The usual documents are the following:

• Promissory purchase and sale agreement or letter of intent

The first document in any real estate acquisition is typically a promissory purchase and sale agreement or a binding or nonbinding letter of intent between the buyer and the seller. This promissory agreement — as well as a binding letter of intent — are generally recognized and allowed under the civil codes of the different states, and are binding if they contain all necessary business terms for the transaction, including the description of the property, purchase price, payment terms (i.e., deposit and installments), conditions precedent for closing, the closing date and any other special terms and conditions of the transaction. These agreements would also typically contain conditions for the benefit of the buyer, such as representations, warranties and indemnities by the seller.

• Due diligence report

Once the promissory agreement of purchase and sale or the letter of intent is signed, it is generally the responsibility of the buyer, usually through the buyer’s local counsel, to conduct due diligence with respect to the property being acquired. This includes title search, procurement of a no-lien certificate, zoning verification, topographical survey and a review of any other restrictions affecting the property (i.e., construction restrictions, setbacks, owner association regulations, easements, etc.) An independent environmental assessment and an independent engineering review of the property, particularly in the case of properties with older buildings and properties located in an industrial area, are often recommended. The buyer’s counsel will also typically provide a title report to the buyer or assist the buyer in obtaining title insurance. In many cases, the buyer’s counsel will provide a title report to the title insurer, but the title insurance company may also perform its own due diligence.

• Title transfer deed that contains the final purchase and sale agreement

The final document executed in any real estate acquisition is a title deed signed before a local notary public (typically selected by the buyer) that formalizes the sale and purchase agreement between the buyer and the seller.

This agreement typically reflects the terms and conditions included in the letter of intent or promissory agreement, including all representations, warranties and indemnities by the seller. When this agreement is signed, title is typically conveyed to the buyer with no reserves, except if, for instance, the seller provides for special conditions precedent or the seller withholds domain of the property conveyed until full payment of the purchase price is received from the buyer.

Generally, sellers would only tend to grant limited representations and warranties typically related to the absence of liens and encumbrances, payment of real estate taxes and anti-money laundering. Sellers also typically provide an indemnity to the buyer in case of eviction. Thus, a buyer is generally responsible for conducting extensive due diligence with respect to the legal and physical condition of the property to be acquired. It is also relatively common to include provisions and warranties that deal with liabilities derived from the environmental conditions of the property, hidden defects, conditions of title, absence of legal proceedings, infrastructure and utilities available on site, etc.

Parties are legally bound as soon as they execute the promissory sale and purchase agreement (or a binding letter of intent, which would be considered a promise to purchase and sell) and if all conditions precedent for closing are met, or as soon as the parties execute a private sale and purchase agreement. For the purchase and sale to be effective against third parties, the corresponding title transfer deed has to be recorded with the Public Registry of Property of the state where the real estate is located. Recordation is typically performed by the acting notary public.

Execution of the title transfer deed, whereby the final sale and purchase agreement (or some other form of agreement such as donation, contribution to a trust, etc.) is formalized before a notary public, is the event that marks the transfer of title from the seller to the buyer. However, parties can also agree to transfer the title upon payment of the price in full or upon fulfillment of other conditions.

The buyer usually pays for the following costs, that typically range from 5%-7% of the transaction value:

• Buyer’s own legal costs
• Due diligence costs
• Environmental assessments, appraisals and real estate surveys
• Registration fees
• Appraisal fees
• Title insurance fees
• Real estate acquisition tax (typically from 2%-5% of the higher of (i) appraised value or (ii) transaction value)
• Value-added tax on improvements existing on the land (currently 16%)
• Notary public’s fees (typically from 0.25%-1% of the transaction value)
• Trustee’s fees and costs (when acquiring through a trust)

The seller usually pays for the following:

• Real estate agent’s fees
• The seller’s own legal costs
• Real property tax up to the closing date
• Income tax and single rate corporate tax on any profit made on the sale of the real estate
• Government fees for subdivision, regularization, etc., of the real property