Salis, PLLC, whose offices are located at 110 East 59th Street, New York, New York
10022, has been actively engaged in the practice of franchise law for over 40 years, during which time he has represented many franchisors and
franchisees, both as an attorney and as a business adviser. Mr. Rosen has counselled and represented franchisors in the setting up of franchising
systems and programmes, has formed franchising entities, and has drafted and negotiated franchise agreements, registration statements,
disclosure documents and other ancillary franchise documents. He has represented franchisees and franchisee associations, has litigated in
both state and federal courts (and is admitted to practise in the State of New York, the Southern District of New York, the Eastern District of New
York, the 2nd Circuit Court of Appeals and the 9th Circuit Court of Appeals) and has arbitrated and mediated matters on behalf of both franchisors
and franchisees. Mr. Rosen is the immediate past Chairman of the American Association of Franchisees and Dealer’s Fair Franchising Standards
Committee, having served in that position for 15 years, and is a member of the AAFD Board of Directors. He is also a past Chairman of the Legal
Steering Committee and the Chairman of the Alternative Dispute Resolution Committee of the AAFD. In 2008, he received the AAFD’s Total Quality
Franchising Lifetime Achievement Award for his contributions to the field of franchising. He has been a member of the American Bar Association’s
Forum Committee on Franchising and its Anti-Trust Section since 1968, a founding member and past Chairman of the Franchise, Distribution and
Licensing Law Section of the New York State Bar Association (and the Chairman of its Franchise Relations and Mission Statement Committees), is
a Panel Member of the Committees on Franchising and Corporate Law sponsored by the Association of the Bar of the City of New York, a member
of the Executive Committee of the Business Law Section of the New York State Bar Association and a member of the International Franchise
Association (“IFA”). Mr. Rosen is a member of the Steering Committee of the National Franchise Mediation Program, a member of the CPR
Institute for Dispute Resolution’s Distinguished Panel of Neutrals in conjunction with the National Franchise Mediation Program and has served
as an arbitrator and mediator of franchise cases. Richard Rosen and his firm have earned Martindale-Hubbell’s highest rating for legal ability and
integrity and Richard is rated amongst Martindale-Hubbell’s List of Preeminent Attorneys. Richard is a charter member of the Franchise Times
“Hall of Fame” of Franchise Attorneys, is listed in Who’s Who in America (and has recently been chosen to receive its Lifetime Achievement Award),
Who’s Who in American Law, Who’s Who in the World, Best Lawyers in America, “101 Best Franchise Lawyers in America” (the Franchise Times), Best
Lawyers in the U.S., America’s Super Lawyers, Chambers, Who’s Who Legal: Franchise, the International Who’s Who Legal (Compendium Edition) and the
International Who’s Who of Business Lawyers, and is a recipient of the Global Award for Franchise Law. In 2016, 2017, 2018, 2019, 2020, 2021 and
2022, Richard was chosen as Franchise Attorney of the Year for the U.S. by Lawyer Monthly and received the Global Award as Franchise Attorney
of the Year for the U.S. from Finance Monthly in 2019. Richard was chosen as Franchise Attorney of the Year for the U.S. in 2017, 2018, 2019, 2020,
2021, and 2022 by Global 100. Richard Rosen was named Franchise Lawyer of the Year in the United States by Intercontinental Finance and Law
in 2017, 2018 and 2019. Richard and his firm were recently honoured as International Franchise Law Firm of the Year by the Global Franchise
Organization. In 2018, 2019, 2020, 2021 and 2022, Richard was named one the 100 Best Attorneys in the World by LegalComprehensive.com.
Richard has frequently lectured on a variety of franchise topics before various groups and organisations, including the American Bar Association,
the International Franchise Association, the New York State Bar Association, the Association of the Bar of the City of New York, the Nassau
County Bar Association and the AAFD, and has been interviewed on both television and radio, and by the American Bar Association Journal, the
Franchise Times, Forbes Magazine and the Wall Street Journal, regarding franchising. Mr. Rosen is a contributor to Franchising 101, The Complete
Guide to Evaluating, Buying and Growing Your Franchise Business, compiled by the Association of Small Business Development Centers, and has
written various articles on the legal and business aspects of franchising. Mr. Rosen and his firm are the authors of the section on Franchise Law
in the United States, which appears in the third, fourth and fifth editions of the (International) Franchise Law Review. In 2017, 2018, 2019, 2020,
2021, 2022 and 2023, Richard and the firm authored the ICLG – Franchise USA chapter, as well as the 2023 edition of the ICLG – Real Estate USA
chapter. Richard and his firm have contributed the chapter on “Real Estate Development in the Cross-Border Franchise Context” to the 2021, 2022
and 2023 editions of Lexology GTDT Practice Guide: Franchise, and have contributed to Lexology GTDT: Franchise USA (New York and New Jersey),
published for the years 2021, 2022 and 2023.
Rosen Karol Salis, PLLC Tel: +1 212 644 6644

110 East 59th Street, 23rd Floor Email: rlr@rosenlawpllc.com
New York, NY 10022 URL: www.richardrosenlaw.com
USA
Real Estate 2024

Leonard S. Salis is a Brooklyn Law School graduate with 27 years of legal experience. He has worked closely with Richard Rosen since August
2002, becoming a partner in the firm in 2010. Leonard has become an experienced business lawyer with an extensive knowledge of real estate
transactions and franchise law and franchise-related matters, as well as corporate law and dispute resolution. In 2022 and 2023, Leonard was
recognised with the award for Franchise Lawyer of the Year in the U.S. by ACQ5 GamechangersTM Global Awards. Also, in 2022, The Lawyer Network
awarded Leonard with its Annual Awards Winner in three categories: Real Estate Lawyer of the Year – New York; Distribution Lawyer of the Year –
New York; and Corporate Lawyer of the Year – New York. Leonard was featured in Marquis Who’s Who Top Lawyers 2020–2021. In 2019, Leonard
was awarded the Albert Nelson Lifetime Achievement Award from Marquis Who’s Who and he has been listed in Marquis Who’s Who since 2019.
Leonard is the co-author of the chapter on Franchise Law in the U.S., which appears in the third, fourth and fifth editions (published 2016–2018)
of the (International) Franchise Law Review, the USA chapter that appears in the 2018, 2020, 2021, 2022 and 2023 editions of ICLG – Franchise, and
the 2021, 2022 and 2023 editions of the Lexology Guide to Franchising in the US (New York and New Jersey). Leonard is admitted to practise law
before the courts of the State of New York, the Southern and Eastern Federal Districts of New York and the 2nd and 9th Circuit Courts of Appeals.
He is a member of the American Bar Association’s Forum on Franchising, as well as the New York State Bar Association (Business Law Section’s
Franchise Distribution and Licensing Committee), the Association of the Bar of the City of New York and New York County Lawyers’ Association.

110 East 59th Street, 23rd Floor Email: ls@rosenlawpllc.com
USA
Dennison D. Marzocco is a real estate and transactional associate at the firm engaged in a wide range of business transactions, specialising
in all aspects of commercial real estate, including complex leasing transactions, acquisitions and the sale of developed and undeveloped real
property and real estate financing transactions, franchise matters, contracts, trademarks and other intellectual property and business formations.
Dennison is a co-author of the chapter on Real Estate Development in the Cross-Border Franchise Context, which appears in the fourth edition
(published 2022) of the Lexology GTDT Practice Guide: Franchise, and is due to appear in the 2023 edition, as well. Dennison received his J.D. from
the Syracuse University College of Law in 2011 and his B.A. (History) from Washington and Lee University in 2008, where he was a member of
Sigma Nu Fraternity. He is admitted to practise in the State of New York, the State of New Jersey, the Southern and Eastern Districts of New York
and the District of New Jersey. Dennison is a member of the Association of the Bar of the City of New York. Dennison is also a NYS licensed real
estate broker and a member of the Long Island Board of Realtors.

110 East 59th Street, 23rd Floor Email: dm@rosenlawpllc.com
USA
Jeffrey S. Mailman is a real estate and transactional associate at Rosen Karol Salis, PLLC, specialising in real estate matters and engaged in a
diverse range of business transactions, franchise matters (including the structuring of franchise programmes, and the preparation of franchise
agreements and related franchise documents), contracts, intellectual property and business formations. He is a contributing author to the 2023
edition of ICLG – Real Estate USA chapter and a member of the New York State Bar Association’s Franchise, Distribution, and Licensing Law
Committee and the Association of the Bar of the City of New York.

110 East 59th Street, 23rd Floor Email: jm@rosenlawpllc.com
USA
Rosen Karol Salis, PLLC (formerly known as The Richard Rosen Law Firm, franchisees in virtually all fields, including restaurants, real estate brokerage,
PLLC) and its predecessors have been providing high-quality legal services healthcare, fast food, fitness, energy, hospitality, education, health and beauty,
in the real estate and franchise fields for over 40 years from their offices telecommunications, senior care, courier services, apparel and many more.
located in New York City. Our firm has represented real estate developers and Rosen Karol Salis, PLLC is highest rated by Martindale Hubbell and amongst
multi-location real estate users over that extended period of time. Richard franchise law firms in the U.S. In 2018, 2019, 2020 and 2021, we were named
Rosen, the firm’s senior and managing member, was a real estate developer Franchising Law Firm of the Year in the USA by Lawyers Worldwide Awards
and owner in the New York Metropolitan Area for over 20 years. He has Magazine and, in 2020, we were recognised as the Best Franchise Law Firm
assembled and developed real property in New York City and has negotiated by Global Magazine and the Global Organization.
leases, acquisitions, sale and financing transactions in the 100s. Mr. Rosen www.richardrosenlaw.com
and the firm have represented franchisees, franchisors and franchisee
organisations in virtually all areas of franchise law, from setting up franchising
systems and programmes, forming all entities, drafting and negotiating (on
all sides) franchise and multi-unit development agreements, disclosure and
other ancillary documents, to mediating, arbitrating and litigating in both
state and federal courts. Our firm negotiates leases, agreements for the sale
or acquisition of real estate, financing documents and handles all matters
applicable to real property transactions. We have represented franchisors and
Real Estate 2024

222 Notes
Real Estate 2024

Notes 223
Real Estate 2024

224 Notes
Real Estate 2024

The International Comparative Legal Guide (ICLG) series brings
key cross-border insights to legal practitioners worldwide,
covering 58 practice areas.
Real Estate 2024 features one expert analysis

chapter and 19 Q&A jurisdiction chapters covering
key issues, including:
• Real Estate Law • Finance and Banking
• Ownership • Tax
• Real Estate Rights • Leases of Business Premises
• System of Registration • Leases of Residential Premises
• The Registry / Registries • Public Law Permits and
• Real Estate Market Obligations
• Liabilities of Buyers and Sellers in • Climate Change
Real Estate Transactions • COVID-19
The International Comparative Legal Guides are published by:

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©2024 Global Legal Group Limited.

Expert Analysis Chapter

Trends in Office Leasing

Norton Rose Fulbright LLP Dan Wagerfield

Real Estate 2024

Real Estate 2024

Real Estate 2024

Norton Rose Fulbright LLP Tel: +44 20 7444 2764

Real Estate 2024

from holding “controlled land” outside of urban areas, with some

Real property is essentially a matter of provincial jurisdiction. 32 Real Estate Rights

Real Estate 2024

First registration of land usually occurs when the Crown

The registry system applies throughout Prince

See the answers to questions 4.1 and 4.3 above.

Real Estate 2024

5.2 How do the owners of registered real estate prove b) Lawyers

62 Real Estate Market

Real Estate 2024

Real Estate 2024

send notices under federal bankruptcy legislation. The lender will

8.2 What are the main methods by which a real

If security interests were granted by a borrower on a legitimate

8.9 What is the process for enforcing security over

8.5 How is a real estate lender protected from claims 92 Tax

Real Estate 2024

municipal levels. The tax rate varies, from a high of 5% of the

The transfer of commercial and new residential buildings is

Real Estate 2024

11.2 Do the laws differ if the premises are intended for

10.6 Does the landlord and/or the tenant of a business

Real Estate 2024

Real Estate 2024

Real Estate 2024

Stikeman Elliott LLP Tel: +1 403 266 9030

Stikeman Elliott LLP Tel: +1 604 631 1342

Stikeman Elliott LLP Tel: +1 514 397 3308

Stikeman Elliott LLP Tel: +1 416 869 5638

Stikeman Elliott LLP is a global leader in Canadian business law, offering

Real Estate 2024

Puga y Ortiz Abogados Pedro León Wielandt

2.1 Are there legal restrictions on ownership of real

Local common law does not have an impact of on real estate in

Real Estate 2024

42 System of Registration 52 The Registry / Registries

The ownership of land and, in general, all other property rights

4.5 Where there are both unregistered and registered

Real Estate 2024

62 Real Estate Market 72 Liabilities of Buyers and Sellers in Real

7.3 Can the seller be liable to the buyer for

Yes. Housing activity, as well as building, is currently limited

There are no liabilities of the buyer.

Real Estate 2024

8.1 Please briefly describe any regulations concerning

8.8 What is the impact of an insolvency process or a