What is the usual process for transfer of commercial real estate?

Real Estate (2nd edition)

Cayman Islands Small Flag Cayman Islands

Transaction Steps

Seller

Buyer

Comments

Heads of Terms (“HoT”)

· Prepare and negotiate HoT

· Identify what consents are required (e.g. landlord’s consent if leasehold)

· Negotiate HoT

· Preliminary title check to identify any matters that need to be dealt with in HoT

· Identify local licensing requirements

· HoT not binding save for agreed exclusivity and confidentiality provisions

Pre-signing

· Prepare draft agreement

· Prepare any ancillary documents (e.g. assignment of leases)

· Negotiate agreement

· Collate any pre-requisites to signing (e.g. corporate registers and constitutional documents, board resolutions)

· Carry out legal due diligence (see question 7 above)

· Arrange valuation and/or survey

· Negotiate agreement and ancillary documents

· Incorporate / register purchasing vehicle (if applicable)

· Apply for local licensing

· Collate any pre-requisites to signing (e.g. corporate registers and constitutional documents, board resolutions)

· No prescribed form of agreement or industry standard terms

· Agreement usually signed relatively quickly and conditional on matters such as consents / approvals, financing, title investigations, physical inspections etc.

Post-signing, pre-completion

· Hold deposit

· Satisfy any seller conditions to closing

· Prepare completion statement (including apportionments)

· Prepare discharge/release of existing security (if applicable)

· Prepare Transfer of Land/Lease and any other Land Registry forms

· Collate any ancillary documents required by buyer (e.g. certificate of good standing etc.)

· For leasehold property, obtain landlord’s consent (if required)

· Answer any final requisitions of the buyer

· Provide consent to pre-closing searches

· Make arrangements for execution of Land Registry forms shortly before completion

· Pay deposit to seller’s lawyer

· Arrange financing (if required)

· Satisfy any buyer conditions to closing

· Satisfy any financing conditions precedent

· Agree completion statement (including apportionments)

· Review and approve Transfer of Land/Lease and any other Land Registry forms

· Request / collate any ancillary documents required for registration (e.g. certificates of good standing etc.)

· Set up bank accounts for any rent payments post-completion

· Ensure local licenses received

· Raise any final requisitions

· Register caution or pre-closing searches on behalf of buyer and lender (if applicable)

· Make arrangements for execution of Land Registry forms shortly before completion

· 5-10% deposit typically paid on signing, which will be forfeited if the buyer fails to complete after agreement becomes unconditional (unless failure is due to seller)

· Land Registry prescribed forms

· Pre-closing searches at Land Registry usually take around three days to register and afford a priority period of fourteen days

Completion

· Execute Transfer of Land, ancillary documents and discharge/release of existing security (if applicable)

· Arrange completion meeting. Provide and receive closing deliverables

· Deposit released and balance of purchase price (after apportionments) received

· Pay off any existing financing

· Execute Transfer of Land, security documents (if any) and ancillary documents

· Attend completion meeting. Provide and receive closing deliverables

· Pay balance of purchase price (after apportionments)

· Most Land Registry forms need to be notarised

· Completion meetings are often held in person at the offices of the seller’s lawyer

Post-completion

· Notify utility companies, tenants, any landlord or other third parties of transfer (if applicable) (jointly with buyer)

· Set up utilities accounts and notify tenants (including new rent payment instructions), any landlord or other third parties of transfer (if applicable) (jointly with seller)

· Pay stamp duty and registration fees, submit all registrable documents to Cayman Islands Land Registry

· Deal with any Land Registry requisitions

· Stamp duty to be paid and Land Registry forms to be submitted within 45 days of first signature

· In practice, stamp duty paid and Land Registry forms submitted ASAP after completion and in any event within the pre-completion search priority window

France Small Flag France

Pre-agreement and due diligence:

The initiative, pursuit and termination of pre-contractual negotiations must be carried out in good faith.

Parties often first sign an offer letter regarding the contemplated purchase of the property for seeking the grant of an exclusivity for carrying out the due diligence. Such a letter must be drafted with care since, under French law, a contract is concluded once the offer has been accepted.

The seller usually organizes an electronic data room with the assistance of its notary and legal advisors and grants an exclusivity period to the selected purchaser candidate for carrying out its due diligence, technical survey and, when applicable, environmental survey.

Signing:

Since the sale of a real estate property is often subject to a pre-emption right of the town or another administrative entity, the sale of a property is usually a two-step process.

The execution of the deed of sale is, thus, often preceded by the signature of a preliminary agreement subject to conditions precedent. The usual conditions precedent are the obtaining of the waiver of the pre-emption right which may be applicable and the obtaining of a recent land registry search showing that there is no mortgage and/or lien registered against the property for a total amount superior to the sale price or the provision by the seller of the agreement of its creditors for releasing them.

The purchaser usually pays a deposit ranging between 5 to 10% of the purchase price to a stakeholder. The stakeholder (most of the time, the notary of the seller) will pay this deposit (i) to the seller if the purchaser does not show up for executing the deed of sale whereas all the conditions precedent have been fulfilled by the agreed deadline or (ii) to the purchaser if the conditions precedent are not fulfilled by the agreed deadline.

In most cases this preliminary agreement takes the form a bilateral undertaking to sell and purchase agreement (promesse synallagmatique de vente) pursuant to which both parties are bound to execute the final deed of sale before the notary once the conditions precedent are fulfilled by the agreed deadline.

It may also take the form of a call option (promesse unilatérale de vente) which is a contract which binds the promisor but leaves the beneficiary the option to decide whether or not to purchase.

Signing to closing:

During this phase, the seller and its notary takes the necessary steps for the satisfaction of the conditions precedent by the agreed deadline and the purchaser arranges the funding of the purchase and, in particular, any third-party financing.

Closing:

Upon the execution of the deed of sale before the party, the purchaser has to arrange the payment of the sale price, notary's fees, registration duties and taxes and the seller has to arrange the repayment of any outstanding debt and the release of any mortgage and/or lien.

Post-closing:

The notary is liable to carry out the registration of the deed of sale at the land registry and to pay the registration duties and the real estate security contribution (contribution de sécurité immobilière) referred to below.

The notary has to keep the single original copy of the deed of sale for 75 years and to provide a certified copy of this deed with the mention of the references of its registration at the land registry to each party.

In the event of a sale of share, it is up to the purchaser's legal advisor to carry out the registration of the sale and purchase agreement and to pay the registration duties to the tax administration. The notification of the sale of the share to the company can be replaced by the signature by the company of an acknowledgement that a copy of the sell and purchase agreement has been filed at its registered offices.

Germany Small Flag Germany

Transaction Steps

Seller

Buyer

Comments

Heads of terms ("HoT")

· Prepare and negotiate HoT

· Collate data room documentation comprising title documents and property information

· Negotiate HoT

· Where hereditary building rights are sold, and land owner's consent is required, collate relevant information about buyer and any guarantor

· HoT are not binding save for agreed exclusivity and confidentiality provisions

· Most data rooms are hosted on virtual data sites

· Depending on parties involved: Parties need to provide KYC/AML documentation

Preparation of sale and purchase agreement ("SPA")

· Prepare draft property sale and purchase agreement

· Prepare any ancillary documents (e.g. annexes such as rent roll, list of agreements to be transferred etc.)

· Negotiate SPA and ancillary documents

· Prepare release mechanism for existing financing and mortgages with financing banks

· Carry out legal and other due diligence

· Arrange a property valuation and structural survey if required

· Negotiate SPA and ancillary documents

· Arrange new financing

· No prescribed form of SPA but industry standard terms depending on market circumstances

· Asset deal SPA requires notarisation in front of a German notary

· Under certain circumstances cartel clearance is required (depending on income from the property and revenues of the buyer)

Signing to closing

· Satisfy any seller's conditions to closing

· Obtain redemption statement and release documentation from existing lender

· Obtain any public law approvals (such as statutory pre-emption right which applies for most real estate transactions)

· Payment of a deposit if agreed at or shortly following signing

· Arrange funding including new bank debt and agree on a land charge on the property to secure such financing

· Pay real estate transfer tax (percentage of purchase price, depends on German state where property is situated)

· Often a deposit is agreed on signing, which will forfeit if the buyer fails to complete sale (unless failure was due to the seller)

· Deposit will typically be paid to notary's escrow account

Closing

· Use price to pay off existing debt (through use of purchase price funds)

· Terminate existing insurances

· Satisfy new lender's loan conditions precedent

· Pay balance of price (e.g. minus any deposit)

· Put new insurances in place

· "Automatic closing" (i.e. no closing meeting required; possession on property transfers without any action being required)

· After payment of the purchase price notary will apply for registration of change of title in the land register, which might take a few weeks. Until registration buyer is secured by a so-called priority notice in the land register (condition to completion).

Post-closing

· Physical hand-over of property from seller to buyer (keys etc.)

· True up of property charges and service charges

· Send rent authority letter to tenants with new payment instructions

· Transfer tenants' rent deposits from seller to buyer

· Hand over other relevant documents

Hong Kong Small Flag Hong Kong

After preliminary negotiations occur and both parties settle on a price, a "provisional agreement", which is legally binding between the purchaser and vendor, is drafted and entered into. It must be complied with and, if not replaced within the stipulated time by a formal sale and purchase agreement, may be relied on to govern the rest of the transaction or to sue for compensation for breach of contract. An initial deposit is usually paid on signing.

Such a provisional agreement usually contains the following terms:

(a) address of the premises;

(b) price of the premises;

(c) details of the parties;

(d) amount of the initial deposit (industry practice being 1 to 3 percent) to be paid on the signing of the provision agreement;

(e) amount of the further deposit (industry practice being 10 percent inclusive of the initial deposit) to be paid on the signing of the formal sale and purchase agreement);

(f) when the formal sale and purchase agreement is to be signed;

(g) the completion date (on which the vendor disposes of the property to the purchaser);

(h) stipulating that the balance price is to be paid by the purchaser of the aforementioned completion date;

(i) the apportionment of legal expenses and stamp duty between the party;

(j) the amount of commission payable to the estate agent by the purchaser and/or vendor;

(k) liability for breach of agreement; and

(l) an escape clause providing a date before which either party may withdraw from the transaction.

The purchaser's solicitors will then draft a formal sale and purchase agreement based on the results of the due diligence exercise. Once both parties agree to the form and content, it will be executed and registered at the Land Registry.

On the date of completion, the purchaser will hand over the balance of the purchase price in exchange for a duly executed document of transfer (otherwise known as deed of assignment). All other title deeds and means of access (e.g. keys) are delivered to the purchaser, unless the property is bought via a mortgage in which case the title deeds will be furnished to the purchaser's mortgagee. The assignment will also be stamped and registered at the Land Registry.

There is no prescribed form of transfer in Hong Kong. The typical legal document involves a provisional sale and purchase agreement, a formal sale and purchase agreement and a deed of assignment which must all be in writing, duly signed and attested, stamped and registered at the Land Registry.

Hungary Small Flag Hungary

Transaction Steps

Seller

Buyer

Comments

Head of Terms (“HoT”) or Letter of intent (“LoI”)

·         Preparation of a teaser on the property

·         Preparation and negotiation of HoT (or LoI)

·         preparation and negotiation of HoT (or LoI)

·         preliminary searches and site visits, if possible under the teaser

·         HoT (or LoI) is not binding save for exclusivity and confidentiality clauses

·         by signing the HoT, access to the data room (usually virtual data room) is granted

Preparation of the sale and purchase agreement and ancillary documents

·         preparation and negotiation of draft sale and purchase agreement (if separate transfer deed is used, the transfer deed);

·         preparation of ancillary documents (escrow agreement, especially if signing-closing separates, transfer of service agreements)

·         carrying out legal due diligence;

·         carrying out technical, financial due diligence and land/technical surveys, site visits, if applicable,

·         negotiation of the sale and purchase agreement and ancillary documents

·         No prescribed form of agreement;

·         in case of asset sale, the property sale and purchase agreement or transfer deed shall be submitted to the land registry, therefore certain formal requirements (Hungarian language, lawyers countersignature) shall be met

Signing to Closing

·         At signing placing into escrow registration consents (if applicable)

·         Satisfaction of any conditions to closing

·         agreement with existing lender on the release of securities (if applicable)

·         Competition Authority’s approval (if applicable)

·         obtaining zero certificates from the tax authorities that there is no outstanding tax or public duty payments

·         payment of deposit to the seller or to an escrow account (if applicable)

·         Arrangement on purchase price funding (including third party debt) (if applicable)

·         Satisfaction of any conditions to closing

·         A deposit of up to 10% of the purchase price is typically paid on signing, which will be forfeited if the buyer fails to complete sale and if it works as an earnest money, the double shall be paid back by the seller if failure to close is attributable to the seller

Closing

·         Repayment of any existing debt and discharge of mortgage (if applicable)

·         Releasing or instructing the escrow agent to release the registration consents (if applicable)

·         Execution of transfer deed

·         Payment of purchase price

·         Instruction of the escrow agent to release the deposit to the seller (if applicable)

·         The releases of existing mortgages may need to be submitted on or prior to Closing

Post-closing

·         Transfer of tenants’ security deposits to the buyer (if applicable)

·         Co-operation on informing the tenants on the transfer of ownership

·         Termination of remaining service agreements, not transferred to the buyer;

·         Reconciliation with paid rents and service charges with the buyer

·         Payment of stamp duty land tax

·         Registration of transfer at land registry

·         Reconciliation with paid rents and service charges with the seller

·         Maximum Land Registry registration fee £910

·         For stamp duty, please see answer to Q14

Spain Small Flag Spain

Transaction Steps

Seller

Buyer

Comments

Heads of terms ("HoT")

· Prepare and negotiate HoT

· Produce information pack comprising title documents and property information (e.g. if property let, leases and ancillary documentation, planning, licences, municipal taxes)

· Negotiate HoT

· Appoint advisors

· HoT not binding save for agreed exclusivity and confidentiality provisions

· Most information packs are hosted on virtual data sites

Preparation of sale agreement

· Prepare draft private sale and purchase agreement (in case there is signing and closing)

· Prepare any ancillary documents (e.g. notifications to third parties, condominium of owners, etc.)

· Negotiate agreement

· Carry out legal due diligence (see Q7)

· Negotiate agreement and ancillary documents

· No prescribed form of agreement but market standard terms

· In some cases the acquisition documentation is drafted by the buyer's lawyers

· In some cases the transfer of the property is completed in a single stage (only closing, without signing a private sale and purchase agreement)

Signing

· Execute the private sale and purchase agreement

· Secure the granting of the notarial transfer deed by means of a bank guarantee (securing payment back of the part of the price paid by the buyer)

· Execute the private sale and purchase agreement

· Pay part of the purchase price to seller

· Up to 10% of the purchase price is typically paid on signing, which will be forfeited if the buyer fails to complete sale (unless failure was due to the seller)

Signing to closing

· Prepare draft notarial transfer deed

· Fulfilment of any seller's conditions prior to closing

· Agree arrangements with current lender for discharge of mortgage upon closing

· Arrange funding including third party debt

· Fulfilment of any buyer's conditions prior to closing

· In some cases the acquisition documentation is drafted by the buyer's lawyers

Closing

· Execute the notarial transfer deed

· Use price (or relevant part of it) to pay off existing debt

· Execute the cancellation of mortgages deed

· Delivery of the asset to the buyer (which usually occurs symbolically)

· Execute the notarial transfer deed

· Pay the balance of the purchase price

· Execute buyer's mortgage documentation

· Documentation to be formalised before Notary Public and to be filed at the Land Registry for registration

· All parties to attend the closing at the Notary's office appropriately represented by means of duly executed powers of attorney (i.e. notarised and apostilled if any party is a non-Spanish entity)

Post-closing

· Pay fees related to the cancellation of mortgages.

· Pay Tax on the Increase of Value of Urban Property

· Transfer tenants' rent deposits to buyer

· Apply to Land Registry to register, the property transfer and the new mortgage

· Serve all notices of transfer (to tenants, to any condominium of owners, etc.)

· Pay relevant taxes (Stamp Duty / RETT)

· Pay the Land Registry fees

· It is standard practice for the buyer to pay the notarial fees (which can be negotiated with the Notary) but this is subject to agreement between the parties

Registration takes 4-6 weeks

India Small Flag India

Transaction Steps

Seller

Buyer

Pre-Contract

· Prepare terms under negotiation / Letter of Intent.

· Collect title deeds and documents including last transfer document, share certificate of co-operative society, information on outstanding liabilities of the property like property taxes, utility bills.

· Prepare and finalise draft agreement for transfer, applications to co-operative society, lessor, government for transfer.

· Consider whether consent of any authority like co-operative society or Lessor or Government is required for transfer.

· Consider ability of transferor to perform obligations proposed to be undertaken and stamp duty and tax liability likely to arise from the transaction.

· Consider terms under negotiation.

· Consider copies of title deeds and documents, share certificates, latest utility bills.

· Consider amendments required in the draft agreement and finalise draft agreement.

· Ascertain whether proposed transferor has the right to transfer and whether consent of any other person like co-owner, partner, beneficiary of a trust, lessor, co-operative society, mortgagee, persons in occupation or Government is required.

· Consider stamp duty, transfer fee, premium to lessor and deposits which may become payable on the transaction.

· Consider Government permission already obtained and feasibility of obtaining permissions required for intended use of the assets.

· Consider availability of means of finance to the transferee, whether from sale of other asset, mortgage of asset to be acquired and terms required to enable the transferee to make payment to the transferor.

Conclusion of contract

· Execution of agreement for transfer against payment of earnest money to the transferor or deposited in escrow.

· Payment of stamp duty on agreement for transfer. Execution of agreement.

· Payment of earnest money.

· Registration of agreement if deemed appropriate, to avail of finance by the transferee or to obtain possession of the property by the transferee before completion of sale.

Post conclusion of contract to completion of sale / transfer

· Production of original title deeds for inspection of the transferee’s Advocate.

· Answer requisitions on title raised by the transferee’s Advocate.

· Apply for no objection / consent of co-operative society, landlord, Government if required.

· Obtain Income Tax clearance certificate and/or certificate for exemption from withholding tax if required.

· Carry out the legal due diligence summarized in the response to question 7 above.

· Prepare draft of Deed of Transfer / Sale Deed.

· Prepare ancillary documents like possession receipt, declaration recording representations by the transferor, indemnity and limited power of attorney from transferor.

Completion

· Execute Sale Deed / Deed of Transfer and other documents and admit execution before Sub-Registrar.

· Deliver original title deeds to the Purchaser.

· Deliver possession.

· Address Letters of Attornment.

· Address letters to authorities for transfer of property and utilities to the name of transferee.

· Pay stamp duty on Deed of Transfer.

· Execute and register Deed of Transfer.

Post-Completion

-

· Complete transfer of property and utilities to the name of the Transferee in records of all concerned authorities.

Ireland Small Flag Ireland

The relevant property is usually marketed on behalf of the seller by an agent who advertises the property and advises on the market value of the property. In commercial real estate transactions, the parties often appoint agents to act on their behalf and the commercial terms are negotiated between the parties and their respective agents. Once the commercial terms are agreed, they are reduced to a non-binding heads of terms document.

Between heads of terms being agreed and a binding contract being signed, the parties may put in place exclusivity agreements and confidentiality agreements (which is becoming more widespread in the sale of commercial real estate). A seller’s lawyer is responsible for drafting contracts, dealing with pre-contract enquiries raised by the buyer’s lawyers, replying to requisitions on title, redeeming mortgages/charges and distributing the balance of sale proceeds to the seller. A buyer’s lawyer investigates the title, raises requisitions on the title, drafts the purchase deed, conducts closing searches, attends the closing appointment and stamps and registers the title.

Surveyors and/or architects may be engaged before the buyer signs contracts to carry out a structural survey of the relevant property. Depending on the nature of the transaction, an environmental expert may also be engaged to provide an environmental report in respect of the property.

In the sale of commercial real estate asset portfolios, the commercial and legal due diligence is usually facilitated by providing interested parties with access to information contained in an online data-room. Before access is granted, the interested parties will typically be required to execute a non-disclosure agreement.

Russia Small Flag Russia

Generally, a real estate transfer involves the following steps:

  • Execution of a letter of intent/memorandum of understanding with an outline of basic commercial terms of the prospective transaction.
  • Due diligence procedures and negotiations on the commercial conditions.
  • Signing of the sales agreement. The sales agreement has to be formalized as one document (rather than separate offer and acceptance). No notarization is required.
  • Fulfilment of conditions precedent (e.g., antitrust clearance);
  • Transfer of possession. Typically, a transfer document (generally called the certificate of transfer and acceptance) is executed simultaneously with the transfer of possession.
  • Transfer of legal title. In order to transfer legal title to the purchaser, the parties submit relevant documents to the Russian registration authority (Rosreestr), which formally registers the transfer of title to real estate to the buyer by executing an entry into the public register of real estate. The procedure of registration takes up to 30 days, and requires the payment of a small fee (approximately EUR 300).

Switzerland Small Flag Switzerland

The sale and transfer of a real estate is only valid if executed in the form of a public deed in front of a notary public. The notary public acts for both parties but is generally chosen by the buyer, as the notary’s fees are paid for by the buyer.

Any terms and conditions, such as representations and warranties, relating to the sale of a real estate must also be contained in the deed of sale. Any undertaking to buy real estate, subject to certain conditions, must also be signed in the form of a public deed. A promissory sale agreement which would be privately signed will not be enforceable against the seller should the latter default on selling the real estate after all the conditions have been met.

Nevertheless, for the sale of commercial real estate, in practice the parties will often start by signing a letter of intent providing the buyer with a certain period of time to conduct its due diligence process and confirm its intention to acquire the real estate. During such period, the seller will generally give an exclusive right to the buyer to acquire the real estate at a certain price. Should the seller default on selling the real estate to the buyer at the end of the exclusivity period, letters of intent often contain penalty provisions. At the end of such period, should the buyer confirm its intention to acquire the real estate, the parties will sign a deed of sale, a deed of deferred sale or a deed of promissory sale (as the case may be) in front of a notary.

Generally, a commercial real estate transaction will go through the following steps:

Transaction Steps

Seller

Buyer

Comments

Pre-agreement

· Negotiation of sale and purchase agreement with buyer

· Due diligence

· Arrangement of purchase price financing, if any

· At the end of the due diligence, preparation of a draft sale and purchase agreement by a notary

· For the pre-agreement phase, the parties will generally sign a letter of intent

Signing to Closing

· Execution, in front of a notary of a deed of sale, or of a deed of promissory sale as the case may be

· Satisfaction of any conditions to closing, if any

Execution in front of a notary of the deed of sale, or of a deed of promissory sale, as the case may be

· Satisfaction of any conditions to closing, if any

· In case of a promissory sale or deferred sale, a deposit of up to 10% of the purchase price is generally paid to the notary’s account on the signing of the deed which will be forfeited if the buyer fails to complete the sale

Closing

· Execution of a request of transfer for the land registry

· Execution of a request of transfer for the land registry

· Payment of the remaining part of the purchase price, stamp duty land tax and any costs/ taxes related to the sale of the real estate

· Upon closing, the notary will immediately proceed with the registration of the transfer at the land registry

Post-closing

· Repayment, through the notary out of the sale price, of any existing debt

· Discharge through the notary of the mortgage, if any

· Payment of stamp duty land tax

· Registration of the transfer at the land registry by the notary

·

Upon registration of the deed of sale with the land registry and execution of post-closing actions, the notary will release the remaining amount of the sale price to the seller

United Kingdom Small Flag United Kingdom

Transaction Steps

Seller

Buyer

Comments

Heads of terms ("HoT")

· Prepare and negotiate HoT

· Produce sales pack comprising title documents and property information (e.g. if property let, leases, tenant arrears and service charge details)

· For leasehold property where landlord's consent required, consider approaching landlord for consent in principle to transfer

· Negotiate HoT

· For leasehold property where landlord's consent required, collate relevant information about buyer and any guarantor, such as accounts and references and provide to seller

· HoT not binding save for agreed exclusivity and confidentiality provisions

· Most sale packs are hosted on virtual data sites

· For leasehold property landlord must respond in principle to consent request within reasonable time (usually 4 weeks) assuming all required information on buyer provided. Documenting consent thereafter will take at least 6-8 weeks

Preparation of sale agreement

· Prepare draft agreement

· Prepare draft property transfer deed

· Prepare any ancillary documents (e.g. if property let, assignment of rent arrears and rent deposits and, if property new building, assignment of construction documentation)

· Negotiate agreement

· For leasehold property where landlord consent required, submit application for consent and negotiate form of consent. Where confidentiality is a concern this stage may be delayed till after signing of the sale agreement.

· Carry out legal due diligence (see Q7)

· Buyer will arrange a valuation and structural survey

· Negotiate agreement and ancillary documents

· For leasehold property where landlord's consent required, negotiate form of consent. If consent not obtained before signing, closing of sale will be conditional on obtaining landlord's consent

· No prescribed form of agreement but industry standard terms

· Land Registry prescribed form of transfer deed

· For leasehold property where landlord's consent required, the terms of the consent are regulated by a mixture of the provisions of the lease and various statutory provisions. A landlord will typically require its costs to be paid and very often will require the seller to guarantee the buyer's performance of its leasehold obligations under an authorised guarantee agreement ("AGA")

Signing to closing

· Satisfy any seller's conditions to closing

· Agree redemption statement and arrangements with current lender for discharge of mortgage on closing including execution of Land Registry discharge form

· Agree apportionment schedule

· Execute transfer deed and ancillary documents

· For leasehold property, finalise and execute landlord's consent to transfer and any ancillary documents (e.g. AGA)

· Pay deposit to seller's lawyer

· Arrange funding including third party debt

· Satisfy any buyer's conditions to closing (e.g. ensuring that releases for all seller's mortgages are produced on closing)

· Agree apportionment schedule

· Execute transfer deed and ancillary documents and give to seller's lawyers

· For leasehold property, finalise and execute landlord's consent to transfer and any other ancillary consent documents (e.g. parent company guarantee for buyer)

· A deposit of up to 10% of the purchase price is typically paid on signing which will be forfeited if the buyer fails to complete sale (unless failure was due to the seller)

· Apportionment schedule deals with rental income, arrears and service charge

· Transfer deed to be executed in accordance with Land Registry requirements (e.g. wet ink signature). Legal opinion required if buyer is a non-UK entity. Notarisation not required

· All parties including seller's lender must be represented by a conveyancer (type of English & Welsh qualified lawyer) or must provide other evidence of identity

Closing

· Use price to pay off existing debt

· Hand over transfer deed, ancillary documents and Land Registry discharge form

· Arrange completion phone call/meeting with lawyers for buyer, seller's lender and buyer's lender for dating of documents and release of funds

· For leasehold property, pay landlord's costs for consent

· Pay balance of price plus/less apportionments to seller's lawyers

· Satisfy buyer's lender's loan conditions precedent

· Attend closing phone call/meeting

· Complete buyer's mortgage documentation

· Loan condition precedents will require preparation in advance of Land Registry application forms and an undertaking from the buyer's lawyers to make the applications and pay any SDLT (see Q14)

· Loan condition precedents will also require a Land Registry priority search with at least 20 working days priority from closing

Post-closing

· Pay seller's lender mortgage redemption monies if not sent at closing

· Send rent authority letter to tenants with new payment instructions

· Transfer tenants' rent deposits to buyer

· Pay SDLT and file SDLT return

· Apply to Land Registry to register release of seller's mortgage, the property transfer and the new mortgage

· Serve all notices of assignment, including on the landlord where the property is leasehold

· If property leasehold and mortgaged, serve notice of charge on landlord

· Set up bank account for tenants' rent deposits

· SDLT must be paid within 30 days of closing

· Land Registry will not accept application without proof SDLT paid

· Land Registry application must be made within the priority search period

· Maximum Land Registry registration fee £910

· Registration takes 4-6 weeks

United States Small Flag United States

Transaction Steps

Seller

Purchaser

Comments

Letter of Intent ("LOI")

· Hire a broker or self-market the asset for sale.

· Depending on the market and level of interest in the asset, the seller's broker may solicit bids from interested purchasers which may then go through multiple rounds of bidding until a potential purchaser is selected.

· Review LOI from purchaser and negotiate same.

· Prepare and aggregate due diligence materials (title documents and property information, including leases, financial information, service contracts, existing third-party reports) for distribution to potential purchasers. Prior to such distribution, it is common for sellers to require that a potential purchaser execute an agreement to keep such information confidential.

· Prepare and negotiate LOI.

· Review and negotiate confidentiality agreement, if applicable.

· Review any due diligence materials provided by the seller.

· Consider and solicit proposals for financing.

· There is no prescribed form of LOI but there are industry standard terms.

· The LOI is generally not binding except for specifically agreed upon terms such as the existence of a broker, confidentiality and, in some cases, an agreement by the seller to exclusively deal with the purchaser for a specified period.

· In some cases (usually where time is short and the deal is relatively straightforward), the parties dispense with the negotiation of a LOI and proceed "to contract". In such a case, the seller will instruct its lawyer to prepare a draft purchase and sale agreement for review by the purchaser and its lawyer.

· Increasingly, most of the due diligence materials are hosted on a secure website known as "virtual data rooms."

Purchase and Sale Agreement (the "PSA")

· The seller's attorney to prepare drafts of PSA and closing documents.

· Negotiate PSA, deed and other closing documents with the purchaser's lawyer.

· Review and negotiate PSA and closing documents.

· If the purchase is not subject to a due diligence contingency period (see Q7 above), carry out due diligence and commission title report, survey of the property, and other third party reports.

· If the purchase is subject to a due diligence contingency period, then carry out limited due diligence to assist with negotiation of PSA.

· There is no prescribed form of PSA but market standard terms.

· Most states have specific rules on the wording for the type of deed to be used and the items that must be present in order for it to be in recordable form.

Signing to Closing

· Satisfy any seller conditions to closing.

· Obtain any third party consents or approvals, if applicable.

· If the property is subject to financing that is not going to be assumed, then request a payoff letter or arrange for the assignment of the existing mortgage to the new lender, as applicable.

· Prepare closing statement and agree on apportionments.

· At signing, pay deposit into escrow with title insurance company or seller's lawyer.

· Finalize sourcing debt and equity capitalization for payment of purchase price.

· Satisfy any purchaser conditions to closing.

· Review closing statement and agree on apportionments.

· A deposit of not more than 10% of the purchase price (less in larger transactions) is typically paid into escrow on signing which will be forfeited if the purchaser fails to complete the sale (unless failure was due to the seller's fault or if the purchaser has a right to terminate).

· Closing statement deals with the apportionment of real estate taxes, rental income, arrears, service contracts, and other expenses.

· Deeds (and any other documents to be recorded in the real estate records) must be notarized (or if executed outside of the U.S., notarized in a U.S. embassy or consulate office or notarized by a local notary with an apostille).

Closing

· Use of purchase price proceeds to pay off any existing debt.

· Delivery of deed and any other closing documents.

· Arrange closing phone call or meeting with escrow agent, lawyers for purchaser, seller's lender, and purchaser's lender for dating of documents and release of funds.

· Pay into escrow balance of purchase price as adjusted by apportionments.

· Satisfy purchaser's lender's loan conditions precedent and execute loan documents.

· Execute closing documents.

· Attend closing phone call or meeting with escrow agent, lawyers for seller, seller's lender and purchaser's lender for dating of documents and release of funds.

· If closing is "in escrow," all closing funds and documents will be sent to escrow agent to be held by them and then distributed upon the satisfaction of specific conditions.

Post-closing

· If not provided at closing, provide purchaser with tenant lease files and any keys to the property.

· Close all utility accounts for the property that are in the name of the seller.

· Remit any rents received by the seller from tenants that relate to the post-closing period.

· If applicable, file any notices required by any government agencies.

· Send notices of sale executed by the seller to tenants, service contractors, and any other applicable third party.

· Transfer (or open new) utility accounts for the property.

· The title insurance company will arrange for recording of the discharge of the seller's mortgage, the deed, and the purchaser's mortgage documents. If it was serving as escrow agent, then it will also arrange for distribution of original sets of closing documents to the purchaser and seller. While the title insurance company may not record the documents on the day of the closing of the transaction, the title insurance company will, in most jurisdictions, insure the purchaser for the gap period between closing and recording.

· In cases where some of the amounts that need to be apportioned cannot be determined at the time of closing, those amounts are typically apportioned based on an estimate and then re-apportioned post-closing once those amounts are able to be determined.

Peru Small Flag Peru

As noted earlier, Peruvian law does not impose a formality on the transfer of real estate; except in the case of donations (free transfer), which requires a public deed, under penalty of nullity. Transfers for valuable consideration only require consensus between the parties to materialize (consensual system). Notwithstanding the foregoing, property transfers are generally made through a written contract, which is subsequently formalized through a public deed and filed with the Public Registries.

As we also pointed out, in accordance with the consensual transfer system, there is no obligation to register the real estate or the rights that may be created over them, including ownership rights; however, it is always advisable to register property and other rights, in order to ensure their enforceability against third parties and to enjoy the protection of the registry.

Mexico Small Flag Mexico

The usual process for a commercial real estate transaction includes pre-contractual arrangements, the purchase and sale agreement contained in a public deed, and recording the public deed with the Public Registry.

Pre-contractual arrangements (heads of terms, letters of intent, term sheets, etc.) may be binding if the parties so provide in the corresponding documents. Arrangements prior to title transfer that are often binding between the parties consist mainly of promises to purchase or sale agreements subject to conditions precedent.

Except in the State of Quintana Roo, title transfer occurs at the moment the parties agree upon the essential elements of the sale (identification of parties, description of real property and price/consideration) and the agreement is formalized before a notary public. For title transfer to be effective as against third parties, the public deed must be recorded with the Public Registry. In the State of Quintana Roo, however, the record of the public deed with the Public Registry is required for title transfer to occur.

Please see below a table with relevant steps and responsible parties for closing a commercial real estate transaction:

Transaction Steps

Seller

Buyer

Comments

Pre-agreement

· Preparation of draft sale and purchase agreement

· Negotiation of sale and purchase agreement with buyer

· Provide buyer with documents and information for due diligence process

· Due diligence

· Buyer conducts a search in public registries. (Please refer to answer to question 7 above).

· No prescribed form of agreement but industry standard terms

· Appraisal of the property prior to the transfer agreement

Signing to Closing

· Satisfaction of any conditions to closing

· Arrangement of purchase price funding (including any third party debt)

· Satisfaction of any conditions to closing

· A deposit of part of the purchase price is typically paid on signing which will be forfeited if the buyer fails to complete sale

· Escrow instruments may be used to secure full payment upon satisfaction of conditions to closing

Closing

· Repayment of any existing debt and discharge of mortgage (if any)

· Execution of transfer agreement

· Execution of transfer agreement

· Payment of purchase price

· A notary public must formalize the transfer.

Post-closing

· Payment of real estate acquisition and other related taxes

· Registration of transfer at the Public Registry

· The registration duties depend on the transaction price and the place where the land is located. Notary publics usually arrange this step

Italy Small Flag Italy

From a general standpoint, the sale process of real estate property is structured and implemented through the following phases:

Phase 1: Execution by the parties of a preliminary and non-binding agreement (such as letter of intent, heads of terms, memorandum of understanding, non-binding offer) (Non-Binding Agreement), and commencement and execution by the prospect purchaser of a legal, tax technical and environmental due diligence exercise over the target real estate property (the Due Diligence). In more detail:

a) Non-Binding Agreement: basically, the parties agree upon (i) key terms of the acquisition transaction, on the basis of which they shall lead and carry out negations, and (ii) exclusivity obligations and periods over which the prospect purchaser may conduct and complete the Due Diligence and the parties commence, and should complete, negotiations with a view to finalize a binding sale and purchase agreement. Terms and conditions of Non-Binding Agreement have no binding nature (exception made for the exclusivity obligations) but oblige the parties just to negotiate on a good faith basis along the lines of and complying with the transaction key terms (the more the key terms are detailed and exploded under a Non-Binding Agreement, the more the parties may not stand back from them over negotiations). Therefore, a possible breach of terms and conditions (other than acclivity obligations) of a Non-Binding Agreement might lead to just a so-called “pre-contractual” liability of the defaulting party.

b) Due Diligence: From a legal perspective, the Due Diligence is mainly and generally focused on the following matters: (i) ownership title, (ii) encumbrances and third parties’ rights burdening the asset, (iii) restrictions to the transferability of the asset (such as, statutory pre-emption rights), (iv) occupancy / letting status of the asset, (v) zoning, town-planning and building-law matters, and (vi) pending and/or threatened litigations concerning the asset.

Phase 2: After execution of a Non-Binding Agreement, and in parallel with the Due Diligence, the parties start and progress negotiations with a view to enter into a binding sale and purchase agreement, which, generally, has preliminary nature (the PSPA). The PSPA provides for the parties’ obligation to complete the transfer of the target real estate property, through execution of the final sale and purchase agreement (so-called “closing”), at the terms and conditions set forth thereunder. The PSPA is negotiated by the parties taking into account the outcomes of Due Diligence and generally provides for, amongst other terms and conditions, (i) the seller’s representations and warranties and consequent indemnification obligations and (ii) possible conditions precedent upon occurrence of which the closing is conditional. It is quite common that at the execution of the PSPA (so-called “signing”), the purchaser is required to pay a portion of the purchase price as down payment or earnest money.

Phase 3: should the terms and conditions (including possible conditions precedent) of the PSPA be meet, the parties consummate the closing, through execution of a final sale and purchase agreement (also referred to as transfer deed) before a public notary. In this context, the ownership title to target asset is transferred from seller to the purchaser. Usually, the transfer deed does not supersede the PSPA and has no novative effect (“effetto novativo”) in relation to PSPA’s terms and conditions. The transfer deed shall be filed (“trascritto”) with the competent Real Estate Registries (“Conservatoria dei Registri Immobiliari”) for publicity formalities vis-à-vis third parties.

Turkey Small Flag Turkey

In Turkish law, there is no difference between the transfer of commercial real estate and residential real estate.

In principle the transfer of the real estate may only be performed at the Land Registry Office where the real estate is located and before the authorized government officers. However, with the development of technology, the sale agreements now can be signed in a different Land Registry Office and the relevant documents are sent online to the Land Registry Office where the real estate is located. A sale agreement signed simply between the Parties or a sale agreement signed in front of the Notary Public would not be valid. On the other hand a preliminary contract for sale of a real estate should be concluded at the Notary. This kind of agreement grants the parties some rights such as demanding the sale of the real estate and the payment but would not transfer the ownership directly. In case the preliminary sale contract is annotated in the land register, the real estate cannot be subject to sale to the third party, pledged or mortgaged for the following five years. The buyer can force, including filing a lawsuit, the owner of the real estate to transfer the title to him, if the conditions in the contract are met. A pre-sale contract, which is conducted in simple form, will not prevent the owner from transferring the real estate to a third party. The buyer can claim damages (and a penalty, if included in the agreement) but will have no right to force a third party to transfer the title to him/her.

Additionally, according to the Appeal Court Decisions, in case at least 90% of the building's construction is completed, the buyer can demand the transfer of the real estate even if the pre-sale agreement is only signed simply among the parties.

There are only two transaction steps in the Turkish Law; Pre-agreement and Closing.

Transaction Steps

Seller

Buyer

Comments

Pre-agreement

· Negotiation of sale and purchase agreement with buyer

· Due diligence

Should be signed before the Notary to be valid.

Closing

· Applying to the Land Registry

· Payment of purchase price

· Payment of relevant fees

· Registration of transfer at land registry

The necessary documents to be submitted should be prepared carefully.

Cyprus Small Flag Cyprus

Transaction Steps

Seller

Buyer

Comments

Pre-agreement

· Provision of information about the title

· Provision of a search report from the land registry showing encumbrances

· Provision of the energy efficiency certificate

· If there are buildings, provision of permits, plans and of the certificate of approvalal

· Due diligence process for anti-money laundering purposes

· Due diligence process and advice

· Drafting of the contract

· Due diligence process for anti-money laundering purposes

Each case may differ from the other and advice is given on its own facts

Signing to Closing

· Satisfaction of any conditions to closing

· Submit the relevant forms to obtain releases from the tax Authorities, local Authority, sewerage board and arrange the payment of utilities

· Satisfaction of any conditions to closing, including payment of the price

· Stamping of contract at the tax Authorities

· Lodging of contract at the land registry for specific performance purposes

· A deposit between 10%-30% is paid on signing which will be forfeited if the buyer fails to complete sale

Post-closing

· Provision of all the releases from the tax Authorities, local Authorities, sewerage board and receipts of payments of all utilities

· Transfer the title deed to the purchaser

Transfer the utilities to the purchaser

· Completion payment

· Accept transfer of the title and pay transfer fees at the land registry

· Accept transfer of the utilities

·

When the immovable property which is being sold is covered by a title deed the conveyancing process is more straightforward. A contract which formulates the rights and obligations of the seller and the purchaser is signed. The contract includes a basic and accurate description of the property, a term in relation to the purchase price and the payment schedule and several other terms determining the time of delivery of possession of the immovable property, the time of transfer of the title of the immovable property, the rights and obligations of the parties and certain warranties, guarantees and representations given or made by the parties. The contract is stamped at the tax Authorities. On the stamp the amount of the stamp duty and the date of stamping the contract is indicated. Then, the contract is lodged at the land registry for specific performance purposes, an encumbrance is created burdening the immovable property and a reference number of the encumbrance is clearly written on the receipt given to the purchaser. The Vendor obtains all the relevant releases from the land registry, the local Authority and the sewerage board. The Vendor also pays any outstanding utility bills. On the date determined on the contract, the parties meet at the land registry, they submit a specific form by which they declare the transaction. The form is accompanied by the various releases. The land registry’s valuation department estimates the transfer fees which are based on the value of the property on the date the contract was signed. The transfer fees are paid by the purchaser and the title is transferred and registered in the name of the purchaser.

In some cases there is no separate title deed covering the property being sold. For example a land may be under division and one of the parts that will arise from the division is being sold or a building complex may be under construction on the immovable property and the purchaser may only be buying a unit of the complex. Usually, the Vendor undertakes to issue separate title deeds for the divided plots or the units (whatever the case may be). The transfer process described above takes place after the separate title deed is issued.

A leasehold interest can be transferred as long as the lease document does not prohibit the lessee from entering into subleases. The transfer takes place by registering the sub-lease at the land registry.

Japan Small Flag Japan

In most cases, real estate transfer starts with the exchange of a LOI between the seller and purchaser providing a rough outline of the terms and conditions of the transfer (including the estimated purchase price) and confidentiality, and then due diligence on the target property is conducted through the review of documents disclosed by the seller.

The sale and purchase agreement for real estate is usually executed after due diligence has begun. In Japanese practice, it can be seen that the sale and purchase agreement is signed on the date on which the target property is transferred to a purchaser. In cases where a sale and purchase agreement is executed before due diligence has been completed, the closing of the real estate transfer may be conditioned upon the completion of due diligence satisfactory to the purchaser.

Meanwhile, the seller prepares documents to be delivered to the purchaser on the closing date, such as the termination of security interest on, or the existing contracts related to, the target property, a confirmation letter regarding the boundary, and filing documents for the transfer registration.

Subsequent to the process above, the transfer transaction is closed. The purchaser pays the total amount of the purchase price (in the case of lump sum payment), or the rest of the purchase price (in the case where a purchaser has paid a deposit (or other partial payment) prior to the closing) on the closing date when the title of the target property is transferred from the seller to the purchaser. The amount of the payment as to the purchase price would be adjusted in accordance with the executed sale and purchase agreement. Ownership transfer registration (or registration of change of the beneficiary in a trust beneficiary interest transaction) is filed on the closing date.

In addition, a bidding process kicks in in the case of a bid project. For example, a bidding offer will be required within the time slot designated by the seller.

Updated: December 12, 2018