- Due diligence report
Before signing a sale and purchase agreement, it is generally the responsibility of the buyer, usually through the buyer’s lawyer, to conduct due diligence with respect to the property to be acquired. This includes title and zoning searches and a review of any leases and surveys of the property as well as insurance coverage. An independent environmental assessment is often recommended.
- Sale and purchase agreement
The first document in any real estate acquisition is normally the sale and purchase agreement between the buyer and the seller. This agreement should contain all necessary business terms for the transaction, including the description of the land, purchase price, deposit (if any), the transfer date and any other special terms. This agreement also typically contains conditions for the benefit of the buyer, and representations and warranties by the seller.
- In case of acquisition by a foreign person, a Lex Koller ruling may be required in certain cases.
The warranties usually relate to tax, capital expenditure, lease agreements and environmental issues. However, the seller usually gives limited representations and warranties. A buyer is therefore generally responsible for conducting extensive due diligence with respect to the property to be acquired. However, in case of a new building, the seller will give additional warranties, in particular construction warranties.
The buyer usually pays for the following:
- Buyer’s agent’s fees
- Legal costs, including notarial costs
- Due diligence costs for consultants who have prepared building condition reports, environmental assessments, valuation appraisals and real estate surveys
- Registration fees
- Transfer taxes
The seller usually pays for the following:
- The seller’s agent’s fees
- Costs of the seller’s legal advisers
- Income tax on any profit made on the sale of the real estate