Real Estate (2nd edition)
1.1 The Cayman Islands maintains a title-by-registration system for real property, whereby the Registrar of Lands maintains a public register for each land parcel upon which registrable dealings are entered.
1.2 While the land registration system is primarily governed by legislation, case law will also apply and, in instances where there is no relevant local statute or case law, decisions in commonwealth jurisdictions may be considered.
1.3 The local real estate market continues to produce strong sales and price results:
(a) High-end condos on Seven Mile Beach continue to sell quickly at increasing prices.
(b) The Westin Grand Cayman Resort and Sunshine Suites Resorts were recently sold by a US real estate investment fund to a Japanese real estate investment fund.
(c) The Cayman Islands’ largest developer, Dart Realty, acquired the Ritz-Carlton Grand Cayman and continues to expand its self-sufficient town known as Camana Bay. Recent developments at Camana Bay include the expansion of Cayman International School, completion of a new office building in the town centre, and commencement of construction of two new phases – a ‘big box’ retail zone and the development’s first ‘for sale’ residential project.
(d) Construction has recently commenced on a new wellness hotel along Seven Mile Beach.
(e) Work continues on the expansion of the Owen Roberts International Airport, expected to drive further growth in the tourism sector and the ownership of vacation homes.
(f) The Government continues with its plan to develop a new cruise ship berthing facility in the capital George Town, with the intent to proceed using a public private partnership (PPP) model.
(g) Other developments still in the planning stages include the Mandarin Oriental resort and residences at Beach Bay, the Grand Hyatt resort and residences along Seven Mile Beach, the Ironwood golf course and town centre development in the eastern interior of Grand Cayman, and the Cayman Enterprise City and Special Economic Zone.
The transfers of the ownership of commercial real estate properties, the registration of securities and easements against them and their lettings are strictly regulated in France in order to ensure the security of the transactions and the protection of the business activities carried out within.
The Federal Republic of Germany consist of sixteen states (Laender), each of which is subject to individual state legislation – in addition to the laws set by the federal legislator which applicable in all states. Consequently, real estate-related laws in Germany result from various sources and may differ from state to state:
- Civil law: Regulations regarding the ownership and transfer of real estate, mortgages, encumbrances etc. and the contractual aspects of construction, leases, purchase and sale can be found in the German Civil Code (Buergerliches Gesetzbuch, BGB). The Civil Code is the centre piece of federal civil law legislation and applicable in all of Germany. It has come into effect as of 01 January 1900 and has seen just one major reform. Especially with respect to title to real estate it has strong influences of Roman law.
- Federal public law: The federal legislator also has the legislative authority concerning zoning and planning law. Hence, while the actual local zoning is under the authority of local municipalities, the overarching principles of zoning and planning to be observed in all of Germany result from federal legislation (in particular the Federal Building Code or Baugesetzbuch).
- Public law of the states: While zoning law is federal law, the actual building law (e.g. permit procedures and building requirements) is under state authority. All sixteen states have more or less different building codes (Landesbauordnung). The applicable building code is the one of the state in which a given piece of real estate is located.
- Public law of the European Union: The legislation of the EU has impact on the German real estate law, albeit in a narrow ambit (safety of buildings, planning and environment are the most important topics). Typically, EU legislation is transferred into federal or state legislation or technical norms and therefore not necessarily directly applicable.
- Last, but not least there are various taxes relevant to German real estate or to owners of real estate which are based on either federal and state tax laws.
While written law is the main source of German real estate law, court decisions may have (partially heavy) influence on the interpretation of those sources. Nevertheless, a court decision is not binding outside the specific case that was decided, since the concept of stare decisis is not enshrined in the German law system.
All land in Hong Kong (with the exception of St. John's Cathedral, the only freehold property in Hong Kong) is leasehold property. The government leases the land for a term of years with covenants and conditions imposed on the grantee. Previously, the government as lessor would issue a Government Lease to the purchaser (usually a developer) (as the lessee). The current practice now is that the government usually executes Conditions of Sale, Grant, Re-grant or Extensions depending on the purpose of grant. Once the conditions stipulated therein are complied, the Conditions of Sale or Grant will convert into a form of legal ownership to the purchaser. Before 1997, the lease terms were in general 75 and 99 years renewable for a further 75 years or 99 years. Some lease terms were even 999 years. After 1997, new lease terms were in general 50 years from the date of grant. Government rent is payable on land and the sum is equivalent to 3% of the rateable value of the property on the land leased. Given Hong Kong's limited supply of land, real estate is usually developed in forms of multi-storey buildings, whether for residential, commercial, industrial or other purposes. Under this system, the entire land and building are notionally divided into a number of undivided shares which are allocated to different premises. Owners buying commercial real estate will therefore own a number of undivided shares in the land together with the exclusive right to occupy the premises and their interests will usually be governed by a Deed of Mutual Covenant.
The real estate regime of Hungary is primarily based on civil law (the Civil Code), legislation relating to the land registry and construction, as well as relevant court decisions. In the past 30 years, the legal regime has been changed and consolidated several times in an attempt to accommodate the needs of modern business practices. Relatively few pieces of EU legislation apply to real estate in Hungary.
Spain is a parliamentary monarchy, based on a social representative, democratic and constitutional regime. The head of the state is the Monarch, while the Prime Minister is the head of the Government which is composed of the Ministers who collectively form the Council of Ministers.
Spain has a highly decentralised system of administration with 17 Autonomous Communities or Regions and two autonomous cities, each based on a parliamentary system, in which executive power is vested in a Council of Ministers, headed by a president, elected by and responsible to a unicameral legislative assembly.
Most of the Autonomous Communities have their own regulations affecting real estate matters to a different extent (contractual rules, planning laws, environmental regulations, etc.).
Our answers to the questions in this Guide are limited to the regulations passed by the Spanish Parliament.
India, a federation of 29 States and 7 Union Territories, is governed by laws enacted and regulations issued by:
- Central Parliament on subjects in the Union List (e.g. taxes on income excluding agricultural income and taxes on the capital value of assets excluding agricultural land) and in the Concurrent List (e.g. transfer of property other than agricultural land, registration of deeds and documents, contracts, trusts);
- State Legislatures on subjects in the State List (e.g. municipal corporations and other local authorities, rights in or over land, including the relation of landlord and tenant and the collection of rents, maintenance of land records, taxes on lands and buildings) and in the Concurrent List to the extent they are not repugnant to any Central law provision on the same subject; and
- by rules, regulations and bye-laws framed by local bodies like municipal corporations and statutory authorities such as planning and environmental authorities.
Many Central legislations on subjects in the Concurrent List (e.g. registration of documents) have State amendments.
Customary laws are applicable to the extent not inconsistent with the Constitution of India (e.g. Islamic Law is applicable to succession in the case of Mohammedans).
A transaction in real estate in India must take into consideration:
- The legal and contractual capacity of the transferor to transfer the property or interest proposed to be transferred;
- The legal and contractual capacity of the transferee to acquire and utilize the property or interest proposed to be acquired, for the intended purpose of acquisition; and
- Statutory requirements and restrictions on transfer and use of the property or interest proposed to be transferred.
Stamp duty for commercial property was increased from 2% to 6% last year for Budget 2018 however this does not appear to have had a significant impact on investment in commercial property over the past year and the Irish property market continues to perform very strongly with strong international investor demand allied to Irish REIT and institutional demand underpinning performance.
The 4% stamp duty rebate scheme that was introduced last year in respect of land purchased to develop residential property has encouraged residential development, particularly in the PRS Sector. Approximately €400 million of development land sales were completed in the first half of 2018. Co-living concepts and PRS/Build to Rent schemes are becoming increasingly mainstream, accounting for 25% of investment spend in the first half of the year, with a strong appetite to forward fund/forward commit. A major deal in this sector was Kennedy Wilson's acquisition of 247 apartments and 3.97 acres of development land at the Grange, Stillorgan, Dublin from NAMA-appointed receivers for a reported €160 million.
The introduction of a vacant site levy, in order to promote the development of vacant under-utilised sites in urban areas has led to an increase in the disposals of sites for development.
Ireland's 12.5% corporate tax rate on residential construction profits has led to an increase in the number of international investors establishing residential development companies, particularly in the Dublin area.
The Dublin office market continues to benefit from relocations due to the uncertainty around Brexit with particular growth in the serviced office sector.
The introduction of tax reforms in 2017 and 2018 which negatively impacted Irish regulated funds focused on Irish property (so called Irish Real Estate Funds or "IREFs") has led a decline in the popularity of such structures. There are now fewer tax advantages to larger non-Irish investors which has, together with the recovery of the domestic investor sector, led to an increase in the number of Irish based buyers of Irish property.
- In the Russian Federation, real estate law is predominantly laid out by the federal legislation, and thus property rights are the same in all regions. Regional (there are 85 regions) and municipal legislation, however, may regulate territorial planning and zoning issues, as well as taxation.
- Russian Real estate law is largely codified. The four most important sources of Russian real estate law are the Land Code, the Civil Code, the Town-Planning Code and the Law on Registration of Real Estate Property, which are all federal statutes. Court practice also plays a significant role, especially in the form of the Plenary Rulings of the Supreme Court, which contain guiding interpretation of the relevant legislation.
- Real estate transactions in Russia are generally in line with international practice and can be structured both as share deals and asset deals depending on the specific circumstances. After the Civil law reform, which was implemented in 2015, Russian law expressly recognizes many legal concepts ordinarily used in international transactions, such as representations and warranties, indemnification clauses, as well as options.
- A distinctive feature of the Russian real estate market is that commercially relevant land is often publicly owned (about 90% of the total land in Russia), and in most cases can only be leased (rather than purchased) by private parties under long-term lease agreements. Notably, in Moscow land plots are predominantly available for lease, and not for sale, even where a construction project is implemented. In these cases the potential lessee must generally obtain the lease right through an auction (with a number of exceptions).
- Property rights to real estate are subject to registration in the public register. However, the public register is not sufficiently reliable, and may not reflect certain types of encumbrances of real estate (such as underground objects restricting the use of land plot, e.g. cable lines). Therefore, a specificity of Russian real estate transactions is that extensive due diligence is often required.
The Swiss Confederation consists of 26 Cantons.
Each Canton is responsible for operating its own land registry(ies) under the ultimate surveillance of the Confederation. Each Canton has one or several land registries together covering the entire territory of such Canton. Any real estate in Switzerland, more specifically any plot of land and any right in rem on such real estate, is registered with the competent land registry where the real estate is located. Only public domains, such as roads, highways, etc., may not be registered at the land registry.
All possible rights in rem under Swiss law, such as ownership, easement, encumbrance or lien, are exhaustively provided by the Swiss Civil Code.
The United Kingdom of Great Britain and Northern Ireland (commonly described as the "UK") comprises the kingdoms of England, Wales, Scotland and Northern Ireland. England and Wales share the same real estate law and registrations system. Scotland and Northern Ireland have their own real estate law and registrations systems. Our answers to the questions in this Guide are limited to the English and Welsh system.
English and Welsh real estate law is a patchwork of:
- practical legislation governing, for example, the registration of real estate at the English and Welsh Land Registry;
- legislation aimed at addressing perceived market abuses and other political or social issues of the day;
- medieval concepts of tenure; and
- complex and often very old case law (i.e. court decisions).
Despite attempts to modernise and consolidate the law, English and Welsh real estate law remains full of seemingly anachronistic rules and many traps for the unwary.
In the last 20 years there has been a governmental drive to ensure that ownership of most of the land and other estate interests (e.g. leases and mortgages) in the UK are registered on a publicly available governmental register. More than 80% of land in England and Wales is now registered at the English and Welsh Land Registry.
The historic nature of much of English and Welsh real estate law means that relatively little of the legislation (outside of planning, environmental and health and safety etc.) derives out of or from European legislation and therefore the legal impact of Brexit is likely to be limited.
The U.S. Constitution sets forth a system of federalism where governmental power is divided between the national (or federal) government and the governments of individual states. Each state also has its own constitution, which further divides governmental power between the state and local governments. For this reason, legislation affecting the acquisition, disposition, use, financing, and taxation of real estate can be found at each of the national, state, and local levels of government.
Each state in the U.S., other than Louisiana (which employs a civil law system), follows a common law regime which evolves through both case law (e.g., court decisions) and legislation, and laws can vary greatly from state to state. In following the common law tradition, U.S. courts generally allow parties engaging in transactions relating to commercial real estate the freedom to set the terms of those transactions by contract, subject to regulations relating to the public interest (e.g., environmental, tax, counter-terrorism).
Mexico is a civil law jurisdiction; therefore, real estate transactions are subject primarily to the provisions contained in civil statutes. Mexico’s federal system is composed of 32 States and several municipalities within each state, and as such, federal and local regulations apply to real property matters. In general, real estate transactions are governed by local statutes (i.e. Civil Codes of the different States) and many permits related to real estate fall within the scope of the municipal authorities. However, it is important to note that there is an extensive uniformity among the local civil codes and other state-related statutes, particularly covering the conveyance of real property. Finally, Article 27 of the Federal Constitution provides a broad general regime for real estate transactions.
Currently, the real estate market in Mexico offers a wide variety of opportunities for domestic and foreign investors. Increase in funding sources and real estate demand are two of the main reasons for the development of this sector during the last few years. Mexico’s legal framework provide for different financial investment vehicles focused on commercial real estate transactions, such as private funds and trusts, as well as capital markets vehicles, such as FIBRAs (equivalent to U.S. REITs) and CKDs (please refer to the answer to question 6 for further detail of such vehicles).
The real estate market in Peru has evolved in recent years. This is due to the high levels of housing demand versus supply, as well as the boom years. Although there have been economic crises that have dragged the real estate and construction industries to decrease their growth levels between 2014 and 2016, dropping to 40%, in general, the real estate market has recovered in 2017 with a 7% rise, as reported by the Peruvian Chamber of Construction (CAPECO).
At the beginning of 2018, the forecast of the Peruvian Association of Real Estate Developers (ADI Peru) was that the sale of apartments in Lima for this year could increase by 20%. In January 2018, this growth was already noticeable with a rise of 13.92%. Also, trends in the Lima real estate market are expected to shift toward the construction of smaller apartments, because people prefer to live closer to their workplace to avoid having to travel long distances, as a result of transportation problems and lack of infrastructure. They also seek more urban spaces combining private and professional life, as well as commercial and leisure areas.
According to the vice-president of the Peruvian Association of Real Estate Companies (ASEI), the sale of apartments grew by 10% in the second quarter of 2018, compared to the previous quarter and more steadily than in the same period last year, because --among other factors-- the real estate industry was affected in 2017 by political uncertainty. However, according to ASEI, there are better prospects for the sector due to a forecast GDP growth of 3.8% and a reduced annual effective interest rate for mortgage loans.
In general, positive industry forecasts stem from Peru’s economic growth, the market demand for home ownership, constant and growing private investment in projects and certain government measures to boost it.
(Sources: El Comercio newspaper 05/15/2018 and 03/04/18 editions, Gestión newspaper 08/10/2018 edition and PQS Peru website 06/14/2018 publication).
The Italian culture and business environment are highly legalistic in nature, and they are governed by a significant number of laws and regulations.
The real estate market in Italy, one of the asset classes historically preferred as an investment by the Italians, has not lost its attraction and, despite the recent changes in the Italian market and the cautious economic growth, it remains an appealing sector.
The good performance of the Italian real estate market emphasizes both the residential and non-residential assets, where foreign capitals confirm their dominant role and with major international players continuing to invest. Office and retail are the preferred asset allocation of investors, with Milan and Rome as primary target destinations.
Other increasingly significant trends include investment growth in the logistics sector (especially in Northern Italy) and in high quality real estate assets, as well as in redevelopment projects, with a great focus on town planning and environmental issues.
Real estate sector is one of the leading sectors in Turkey. Not only the houses but also the malls, offices, hotels and industrial constructions are playing a significant role within the growth of the real estate sector. Strategically situated at the crossroads of Europe, the Middle East, and Central Asia, and home to almost 80 million people, Turkey offers great opportunities for real estate developers and investors by combining a large construction sector with growing commercial and industrial output. Since the government was aware of this potential, it encouraged foreign and local investors to invest in real estate and tried to make the life easier for them. The enactment of the reciprocity law, the urban renewal projects, the tax advantages etc. are tools the government has offered. In this respect, it is expected the real estate sector in Turkey to grow faster in the next years and will be an attraction centre for foreigners all around the world.
The right of ownership is protected by the constitution of the Republic of Cyprus. The registration, transfer, mortgaging and generally the dealings that relate to immovable property are determined by Acts of parliament. Furthermore, regulations are issued by the assigned Authorities. The Courts also play an important law since Cyprus’s legal system is common law. The Supreme Court, issues decisions and the interpretation of the law by the Supreme Court is binding on all lower courts.
Moreover, Cyprus is an EU member, hence EU regulations and directives apply.
Under the laws of Japan, ownership of land and buildings is separately indicated. The owner has the right to use, obtain profit from, and dispose of the real property.
There are no restrictions on who can be an owner, so foreign entities are eligible to own real property. However, foreign entities tend not to purchase real property on their own account, but generally instead to establish a vehicle in Japan to own real property due to the tax considerations.
It is also common to purchase real property by way of beneficiary interests, under which a trustee becomes a legal owner of property, mainly due to tax benefits.
Leasing rights are common under the laws of Japan. The rights are governed not only by the Civil Code but also the Act on Land and Building Leases that provides lease right holders with legal protection to some extent. Certain provisions that are disadvantageous to the lessee may be regarded as invalid under the Act.
There is a real estate registration system under which ownership, other rights in relation to property use, and security interests over real property are registered in accordance with the Real Estate Registration Act.
- Thailand uses the Civil law system, under which all of the laws and regulations are set forth in the forms of codes and related legislation, for example: acts, emergency decrees and royal decrees.
- The Civil and Commercial Code (“CCC”) (Articles 1299-1434) provides key provisions on rights in property and ownership.
- The Land Code regulates the ownership, possession, rights and affairs of and with respect to land – under the authority of the Ministry of Interior.
- Given that Thailand has relatively strict rules for foreigners (both natural persons and juristic persons) regarding holding/ obtaining the ownership/rights in real estate in Thailand, there is legislation enacted to facilitate and encourage certain types of investment in Thailand which makes available ownership/rights in real estate, for example: Investments Promotion Act 1977 and Petroleum Act 1971.
The institution of ownership and, by extension, the law of real property is primarily established and protected by the Greek Constitution and the Civil Code. However, limitations may be legally imposed on the right of ownership in cases concerning public interest.
The real estate regime in Greece has undergone only slight changes mostly associated with environmental issues, residential needs and better organization, and the regulation of short-term leases in the context of sharing economy via digital platforms.
Moreover, the “Golden Visa”, a plan launched in 2014 which applies to all non-EU citizens who purchase a property in Greece and facilitates the issuance of a residence permit, previously reserved for investors of a minimum 250,000 Euros in real estate in Greece, is planned to be expanded to include those who make a bank deposit or an investment in Greek bonds or shares of at least 400,000 euros. The scheme aims to entice investors to contribute to the country’s economic revival and to respond to the ever-increasing market demand.
Bulgarian law recognizes sole/ co-ownership over real estate as well as different types of limited rights in rem. Real estate can be hold by natural and legal persons, private citizens, public entities, the Municipality and the State. Local natural and legal persons may acquire all types of property except those, owned exclusively by the State/ Municipality as public property in public interest.
Establishment and transfer of in rem rights are generally effected by a Notary deed executed by a duly qualified Notary public authorised to act within the area, where the property is located. As an exception, other title documents may be administrative acts, judicial acts, written contracts, etc. All title documents are subject to mandatory entry into the Property register. Any encumbrances, liens and third parties' rights are also entered in the Property register.
From 2010 to 2012 Brazil faced one of its most preeminent moments with an established economy, high employment rate and low default rate. However, from 2013 onwards the worldwide crisis and national particularities led to unemployment, credit shortage, interest rate escalation and, inexorably, demand reduction.
After a challenging recession period, a combination of structural factors has contributed to the country’s economy gradual return to an upbeat trend. Political scenario alterations, significant macroeconomic adjustments and a profound change of paradigm towards anti-corruption joined forces with the labour reform, resulting in a GDP growth and the reduction of interest and inflation rates.
The federal government recent acts – even if not very popular – as the reduction of public costs, capping the primary federal expenses, renegotiation of debts, proposal of social security reforms, privatizations among others, steered indicators of economic recovery and empowered an increase in the financed real estate sales.
Complementing the enhanced economic scenario, certain changes in the law and legal trends also envision a market regulation and improvement. Midst several initiatives, two statutory changes that introduced new concepts to real estate transactions in the last years - and are still under development – are worth noticing.
The recent Federal Law # 13.786/2018 should likely balance the commercial and residential real estate development market establishing a fixed penalty in case of no fault termination of purchase agreements by unit buyers. There is an extremely high rate of at will contract cancellations by buyers (achieving 30% in 2018 as per a São Paulo University – USP - and Real Estate Brazilian Developers Association – ABRAINC research ) that excessively burden the entrepreneurial activity, as the majority of judicial decisions convicted developers to return to buyer up to 90% of the price paid. There is no doubt that the law in force will discourage early terminations in benefit of the effective completion construction projects and delivery of the units to the buyers.
Another project bill expect to have optimistic reflections to the Brazilian real estate market, granting in rem rights to the time-share owners, which would authorize the enforcement of certain rights and obligations towards third parties and add value to such enterprises.
In addition, the Brazilian Central Bank regulated the issuance of a new covered bonds based credit instrument (Letra Imobiliária Garantida - LIG), which ensures priority payment to investors backed up by real estate portfolio segregated from the other financing agents’ assets that should assist the market’s capitalization.
Another novelty in the real estate market is that the Brazilian Securities and Exchange Commission (CVM) had a change of heart with regards to condo-hotel public offerings. A 2018 rule considerably expedited condo-hotel investment contract registration procedures and now prioritizes a more equitable regulatory regime, in which the non-offering hotel operators no longer are deemed jointly liable with the developer for attributions naturally held by those who public offer securities.
Thus, in view of the economic recovery - with less inflation and more credit - and constructive legal improvements, the Brazilian real estate market is optimistic towards 2019, with the aggregated advantage that international investments are benefitted with quite an encouraging exchange rate.
Real estate law in Sweden is essentially based on statutory law with interpretive influences from case law.
All Swedish land is divided into independent property units (Sw. fastigheter), all registered in a central cadastral register. A Swedish real property is traditionally a two-dimensional unit including all the land below ground within its boundaries and the air space above it. Since 2004, three-dimensional property units may also be created, allowing buildings or parts of buildings to become separate, transferrable properties within one two-dimensional ground unit.
For a property transfer agreement to be legally binding under Swedish law, certain formal requirements must be fulfilled. Requirements include written form, signature from both parties, a clear declaration of transfer, statement of purchase price and any conditions precedent. It is possible to transfer only a part of an existing property, such purchase will however become null and void unless sufficient parcelling measures in order to separate the purchased land from the original property are applied for within six months from the purchase and subsequently implemented. As a consequence of the formal requirements on real estate transfers, options on real estate acquisitions are not legally binding under Swedish law.
Lease law in Sweden is quite extensively regulated in statutory law, under provisions which essentially are mandatory to the benefit of the tenant. Swedish lease law includes provisions granting tenants a right to prolongation at the expiration of a lease term, sanctioned by an obligation for landlords to pay full damages if prolongation is denied (unless specifically prescribed exceptions to the general rule are at hand).
From an international perspective, the Swedish real estate legal system is relatively well-organized, predictable and transparent, and generally provides a relatively stable legal platform for investors.
Over the past decade, the real estate sector in Indonesia has shown strong progress due to a range of factors – most notably the country’s rapidly expanding middle class and national economic growth. International investment in the real estate sector is active in the office, retail, residential, industrial and logistics sub-sectors. Although some of these sub-sectors are currently oversupplied, the longer-term attractiveness of the Indonesian real estate market remains compelling.