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the property? If there is only a private road, the buyer must be fully apprised of authorization access to the property as well as issues such as snow clearance in winter.

      Another factor that should not be overlooked is security. The buyer should enquire as to the frequency of burglaries in the area where the property is located. If the house is very isolated, the buyer must consider the precautions that should be taken, such as the installation of a burglar alarm or the hiring of a private surveillance service. Perhaps there are neighbors and trustworthy persons who can keep an eye on the house when the owner is absent.

      The following aspects must be considered with regards to the actual building: the size and configuration of the rooms and ancillary premises, the number of bathrooms, potential for additional fittings and extensions, construction quality of the building, heating insulation, energy consumption, heating and cooling systems (i.e. is the oil tank located in an environmentally safe place such as in a cellar or protective trough?); and communication accessibility (telephone, Internet, ISDN/ADSL, cable TV connections, a satellite dish). Furthermore, the buyer should also carefully examine these various installations and technical equipment and check whether the installations have been regularly maintained.

      It is important to ensure sufficient sound insulation especially in apartments/condominiums and duplex villas. The best way to investigate these premises is to spend several days in the building or, if that is not possible, to have the sound insulation inspected by an expert who can accurately measure it.

      From a legal perspective, it is very important to check before every acquisition whether the property to be acquired is encumbered with any easements, servitudes, charges, restrictive covenants, liens or mortgages. Such rights may be significant and may often greatly restrict the enjoyment or use of the property. The existence of such encumbrances may also have considerable effects on its value and future appreciation. The various rights and restrictions will differ in each jurisdiction, therefore even though it is usually noted in a land or ownership register or in the title deeds, it is important to have a local legal advisor investigate this properly.

      Finally, when searching for a property, one should ideally already apply criteria which will be significant to future buyers when it comes to a resale.

      Real estate holding structures

      In some situations, it is sensible to use a holding structure such as a company for fiscal and succession planning or to avoid restrictions or licensing requirements. There are also other factors which will dictate whether a property should be held in a holding structure. In many cases, the decision will be determined by the specific country in which the individual is purchasing the property as each country’s specific regulations will have a different effect on their tax and succession planning. In addition to tax and succession planning aspects, it is also desirable, for confidentiality and asset protection purposes, to hold real estate via the intermediary of a company rather than directly, as this prevents the effective owner from appearing in the ownership or land register.

      The more expensive the real estate, the more sense it makes to use a holding structure rather than place the asset in the individual’s name.

      However, in some circumstances it is preferable to acquire the real estate directly in one’s own name. Firstly – for example in France – comprehensive regulations aim to prevent acquisition via the intermediary of companies and thus make such procedures more complicated – with the notable exception of the domestic SCI.¹⁷ Secondly, this can even have tax disadvantages, as companies are often liable to higher capital gains tax than directly owned properties at a resale. Furthermore, most companies (again perhaps with the exception of a French SCI) incur administrative costs. In many countries it therefore makes more sense to acquire properties in the lower to middle price range directly in one’s own name. However, careful planning is of particular importance in such cases, and includes drawing up a suitable will or possibly also acquiring the property in the name of your children.

      The use of a holding structure has differing effects in the various jurisdictions. Therefore it is important to understand the implications of the residence status and the local tax and succession laws. Often, companies are usually set up in countries where company taxes are nil or limited and annual maintenance costs are low. Such jurisdictions include Anguilla, the BVI, Luxembourg, Nevis, Malta and Panama, where companies can be set up and maintained at low cost and with no or only limited local tax consequences. However, tax consequences may have to be taken into account depending on the country of residence of the company owner and the country from where the company is effectively managed. So it is essential to clarify all circumstances and tax consequences carefully – including in the country where the company owner is resident.

      It is also worth noting that corporate and other holding structures (such as private foundations and trusts) are often recommended and also implemented despite failing to pass a thorough scrutiny by the relevant tax authorities – where such scrutiny takes place. Many countries have now extended their relevant tax laws with very extensive anti-abuse regulations. If more than 50% of a company’s assets consist directly or indirectly of real estate, that company will often be taxed just like real estate. Thus the capital gain from the sale is also taxed on the same basis (and cannot simply accrue tax free in a zero tax country) when the responsible tax authorities discover the true nature of the transfer. Ultimately, many company structures are based on the transfer of company shares without the notification of the tax authorities. Although it is often highly unlikely that the tax authorities will ever find out about the transaction, it cannot form the basis of a legal arrangement and sound planning.

      In 2012, new rules relating to dwellings worth over GBP 2 million held by corporate structures came into force in the UK, making it essential to take professional advice if you own, or are considering investing in, valuable real estate in the UK.

      Real estate transactions

      The buyer generally bears the greater transaction risk, as is fittingly expressed by a principle of Roman law: Periculum est emptoris¹⁸, or in other words: Caveat emptor¹⁹. That is why certain precautions and clarifications are needed prior to every purchase in order to minimize the risks. As a long-term investment which usually ties up greater capital, the acquisition of real estate should be planned and carried out in a careful and rational manner.

      Once the buyer has identified the target property, there are a number of practical and legal criteria that the buyer should observe thereby ensuring full and proper title to the property. Besides restrictions imposed by the country, there may be problems with the seller’s title, third party claims and other onerous issues that are not immediately apparent. It is imperative that the buyer investigates the title thoroughly and carries out the necessary due diligence, ideally with the help of a legal advisor.

      The seller must ensure that he can produce all authorizations (e.g. consent of his spouse) needed for the purchase, as failure to do so would delay the transaction.

      In most countries the seller is obliged to inform the buyer of any defects. As a rule, the seller must also inform the buyer of the existence of any preemption rights. Often, the seller is liable to a comprehensive obligation for information and disclosure and bears corresponding liability to the buyer. Accordingly, it is essential for the seller to settle all questions of liability in the agreement in a detailed manner. In general, it is recommended wherever possible to exclude all liability by the seller from the agreement (this is also common practice for re-sale property in most countries). This liability exclusion should be comprehensive and expressly include liability for legal and material defects, error and damage compensation, as far as this is permissible on the basis of the local law. In any case, care must be taken to ensure that the sales agreement contains no guarantees which the seller is unable to satisfy. If the seller makes any representations and warranties, a carefully drafted sales agreement will limit the warranties and representations to the period of time the seller has owned the real estate and exclude the periods of ownership by previous owners.

      The seller should also note who is responsible for which fees – for example taxes and lawyers’ or notaries’ fees. In many cases, notaries’ fees and transfer taxes are divided on a fifty-fifty basis, but this division is ultimately a matter

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