LEGAL GUIDE TO REAL ESTATE INVESTMENT AND FINANCE
A CHECKLIST
Land Use Regulation
- Local zoning and state and federal controls (e.g., rent control, conversion from one use to another wetlands, historic preservation)
- Environmental damage: liability of "potentially responsible persons"
- Restrictions running in ownership chain: deeds, easements, permits, licenses
- International: nonresident alien personal planning for capital gains, income tax, gift and estate taxes, and inheritance planning; tax treaties
- Federal: tax "transparency" of ownership vehicle, debt-equity ratios, depreciation issues
- State and local: capital gains, commercial rent tax, special taxing districts
- Entity: selection of LLC, Inc., partnership, cooperative, REIT
- Permits: checklist of competent authorities, applications, hearings
- Services: outsourcing of management, construction, supply and other services
- Returns on capital: guaranteed, preferred, contingent, kickers
- Fees: carried interest for syndicators, management fees, incentives
- Securities laws: registrations, exemptions, public trading in partnership interests or mortgage-backed securities
Tax Planning
- International: Withholding tax, FIRPTA, intercompany transactions, tax treaties
- Federal: deductibility of interest, points, fees, etc.; method of accounting
- State and local: recording fees, intangibles taxes
- Purchase Money Loans: funding flows, pre-payment, usury, default interest rate, subordination
- Housing Loans: lender's compliance with federal procedures, deductibility of "points"
- Credit Agreement: permitted subordinate mortgages, nonrecourse to shareholders
- Security for repayment: mortgage, pledge, guarantees, covenants, sale-leaseback, collateral assignment of rents, lock-box collection, nondisturbance and attornment agreement, confession of judgment, security interests, purchase option, insurance, escrow, power of attorney, subrogation, subordination, estoppel certificate, legal opinion, cross-default
- Agreements between creditors and rights owners: leasehold mortgage, recognition agreement, subordination
- Warranties
- Conditions precedent: mortgage contingency, third-party consents
- Options
- Agreements: architect, contractors, sub-contractors, construction manager
- Permits, inspections, certificate of occupancy
Insurance
Leasing
- Net leases
- Statutory rights of tenants
- Managing agent
- Business operation manager
More Tax Planning
- Tax-free like-kind exchanges
- Long term leases vs. sales
- Depreciation recapture
- Adjustments to tax basis
- Step-up in basis at death of owner
- Allocation of special assessments
- Corporate reorganization
- Flexibility/Constraints: options to enlarge or shift premises to renew, to grow
- Special situations: joint ventures, equity kickers, veto rights on competing tenants
- Brokerage agreements
- Condominium and cooperative apartments: Government review of plan
- Securities regulations
- Business opportunities regulations
- Voluntary: loan workouts
- Involuntary: receiverships, bankruptcy, foreclosure
- WARN: Federal law on notice of closing of business
- Lender liability; exceptions
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