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The combination of a weak U.S. dollar and low interest rates has resulted in an increase in foreign investment in U.S. commercial real estate. From a U.S. federal income tax perspective, the primary obstacle facing foreign persons who invest in U.S. real estate is the Foreign Investment in Real Property Tax Act (FIRPTA), more specifically Section 897 . Under this provision, any gain recognized by a foreign person on the disposition of a "United States real property interest" (USRPI) will be treated as if such gain were effectively connected to a U.S. trade or business and, therefore, subject to U.S. federal income tax at the graduated rates that apply to U.S. persons. Additionally, when Section 897 applies, the purchaser of a USRPI typically is required to withhold and remit to the IRS 10% of the purchase price i n accordance with tion 1445.

One possible strategy to avoid FIRPTA is the use of a shared appreciation mortgage (SAM). In a typical SAM arrangement, a lender provides a developer with a loan bearing a below-market fixed rate of interest, plus a share of the profit on a subsequent disposition of the property. As this article will illustrate, if the transaction is structured correctly the taxpayers investing in U.S. real estate who may have the most to gain from the use of SAMs are non-U .S. taxpayers.

FIRPTA in General. Foreign persons typically are not subject to U.S. federal income tax on U.S. source capital gains unless those gains are effectively connected to a U.S. trade or busi ness. As stated above, Section 897 treats any gain recognized by a foreign person on the disposition of a USRPI as if it were effectively connected to a U.S. trade or business.

A USRPI is broadly defined as ( I ) a direct interest in real property located in the U.S., and (2) an interest (other than an interest solely as a creditor) i n any domestic corporation that constitutes a U.S. real property holding corporation (i.e., a corporation whose USRPls make up at least 50% of the total value of the corporation's real property interests and business assets).

Reg.1.897-l@ru_(j) elaborates on the phrase "an interest other than an interest solely as a creditor" by stating it includes "any direct or indirect right to share in the appreciation in the value, or in the gross or net proceeds or profits generated by, the real property." The Regulation goes on to state that a "loan to an individual or entity under the terms of which a holder of the indebtedness has any direct or indirect right to share in appreciation i n value of, or in the gross or net proceeds or profits generated by, an interest in real property of the debtor is, in its entirety, an interest in real property other than solely as a creditor."

This principle is illustrated by example in f!e _g.1.897-l@fllill : A non-U.S. taxpayer lends money to a U.S. resident to use in purchasing a condomini um. The nonresident lender is entitled to receive 13% annual interest for the first ten years of the loan and 35% of any appreciation in the FMV of the condominium at the end of the ten-year period. The example concludes that, because the lender has a right to share in the appreciation of the value of the condom inium, he has an interest other than solely as a creditor in the condominium (i.e., a USRPI). Accordingly, a SAM that is tied to U.S. real estate is a USRPI for purposes of ectio'Z.

Simply owning a USRPI, however, does not necessarily trigger any adverse tax consequences under Section 897 . Rather, a non-U.S. taxpayer will be subject to tax under that provision only when the USRPI is "disposed of." Although Section _JJ97 does not define "disposition," Reg. 1.897-l(g) provides that disposition "means any transfer that would constitute a disposition by the transferor for any purpose of the Internal Revenue Code and regulations thereunder."

With respect to SAMs, Reg. 1.897-l(h.h_Exam ple 2 , illustrates a significant planning opportunity for non­ U.S. taxpayers investing in U.S. real estate. In the example, a foreign corporation lends $1 million to a domestic individual, secured by a mortgage on residential real property purchased with the loan proceeds. Under the loan I agreement, the foreign corporate lender will receive fixed monthly payments from the domestic borrower, constituting repayment of principal plus interest at a fixed rate, and a percentage of the appreciation in the value of the real property at the time the loan is retired.

The example states that, because of the foreign lender's right to share in the appreciation in the value of the real property, the debt obligation gives the foreign lender an interest in the real property "other than solely as a creditor." Nevertheless, the example concludes that Section 897 will not apply to the foreign lender on the receipt of either the monthly or the final payments because these payments are considered to consist solely of principal and / interest for U.S. federal income tax purposes. Thus, the example concludes the receipt of the final appreciation payment that is tied to the gain from the sale of the U.S. real property does not result in a disposition of a USRPI for purposes of Section 897 because the amount is considered to be interest rather than gain under Section I 001 . The example does note, however, that a sale of the debt obligation by the foreign corporate lender will result in gain that is taxable under Section 897.

By characterizing the contingent payment in a SAM as interest (and not a disposition of a USRPI) for tax purposes, the Section 897 Regulations potentially allow non-U.S. taxpayers to avoid U.S. federal income tax on gain arising from the sale of U.S. real estate, if structured correctly.

Withholding on U.S.-Source Interest. Non-U.S. taxpayers generally are subject to a 30% withholding tax (unless reduced by treaty) on certain passive types of U.S. source income, including interest. An important exception to this rule exists for "portfolio interest," which is exempt from withholding tax in the U.S. For this purpose, portfolio interest is defined as any interest (including OID) that is paid on a note that is either ( l ) in registered form or (2) that is not in registered form, if there are arrangements reasonably designed to ensure that the note will be sold only to non-U.S. persons and certain other conditions are satisfied.

There are, however, exceptions to portfolio interest. In particular, it does not include certain "contingent interest." For purposes of this provision, contingent interest is interest that is determined by reference to any of the following: ( 1) Any receipts, sales, or other cash flow of the debtor or related person; (2) Any income or profits of the debtor or a related person; (3) Any change in value of any property of the debtor or a related person; (4) Any dividend, partnership distribution, or similar payments made by the debtor or a related person; and (5) any other type of contingent interest that is identified in Regulations, where a denial of the portfolio interest exemption is necessary or appropriate to prevent avoidance of federal income tax.

Therefore, a payment on a SAM that is otherwise treated for U.S. federal income tax purposes as interest will not qualify for the portfolio interest exemption if the payment is contingent on the appreciation of the financed real property. Accordingly, unless a treaty applies to reduce the withholding tax, the contingent interest feature of a SAM would be subject to a 30% withholding tax in the U.S.

Currently, there are at least seven jurisdictions that have concluded income tax treaties with the U.S. that contain provisions that entirely eliminate U.S. withholding tax on contingent interest paid from the U.S. to the respective treaty jurisdiction: ( l ) The Czech Republic; (2) Hungary; (3) Norway; (4) Poland; (5) The Russian Federation; (6) Greece; and (7) Ukraine.

A payment of U.S. source interest made to a resident of one of these treaty jurisdictions generally would
not be subject to U.S. withholding tax, assuming such person otherwise is eligible for treaty benefits. (It should be / noted that the United States and Hungry have signed a new income tax treaty, which would tax contingent interest, , although this treaty is not yet in effect).

For a non-U.S. taxpayer to be eligible for treaty benefits, the taxpayer must be considered a resident of the particular treaty jurisdiction and must satisfy any l imitation on benefits (LOB) provision in the treaty. Under most "modern" income tax treaties, a resident of a treaty country will satisfy the LOB provision if that resident is an individual, or a corporation that is at least 50% owned by citizens or residents of the U.S. or by residents of the jurisdiction where the corporation is formed and not more than 50% of the gross income of the foreign corporation is paid or accrued, in the form of deductible payments, to persons who are neither citizens nor residents of the U.S. or residents of the jurisdiction where the corporation is formed.

Accordingly, a non-U.S. taxpayer that satisfies both the residence and LOB provisions in one of the treaties listed above should not be subject to U.S. withholding tax on the SAM payments, including the contingent payment. In order for a non-U.S. taxpayer that is not resident in one of the treaty jurisdictions listed above to obtain a complete exemption from U.S. withholding tax on the contingent interest payment, that taxpayer must rely on a treaty that has been concluded with the U.S. which has no LOB provision. Currently, four treaty jurisdictions provide an exemption from withholding on payments of U.S.-source interest, including contingent interest, and do not have LOB provisions: ( I) Hungary; (2) Norway; (3) Poland; and (4) Greece.

Therefore, a non-U.S. taxpayer that is not resident in a favorable treaty jurisdiction can obtain a complete exemption from withholding on contingent interest (and therefore avoid FIRPTA) by investing through a corporation formed in one of these three jurisdictions. (As noted above, the United States and Hungry have signed a new treaty, which does include a comprehensive LOB provision). Once the income is received in the respective foreign jurisdiction, there are alternative strategies available to minim ize or eliminate any foreign corporate tax on such income.

Immigrant visa: the $1 million investment

This article wants to highlight some of the most utilized visa categories for foreign real estate investment and the investors or companies engaged in it.

Different visa categories are available depending on the individual's country of origin, whether the real estate investment will be passive or active, the intended duration of stay in the United States and the possibility to directly or indirectly earn money from a U.S. source.

1. The Visa Waiver Program (VWP)
Depending on the country of origin, no visa might be required to simply buy, sell, own, or lease real estate as an individual as long as this activity does not reach commercial proportions.

If the investor comes from a visa waiver country, he does not need a visa to enter the United States for a maximum of 30 to 90 days at a time. The only requirements are a machine readable passport and a return or onward ticket. The applicants will be photographed and fingerprinted when seeking admission. The participating countries are currently: Andorra, }\v.stralia, Austria, Belgium, Brunei, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Irel{a1d, Italy, Japan, Lativia, Liechtenstein, Lithuania, Luxembourg, Malta, Monaco, the Netherlands, New Zealand, Norway, Portugal, San Marino, Singapore, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, and the United Kingdom. There is no black law, but if the immigration authorities deem that a person spends too much time in any given year or in a period of time in the United States, entry can be refused to that individual. Once entry on a visa waiver has been refused, the Applicant can only reenter the United States if in possession of a valid visa. Thus, the visa waiver is suitable only for short vacation or business trips.

2. B visas
If the investor is not a citizen of a country that participates in the visa waiver pilot program or intends to remain in the United States for up to six (6) months, a B-1 "business visitor" or B-2 "extended tourist" visa might be the right choice.

a) B-1Overview

The B-1 "business visitor" visa allows an individual to come to the U.S. for a short period of time for purposes that include the following:

• engaging in meetings and consultations with U.S. business associates attending non-productive training for the benefit the overseas company
• attending professional conferences or seminars

A B-1 visitor is not authorized to perform productive work in the U.S. and must maintain a foreign residence to which the B-1 visitor intends to return at the end of the authorized period of stay. The B-1 status may not be used as a means to accelerate a candidate's eligibility to enter the U.S. to work. The B-1 entrant will generally remain on a foreign employer's home country's payroll and cannot receive compensation from a U.S. source, other than reimbursement for incidental expenses.

The B-1 visa is applied for directly at the U.S. Embassy or Consulate. 8-1 visa holders are generally admitted for the period of time necessary to conduct the business. In theory, a B-1 entrant may be admitted up to a maximum of six months. However, in practice, immigration officers typically allow business visitors to remain in the United States for no more than 30-90 days. If unexpected events necessitate an extension, individuals may apply to extend the authorized period of stay up to six (6) months. However, prolonged business visits may give rise to a presumption that the visitor is engaged in prohibited productive employment.

b) B-2 Overview

The extended tourist visa is normally issued by the foreign U.S. Consulate for ten (10) years and allows a tourist to remain in the United States for up to six (6) months at a time. This visa is used by many foreigners who own holiday residences in the United States. Typical examples are the so called "snowbirds" that leave Europe to spend the winter months in Florida. However, even if the visa holder never overstayed, too frequent visits to the U.S. may at some point become a problem and will be asked to return with a more permanent visa.

If the investor intends to engage in active real estate investments that are connected with an ongoing business activity and from which he derives revenues, the investor needs a visa category which allows longer periods of admission and the authorization to directly or indirectly earn money from a U.S. source.

The most used visa in this category is the E-2 treaty investor visa for citizens of a country that has a Treaty of Commerce and Navigation with the United States. However, many Latin American and former Soviet Union countries do not yet have such treaties in place with the U.S.

3. Treaty Investor visa

The E treaty investor visa allows an individual to come to the U.S. for the purpose of furthering a substantial investment in a U.S. enterprise made by individuals or businesses that are citize ·s of a treaty country.

a) Requirements

At least 50% of the U.S. entity must be owned by nationals of the treaty country in or4er to qualify to utilize E visas. In order for a business to qualify, the company must demonstrate that a substantial instment in the U.S. business has been made by individuals or companies that are citizens of the treaty country. Irr order to be considered a substantial investment, the funds must be "at risk". Whether the actual amount invested is substantial depends on the type of business and is weighed based upon a variety of factors. In addition, the investment must not be "marginal", i.e. not made solely for the purpose of earning a living.

Ownership. The Principal Investor needs at least 50% ownership of the investing company and the nationality of the treaty country.

Active investment. The investor must have made an irrevocable commitment of funds into an active·, commercial investment.

Substantial investment. Only those financial transactions in which the investor's own resources are at risk will be considered.

Marginality. The investment needs to generate a return that is greater than just covering the cost of living for the principal investor and his family. The investment should create job opportunities for U.S. workers.

Essential role in the company. The treaty investor must have a key position within the company, either as the investor, who will develop and oversee the investment, or as a supervisory manager, or as a specially trained, highly qualified employee necessary for the development of the investment.

b) Essential Employees

Under the E visa category, a qualifying company can employ ..essential employees" from the Treaty country if this person will have supervisory and managerial functions in the company and/or ••possess skills that are essential to the efficient operation of the business". Accordingly, the candidate's qualifications and the necessity to employ the foreign national over a U.S. worker (i.e. the availability of a U.S. worker or the possibility to train a U.S. worker) are closely scrutinized.

c) The application process

Before an individual can apply for an E visa, the company in the United States where he or she will work must become E qualified. An initial request to quality the U.S. company for E status must be filed together with at least one individual's E application at the U.S. Embassy or Consulate that has jurisdiction over the treaty country. Once the company is E qualified, an individual who is a national of the treaty country can apply for an E visa if he or she is coming to work as an executive or supervisor, or an essential employee. The individual does not have to be employed by the company abroad in order to qualify for E status.

E visas can be issued for up to five (5) years and are renewable indefinitely as long as the company and the individual continues to qualify for E status. Upon each entry to the United States, E visa holders are generally granted two (2) years of E status on Form 1-94 Arrival/Departure Record as long as the E visa is valid at the time of entry.

E Visas are generally applied for directly at a U.S. Embassy or Consulate at the non-immigrant alien's country of citizenship or residency (visa granted for 5 years), or with the U.S. Citizenship & Immigration Services (visa granted for 2 years). Filings in the U.S. can ask for Premium Processing by paying an additional $1,000.00.

d) Spouse and children
The spouse and unmarried children under the age of 21 may obtain a "Dependant Beneficiary" E visa. The E spouse and children can attend school in the United States and the E spouse can obtain an independent employment authorization (E children are not permitted to be employed under their dependant beneficiary status).e) Permanent Residency
The normal procedure for an E essential employee to obtain permanent residency is the labor certification process. However, E-2 Principal Investors cannot file labor certifications because of their controlling interest in the qualifying company.

4. The Intra-company Transferee visa

For investors who are citizens of a country that has not yet entered into the required Treaty of Commerce with the United States, the International Transferee visa is an option.

This category is for international business people coming to the U.S. as intra-company transferees from a foreign parent or subsidiary of the U.S. company (51% ownership) that will engage in real estate investment and development in the United States. L-1 visas are available to people who have worked for the foreign company for at least one ( l ) continuous year within the three (3) years preceding the application. They must have been employed in an executive/managerial or specialized knowledge position and will be transferred to the United States temporarily to work in an executive or managerial capacity for the U.S. company.

a) Duration of stay

An L-1 non-immigrant alien will be admitted to the U.S. for the time required by the employer up to a maximum initial period of stay of three (3) years. An exception to the three (3) year initial stay exists for newly created companies in the U.S. (existing for less than one (l ) year) in which case the visa will be issued for only one ( 1) year in order to control the new company's viability beyond the first year of operations. The visa may then be extended for three (3) years and another three (3) years up to a maximum of seven (7) years for L-1A managers and executives.

b) The application process

The U.S. employer must file a petition with the U.S. Citizenship & Immigration Services (USCIS). The application requires various supporting letters, documentation, and other materials that need to be submitted in order to give a complete picture of company's viability and the transferee's position. Once the petition is approved, the Approval is sent to the competent U.S. Embassy or Consulate where the alien can obtain issuance of the visa into the passport. If the alien is already in the United States in a different non-immigrant category, his or her status can be changed to the L-1 A category. For payment of an additional $1000.00 USC IS offers premium processing whereunder a visa application needs to be approved or denied by USCIS within fifteen (15) business days from the date of filing. As of March 2005, a $500.00 fraud fee needs to be paid to the U.S. Citizenship & Immigration Services in addition to the basic filing fee (currently $185.00) and the afore-mentioned premium processing filing fee.

c) Spouse and Children

The spouse and unmarried children under the age of 21 may obtain a '"Dependant Beneficiary" L visa. The L spouse and children can attend school in the United States and the L spouse can obtain an independent employment authorization (L children are not permitted to be employed under their dependant beneficiary status).

d) Permanent Residency

L-1 A executives and managers have the opportunity to directly file an immigrant petition without going through the labor certification process. The application can be filed once the U.S. company has been in existence for one ( 1) year. Under the so-called '•dual intent doctrine" the applicant can maintain and extend their L-1 A status during the permanent residence application process and do not need to obtain separate employment authorizations and travel permits. L-1 B specialized knowledge workers have to go through the labor certification process. The L structure i.e. the relationship between the foreign and the U.S. company (at least 51% ownership) must be maintained during the whole period i n L status and up to the granting of permanent residency.

5.Conclusion

The U.S. government generally favors investment into the U.S. However, the investment must be into an active, commercial enterprise and, thereby, justify the presence of a foreign individual. Passive investments into vacation homes, etc. are subject to restrictions on the duration of stay in the U.S. Thus, the "simply live in the U.S." visa, i.e. own a house and live off funds accumulated outside the U.S., unfortunately, does not exist. Many other nonimmigrant and immigrant visa categories are available, but they are less used for real estate investments and would exceed the scope of this article.

With a booming economy, attractive beaches and numerous attractions, South Florida has, over the last years, seen a flood of foreign investors seeking, among other things, to purchase real estate for either residential or com mercial purposes. In a world where many foreign currencies fluctuate greatly on a monthly, if not daily, basis, a real property investment protected by a stable U.S. economy and a strong currency justifiably appears to be a reasonably safe method to protect one's assets against the roller coaster of the world's and developing countries' economies.

Once a foreign investor has made the decision to purchase real estate in Florida, the next issue to resolve is exactly how this foreign investor will hold title to the property he intends to acquire. Unlike many other foreign countries, the United States allows foreign citizens to hold title to real estate in fee simple, i.e. personally and absolutely regardless of any immigration status and without the need for assistance from a U.S. trustee or company. This article will discuss the most common methods of ownership in Florida, which can be divided into ownership through persons and ownership through legal entities.

Sole Proprietorship in Fee Simple

This is the simplest form of ownership. The Buyer purchases the real property in his own individual name. It should be noted that when this method of ownership is selected, the attorney or title company handling the closing will usually require the Buyer to disclose his marital status. The marriage status of the owner becomes especially im portant when he or she will in turn sell or mortgage the property to a third party. Because of the homestead protection from creditors pursuant to the Florida Constitution, the signature of the unnamed spouse is required in order to mortgage or sell a primary residence located withi n the State of Florida. If the real property is a second home, the deed or instrument of conveyance executed by the Seller must contain language affirmatively stating that the property bei ng conveyed is not the Seller's primary residence or homestead.

The main advantage of sole proprietorship in fee simple is the fact that it can be easily conveyed without the necessity to produce the signatures of others (except for the spouse in case of homestead) or any other sort of trust or corporate formalities.

Co- Tenancies

Co-Tenancies are created when two or more individuals or entities share ownership of real property as a whole. There are three basic forms of co-tenancies.

Tenants In Common

A common form of co-tenancy is the ..tenancy in common". The most common way of creating a tenancy
in common is by conveyance or transfer to two or more persons. It may arise by a deed or conveyance of an undivided tract of land to two or more persons, in which case the new owners are tenants in common until the tract is divided by agreement or otherwise. A tenancy in common among partners may be created if a partner purchases properties out of the partnership funds where the property is not to be used for partnership purposes. If one partner conveys his partnership interest to a stranger, the latter and the remaining partners become tenants in common.

The interest of tenants in common in real property ownership is subject to the laws of descent and distribution. I n the event of the death of a tenant in common, his interest in the subject real property will be included in the tenant's estate and will pass on to his hei rs or beneficiaries through probate. Unless specifically described in the instrument of conveyance (or Deed), it may be presumed that the interests of tenants in common are equal. For example, i f Property A is conveyed to Mr. Smith and M r. Wilson as tenants in common, it will be presumed that Mr. Smith and Mr. Wilson each have a 50% interest in that property. If Mr. Smith and Mr. Wilson intend to split the property otherwise, it should be specifically spelled out in the Deed. The percentile interest of tenants in common becomes really relevant only when revenues generated by the real property or sales proceeds are divided among the co-owners because an important feature of a tenancy in common is '"unity of possession". Unity of possession means that tenants in common must be vested with such title as will authorize them to take and hold possession of the property.

Joint Tenancy with Right of Survivorship

An estate in joint tenancy can only be created through a Deed or a Will. In order to create a joint tenancy with right of survivorship, there must be unity of possession, interest, title and time. In Florida, the right of survivorship must be expressly provided for in the Deed or Will. Unity of possession, interest, title and time means that all joint tenants of a property must have acquired equal rights and an equal interest in the property at the same time.

A joint tenancy may be broken or terminated voluntarily through a partition of the property or involuntarily by conveyance of the interest of any joint tenant to a third party. Indeed, any conveyance by a joint tenant to a third party would extinguish the requisite unity of title and time. The most popular advantage of joint tenancy is that it is not subject to the laws of descent and distribution. Therefore, upon death of a joint tenant, the property passes to the surviving tenant(s) to the exclusion of the heirs of the decedent. It should be mentioned that the last surviving tenant will receive the estate in sole proprietorship and the property will pass to his heir through probate upon his death.

Estate by The Entirety

An estate by the entirety is basically a joint tenancy by husband and wife. As tenants by the entirety, husband and wife own and control the whole estate as if one person under the law. The estate by the entirety also features the right of survivorship. However, because of the required marital relationship between the owners, the right of survivorship does not need to be expressly described in the Deed or instrument of conveyance. Because a tenancy in the entirety is based on the marital relationship between the two owners, the general rule is that dissolution of the marriage destroys an estate by the entirety and converts the husband and wife into tenants in common as if they were never married.

While the use of co-tenancies has been justifiably recommended by attorneys advising foreign clients in connection with the estate planning aspect of their real estate acquisitions, it should be pointed out that the necessity of obtaining the signature of all co-tenants in order to convey full fee simple title to a third party can create some difficulties where the other co-tenants may be difficult to reach and/or their relationship may have deteriorated and cooperation from them may be hard to obtain. On the other hand, a tenancy by the entirety provides some asset protection to those foreigners who do not qualify for the homestead protection from creditors otherwise, as collection into such property is only possible i f a judgment exists against both husband and wife.

Real Property Ownership Through A Corporate Entity

For estate planning or liability purposes, foreign investors may be advised by their attorney to purchase real estate in the name of a domestic or foreign corporation (or as tenants by the entirety as stated above). The advantages of owning real estate through a corporate or similar business entity has numerous advantages which are discussed in this article. It should be noted, however, that these advantages come at a cost. In addition to the annual fees and additional accounting requirements which wi ll be required for the proper maintenance of corporate fonnalities, financing will be more difficult and costly to obtain (larger equity in the property required, higher interest rate, personal guarantees of foreigners) and insurance premiums for the property will probably also be higher. Consequently, the typical foreign investor, in light of his own personal situation should balance the potential advantages and costs of corporate ownership before setting up sophisticated corporate structures for real estate purposes. On the other hand, where foreigners can take advantage of double tax avoidance treaties, they might have a significant advantage exempting property from estate taxation in the United States by holding it through a corporate entity.

Trusts

Some estate planners may recommend the use of a trust or '·Florida Land Trust" under certain circumstances. Most trusts grant the power to hold, manage and convey the property to one or more trustees who m ust perform their duties in the best interest and for benefit of the beneficiaries of the trust. Under certain types of trusts, the trustee(s) may also be beneficiaries of the trust (grantor trusts). Dependi ng on the language of each trust agreement, the powers of trustees can be more or less restricted to fit the specific intent and purpose of the individual(s) creating said trusts. There are several types of trust agreements (revocable, non-revocable, land trusts, etc.). The choice of a specific type of trust should only be made after consulting a specialized professional.

Conclusion

When selecting a form or method of real estate ownership, foreign investors should seek professional advice, and should not only consider the tax and estate planning ramifications of their choice, but also consider the short- and long-term costs which will result from their choice (facilities i n obtaining).

INTRODUCTION

The credit situation i n the United States and the real estate market are both characterized by unusually stressful circumstances. Foreign and domestic purchasers of U.S. real estate will find it increasingly difficult to obtain mortgage loans. For purchasers who are able to pay cash and who seek medium and long term placements, the real estate market in Florida offers very attractive investment opportunities. For anyone who needs third party financing, the landscape is at present somewhat bleak.

This being said, financing opportunities still exist. In this article, we will discuss those opportunities. While banks are undergoing a definite ''credit crunch", banks are still lending to appropriate potential buyers. The United States banking system is exceedingly complex, and at present becoming daily more so. The basic structure of the banking industry remains unchanged, however, and we will first point out the types of financial institutions that may offer financing to foreign borrowers. We then analyze the terms and conditions of a typical mortgage contract and the promissory note the mortgage secures, as well as other documents typically used in connection with the mortgage loan. Finally, we underscore the items of which the foreign borrower-buyer must be aware at and after the closing of the purchase.

PRELIMINARY OBSERVATION:
NEED TO CONSULT PROFESSIONAL ADVISERS

Our professional experience has confirmed that foreign buyers must consult two professionals when seeking to purchase real property in the United States: a qualified real estate broker and an attorney experienced in real estate transactions. In Europe and Latin America, the acquisition of real property involves different types of documents and takes place in a framework that is often so different that foreigners rely on home country knowledge when buying property in the U.S. at their peril. Obviously, the value of realty depends on many factors that a person who is unfamiliar with a region is not able to weigh properly when making investment decisions. For this reason, the input of a real estate broker experienced in the region and in the type of property to be purchased is essential. In addition, properly following local law and custom when purchasing realty is clearly the key to a successful transaction and requires the input of an attorney.

Initially, foreign purchasers should consult real estate professionals with respect to the present state of the market: areas of expansion and growth; the relationship between price and quality is in the various neighborhoods; whether present economic conditions make the market more favorable to buyers or to sellers; and other practical information such as availability of schools, distance from commercial areas and possible effects of catastrophic events such as hurricanes. Once one or more properties that correspond to the purchaser's requirements have been found, the broker will assist the potential purchaser in deciding how best to formulate an offer, and in particular, what strategy to adopt as regards price (a buyer generally offers less - even 20 to 30% less under present circumstances - than the asking price, and negotiations continue until the parties reach an agreement). When a proposal regarding price has been decided upon, the purchaser makes an offer to the seller by delivering a draft contract that sets forth the terms of the transaction: price, conditions, closing date, etc.

Because U.S. real property law is quite different from that of other countries, the preparation of the contract should be entrusted to an attorney. Even if the broker uses a printed contract form that the broker has assisted the buyer in filling out, the buyer should consult with an attorney before tendering the contract to the Seller, especially since the contract is not a '"pre-contract" as is used in many countries, but the key document that governs the entire transaction, far more than general law. The assistance of an attorney is essential for many reasons. For example, the U.S. does not have a real property registry in the strict sense of the term, and as a result, determining whether a Seller is in fact the owner of the property being transferred requires expertise that the layman often does not possess. A purchaser of realty in the United States is protected as to title by a system of title insurance that guarantees that a purchaser will in fact be the full owner of the property and provides for the curing of any defects. Real estate attorneys help a purchaser in obtaining and understanding a title insurance policy. Foreign purchasers should be aware also that in the U.S. there are no "Notaries" as there are in the civil law countries of the U.S. and Latin ( America. In the U.S. real property transactions are handled by attorneys, not "Notaries" ( Notaires or Notarios ).

It must be noted in addition that U.S. real estate acquisitions tend to involve more documentation than is the case in foreign countries. When a buyer obtains financing, the documentation at closing is indeed voluminous and includes all the mortgage documents as well as the real estate documents that transfer title to the buyer. The number and complexity of documents are all the more reason to use an attorney. Although it is possible to close a purchase transaction though a title insurance company only, experience shows that it is advisable to hire an attorney whose job is to protect the buyer only.

The U.S. tax system also can make it advisable to purchase U.S. real property in the name of a legal entity, such as a Florida or an offshore (non-U.S.) corporation or limited liability company or both. This is another reason to consult an attorney, as it is practically impossible for a foreign national (or a broker) to assist with establishing a corporate structure for a real estate acquisition.

The cost of professional assistance consists essentially of the broker's commission and legal fees payable to the attorney. The realtors' commission is generally paid by the seller but at times by the Buyer. The rate of the commission and the names of the Brokers (or of the Broker if there is only one) is established in the contract. It is suggested that the potential purchaser discuss the commission question with Realtors from the beginning. As for attorneys, they can be hired in the United States on a fixed fee basis or on an hourly basis. The advantage of hiring an attorney on a fixed fee basis is the avoidance of any surprise when the time comes to pay the bill. Fixed fees for real estate acquisitions run anywhere from 0.5 percent to l percent of the gross purchase price of the property, depending on the circumstances. As a practical matter, attorneys in the U.S. spend much more time in assisting foreign purchasers than would be required to assist U.S. persons, simply because foreign clients are unfamiliar with the system and need lengthy explanations and generally more assistance than local clients.

In summary, the enlightened sel f interest of a foreign participant in a U.S. real estate transaction definitely benefits from the assistance of real estate professionals and attorneys.

FINANCING
TYPES OF FINANCIAL INSTITUTIONS

In theory, a foreign purchaser of U.S. realty could obtain a loan from foreign banks or finance companies. Under Florida law, a foreign financial institution may lend money for the purchase of Florida realty and take a purchase money mortgage encumbering that realty to guarantee repayment of the loan. Some foreign purchasers mortgage real property they own in their home country and use the proceeds for the purchase of Florida property.

However, foreign banks and finance companies often are not willing to make loans for the acquisition of real property outside their home countries (in this case, in the United States) for reasons of unfamiliarity with the system Ir and the corresponding increase in costs (they must hire an attorney also!), not to mention the tax situation. The reality is that the foreign purchaser generally must consult a local lender. These lenders normally fall into two categories: mortgage, or "finance" companies, and banks.

ROLE OF MORTGAGE BROKERS

Experienced mortgage brokers maintain contacts with finance companies and banks who are willing to lend to foreign buyers. They are often able to save foreign buyers considerable time i n finding a program that corresponds to their needs. A mortgage broker explains the essential terms and conditions of the various loans that are offered and assist the foreign buyers i n completing the documentation that each lender requires. Foreign buyers should always ask all necessary questions when dealing with mortgage brokers (and indeed when dealing with the lenders themselves). When considering certain types of mortgages, in particular those with an adjustable rate feature, they should definitely be sure they understand exactly how the interest rate adjusts.

MORTGAGE COMPANIES

In Miami, several mortgage and finance companies specialize in financing the acquisition of Florida realty by foreign buyers. The situation is comparable in other states with a large foreign presence. Most real estate attorneys can direct buyers to mortgage companies dealing with foreign borrowers in their area. In addition, some foreign consulates maintain lists of such institutions. Brokers also are a good source of information in this regard. Here, foreign buyers must be aware of the primary rule in American business practices: always get more than one quote for any transaction. This is especially important when shopping for a real estate mortgage loan. The considerable differences in conditions from one lender to the next are often surprising.

At the outset, it must be noted that these companies generally requi re that the Buyer furnish 30 to 40 or even 45% percent of the total price as a down payment. As a general rule, moreover, given the reduced availability of credit in late 2008 and very likely throughout 2009, obtaining financing in the U.S. for foreign buyers will remain difficult for the foreseeable future, and down payments required will be in the neighborhood of 40% or 45%. Note also that most of these specialized companies charge interest rates somewhat higher than local banks lending to U.S. persons. Finally, they ask for extensive information from the Buyer regarding creditworthiness: bank references, financial statements, recommendations, etc.

Foreign buyers planning on financing their purchase m ust be sure that their attorney includes a financing contingency in the purchase contract, that is, a clause granting the buyer a certain time to obtain financing, and providing that if the buyer cannot get financing by a certain date, the buyer can cancel the contract and get the deposit back (often I 0% of the purchase price). Note that the financing contingency section of a contract usually requires that the buyer initiate immediately the loan application process. Also, if the foreign buyer plans to take title in the name of an offshore (non-U.S.) corporation, this intention should be expressed to the potential lender during the first meeting. While most lenders finance acquisitions by foreign corporations, they usually will require a personal guarantee by the principal of the company.

Once a mortgage company is found, the application process is generally straightforward. An application form m ust be filled out and the closing itself prepared. Although straightforward, the application form as indicated is usually quite thorough and calls for personal and professional references, especially from bankers, and personal and professional data. One Miami mortgage company req uires the following from a potential foreign borrower, for example: a letter from the borrower's accountant; two bank references; three credit references (with payment history); corporate documents if the borrower is a corporation; U.S. credit history; copy of the passport with the entry visa; and an appraisal of the real property.

Mortgage companies, like banks, assist the Buyer throughout the acq uisition process, among other reasons because their security depends on the Buyer's obtaining good title. When a mortgage company provides financing, the purchase process itself is almost identical to what it would be in the case of a purchase financed by a bank, and the remarks below apply to all such financed transactions no matter what type of institution finances the purchase.

BANKS AND SAVINGS AND LOAN INSTITUTIONS

Foreign purchasers seeking financi ng sometimes will want to contact U.S. banks, some of which are willing to lend to foreigners acquiring U.S. real estate, although at present the amount financed by banks rarely will be over 60% in Florida. There are many types of banking institutions in the U.S. and the banking regulatory system is complex and undergoing change at present. Because of the volatility now affecting banks and other financial institutions in the U.S., foreign buyers, again, should always consult experienced professionals when seeking financing through relations with U.S financial institutions. The following discussion will help to familiarize foreign buyers with the system.

SAVINGS & LOAN INSTITUTIONS AND COMMERCIAL BANKS

The first division one must point out is the distinction between Savings and Loan Associations and commercial banks. These are the two main types of banks that make real estate loans. Generally, it may prove somewhat more difficult for a foreign purchaser to obtain financing from a Savings and Loan institution ("S&L"), even in cities such as Miami where many such financial institutions have a "foreign" department. The reason for this reluctance on the part of S&L's to make loans to foreigners is often the perceived difficulty in properly verifying the creditworthiness of the potential buyer and in recovering any deficiency in a foreign country if the borrower defaults on the loan. Having said this, many Miami commercial banks and banks in other large cities can and do make real estate loans to foreigners. Here again, it is necessary to consult attorneys and brokers and others knowledgeable in this area to find potential lenders.

TERM AND CONDITIONS FOR FOREIGNER BORROWERS WHO FINANCE THEIR PURCHASE OF US. REAL PROPERTY

Many of the financing institutions mentioned above can and do make real estate loans to foreign buyers. The terms and conditions of these loans are worthy of analysis for the foreign purchaser. We underscore that the substantive aspects of a real estate acquisition by a foreigner, such as the transfer of title by deed and the documentation of the transaction (no lien affidavit, bill of sale for personal property, inspections, purchase of title insurance, etc.), are quite similar to what they would be if the purchaser were payi ng cash. In other words, there is a core of common procedures and documents that one finds in all real estate transactions, whether the purchaser is foreign or domestic and whether the transaction is all cash or with a mortgage loan. What is different in a financed acquisition is the subject of the following discussion.

A purchaser who finances the acquisition of real property m ust consider the following points: Amount financed and the terms of the financing, essentially the following:

• Amount of down payment.
• Interest rates (fixed or adjustable). Promissory Note: terms and conditions. Mortgage: terms and conditions.
• Financing Fees and Costs Title Insurance.
• Post Closing Considerations

PROCUREMENT OF THE FINANCING: GENERAL

Assuming the foreign purchaser locates a lender willing to finance the purchaser's acquisition of U.S. real property, the purchaser will be asked to fill out an application, provide references, and fulfill any other requirements I the lender may have. Some buyers ••pre-qualify" for a mortgage loan before signing a contract to purchase. This practice is to be recommended. Other buyers sign the contract and then begin to look for financing. Obviously, a Buyer who intends to finance the acquisition must be sure that the purchase contract provides a reasonable period of time for the Buyer to find a lender and that it permits the Buyer to recover the Buyer's deposit if after making good faith efforts to obtain a loan, the Buyer ultimately is unsuccessful.

Once the Buyer has com pleted the loan application and the loan is approved, the lender will give the purchaser a good faith estimate of the costs and expenses to be incurred by the Buyer i n connection with the transaction, the remainder of the down payment, and the amount of cash to be provided by the purchaser at closing. The "closing" in question is the second stage of a U .S.-style purchase transaction that begins with the signature of the purchase contract and ends with the closing, a ceremony at which the payment of the purchase price by the Buyer is made in exchange for the delivery by the Seller to the Buyer of the deed, the document that represents the ownership of the property.

DOWN PAYMENT, NTEREST RATES, TERM OF LOAN

DOWN PAYMENTS

During the preliminary examination of the terms and conditions of the loan, the purchaser must verify that the amount financed is correctly stated and that the terms of the financing are those agreed upon with the lender. In particular, the amount of the down payment to be paid by the Buyer must be correctly indicated, and the term of the loan and the interest rates must be as agreed. As regards the down payment generally, banks or other financial institutions lending to foreigners will require that the percentage of the price paid in cash by the Buyer (in the form of a "down payment" that appears in the purchase contract and on the closing statement as a "deposit" or "deposits" if more than one) be in the neighborhood, at present, of 40 or even 45 percent. During the height of the real estate bubble in Florida, lenders would sometimes finance 100% of the purchase price of realty for U.S. buyers, whereas at present U.S. citizens or residents generally must make down payments of 20%.

INTEREST RATES

Interest rates may be fixed or variable (in the so called "adjustable rate mortgages" or ARMs). Foreign purchasers may obtain an idea of prevailing rates in The Wall Street Journal or other financial publications or even on the internet. Here again, the foreign purchaser will be well advised to seek quotes from more than one lender and to keep in mind that loans to foreign purchasers often are made on terms that are less favorable than those governing loans made to U.S. residents.

The potential borrower will find that variable (or adjustable) interest rates are generally lower than fixed rates for the first few years, but that as their name indicates, they then may vary by reference to an agreed-upon figure such as the prime rate. Purchasers who request variable rates often need lower monthly payments in the beginning and believe that when (and it) the rates go up subsequently, they will be in a better financial situation and will have access to more funds than at the time of purchase. Finally, if opting for a variable rate mortgage loan, the foreign purchaser should ask the lender to go through and explain several scenarios including increases and decreases in the prime rate of various magnitudes. Also, if more exotic mechanisms such as balloon mortgage are used, in which the payments are lower for a preliminary period but the entire loan becomes due at the end of that period, usually fairly short, it becomes essential that the purchaser request complete explanations from the lender and from the purchaser's attorney.

Many classic calculations used by foreign buyers in the past when considering the purchase of U.S. realty have unfortunately become obsolete as a result of the bursti ng of the so-called real estate "bubble" in Florida and the increasi ng unavailability of financing for real property purchases. Foreign buyers who are able to pay cash will find very favorable transactions but they too must be aware of the rapidly evolving market conditions if they are to take full advantage of the situation. Consulting a qualified real estate broker is all the more crucial under present circumstances for a successful transaction.

MISCELLANEOUS CLOSING COSTS DUE TO FINANCING BY LENDERS

A mortgage lender will provide the prospecti ve purchaser-borrower a good faith estimate of all costs to be incurred by the purchaser at closing. This estimate generally takes the form of a pro forma closing statement.

I should be carefully reviewed by the purchaser and by purchaser's attorney. Among the expenses, fees and charges that the purchaser can expect to see on the closing statement when bank or mortgage company financing is involved are the following:

"Points": Lenders often charge a certain percentage ( I percent, 1 .5 percent) of the loan amount as a ..loan ( origination fee", i.e., the cost of the loan. The actual amount of this fee is subject to negotiation and its reasonableness should be considered in relation to the interest rate being charged. The term ''points" also refers to discount points that lenders use to bring the yield on their loan as close as possible to prevailing market conditions. For the borrower, this is simply another charge to be paid.

APPRAISAL FEE

Mortgage lenders require an appraisal of the property performed by a qualified professional. The cost of the appraisal, several hundred dollars generally, is often charged to the borrower, although this is subject to negotiation.

ESCROW PAYMENTS FOR TAXES
AND CASUALTY INSURANCE PREMIUMS

Mortgagees (lenders) do not want to run the risk that the borrower, as new owner of the property, will not pay the property taxes or casualty insurance premiums when due. Mortgagees (lenders) thus require that the buyer pay part of those charges in advance, into escrow, for use at the proper time to pay these taxes and premiums.

INSPECTIONS (TERMITE) AND INSURANCE

A mortgage lender often requires that the purchaser have the property inspected, in particular for termites, at least in Florida, and also will require that the Buyer insure the property. Costs involved for these items are generally charged to the borrower. Of course, a Buyer paying cash also will want to keep the property fully insured.

Lender's Attorney's Fees: It is quite common for the borrower to have to pay the attorneys' fees incurred by the mortgage lender. As a general rule, mortgage lenders use attorneys who are highly specialized in real estate closings. Consequently, these attorneys' fees are generally reasonable. Nevertheless, they represent another item that must be considered by the Buyer.

Mortgagee's Title Insurance: The borrower-purchaser generally must pay the premium for the mortgagee's title insurance. As described above, title insurance provides greater certainty to the owner and other parties such as the mortgage lender having an interest in the property that their interests are as they should be, and that if problems arise, these parties, owner and mortgagee, will not suffer economic harm. The State of Florida has published minimum premium rates for title insurance. The agent of a title insurance company, often the attorney for the lender, may charge more than the minimum rate, although some charge the strict minimum. Such agent collects part of the premium as a commission. Here again, the borrower-purchaser should verify carefully the pro forma closing statement to determine what the actual premium will be.

OWNER'S TITLE INSURANCE

Because the risk is practically the same as in the case of a mortgagee insurance policy, the title insurance company usually will issue an owner's title insurance policy simultaneously with the mortgagee's policy at a much lower premium, also l isted on the pro forma closing statement. This policy, also paid for by the Buyer, protects the Buyer's title as owner of the property and obviously is very important for the peace of mind of the purchaser of U.S. real property.

INTANGIBLES TAX ON THE MORTGAGE

The State of Florida levies a tax on intangibles, that is, on ''intangible" evidence of indebtedness such as a mortgage. The rate is 2 mills per dollar (0.002 percent) of the principal indebtedness. This tax is normally paid by the borrower-purchaser.

STRATEGIC CONSIDERATIONS

The bank or mortgage company will be on the Buyer's side as regards title, since the validity of the Bank's security, its mortgage, depends on the mortgagor (Buyer) being truly the owner of the mortgaged property. As a result, the bank's attorneys or the attorneys or closing agent for the mortgage company will carefully scrutinize all the documents to make sure there are no flaws or errors.

LEGAL DOCUMENTATION FOR FINANCING: NOTE AND MORTGAGE
NOTE AND MORTGAGE: GENERAL

The principal instruments of the financing transaction are the mortgage and the promissory note, or '"note." The Promissory Note evidences the debt, that is, the promise by the borrower to repay the loan. The mortgage secures the Note: if the borrower defaults, that is, fails to make the promised payment (or fails to comply in some other way with the req uirements and conditions contained in the mortgage), the lender, or mortgagee, may foreclose its mortgage, take possession of the property and sell it. From the Proceeds of the sale, the lender recovers (hopefully) the amount of the Loan. Any excess goes to other creditors and the borrower. Any deficiency still must be paid by the borrower if the loan is a recourse loan as most mortgage loans are.

ASPECTS OF THE MORTGAGE AND NOTE TO VERIFY

Because the Note and Mortgage govern the entire financing transaction, the borrower must be extremely careful when reviewing these instruments. Generally, the borrower's attorney will review the documents and negotiate any necessary modifications with the lender's attorney. As an educated buyer is better able to discuss the transaction with the other parties, we set forth below a few of the main points to verify in connection with each of these documents.

PROMISSORY NOTE

The Promissory Note embodies a promise by the borrower to repay a specific amount of money over a speci fic period of time at a given interest rate. Promissory Notes are negotiable instruments. Unlike promissory notes in many foreign countries, notes in the U nited States may call for staggered repayments over very long periods ( 15 or 30 years being quite common) in one instrument. When reviewi ng the terms of the promissory note, the following items should be carefully checked:

• Principal Amount: This must be the amount of the mortgage loan.
• Interest Rate: All the details regarding the interest rate m ust be clear, fixed or variable; if variable, how it is calculated; and how and where the interest is to be paid.
• Payment Schedule: The Note should set forth a schedule of payments, indicating what each payment consists of (usually princi pal and interest). I f the loan calls for a balloon payment, this fact must be indicated conspicuously on the note itself. The place of payment also should be indicated.
• Grace Period: Generally, the borrower wi ll not want to be declared in default if a payment is one or two days late. The Note should provide for a grace period of from 5 to I O days, at least. That is, if the payment is due on the first day of the month, the borrower has until the tenth (10th) day, for example, to pay and can only be declared in default ten days after the payment date.
• Right of Prepayment: They will want to verify whether or not the lender permits prepayment of the outstanding balance due on the mortgage loan, and whether or not prepayment entails payment of a penalty.
• Events of Default: The principal "'event of default" is. of course nonpayment of an installment. There I usually are other such ••events of default," however, such as the borrower's insolvency or the filing of a judgment / against the borrower, that the borrower will want to know about.
• Acceleration:Most notes call for an acceleration of the debt in the event of borrower's default, i.e., if the borrower fails to make a payment when due, the lender may declare the entire amount of the loan immediately due < and payable, and if the borrower cannot reimburse the entire amount of the loan, the lender may foreclosure the mortgage. It is important that the borrower know of this consequence of a failure to comply with applicable obligations.

MORTGAGE

The mortgage is a contract between the borrower and lender. Its purpose is to secure, or guarantee, the lender against loss of the loan amount in the event of Buyer's default. A mortgage creates a lien on the property in Florida and in many other states. In some '"title theory" states, the mortgagee, i.e., the lender, becomes the actual owner of record of the mortgaged property, but the effect is identical and methods of foreclosure, etc. are not significantly different in "title theory" states than in '"lien theory" states such as Florida.

The mortgage agreement is executed by the borrower and recorded in the real property records of the county where the property is situated. Before the mortgage can be recorded, certain taxes must be paid (in Florida, for example, the intangibles tax). Because a mortgage contains requirements affecting the use of the mortgaged property and because it also governs the foreclosure process, the prospective borrower will want to have a lawyer review the document. In particular, a borrower should ask about, and examine, the following matters:

• Legal Description: any error in the legal description harms the lender more than the Buyer, but it nevertheless is important that this description be correct at the outset.
• Loan Amount: Check to be sure the description of the debt being secured by the mortgage is complete and correct, including interest rates and default rates, if any.
• Special Requirements: If the lender requires that the Buyer insure the encumbered property, for example, or fulfill other requirements (keep the property in good condition, etc.), these requirements will figure in the mortgage agreement and should be reviewed by the borrower.
• Events of Default and Acceleration Clauses: The borrower will want to review the so-called "Events of Default" and the remedies provided for the lender in the event of a default (acceleration of the outstanding debt, foreclosure, etc.). Grace periods for payment of installments should be verified, and if none are provided, should be requested.
• Second (Junior) Mortgages: Some lenders pennit the borrower as owner of the property to contract for subsequent loans from other lenders and to secure such later loans by a second mortgage on the property. Others strictly prohibit any 'junior" mortgages or encumbrances. The borrower will want to verify the rules governing junior mortgages if any are contained in the mortgage instrument.

POST CLOSING CONSIDERATIONS

A Buyer who purchases real property for cash has less to worry about than a Buyer who finances the acquisition of the property through a loan provided by a financial institution. The borrower who acquires real property encumbered by a mortgage should be aware of several matters that must be attended to for as Payment of mortgage installments: Obviously, the foreign borrower will want to take steps to have mortgage payments made in a timely manner, in U.S. dollars. The easiest system is to have the borrower's bank in the U.S. make pre-authorized payments. It is most important also that the foreign owner verify from time to time that the payment arrangements in fact are being respected. Some foreign borrowers have had to defend foreclosure actions by lenders because payments on the mortgage were never made by the person charged with making them. Finally, foreign owners should be sure to get the name of the bankor mortgage company officer with whom they will be dealing in connection with the mortgage. In case of difficulty, a U.S. representative of the foreign owner will need this information before all else. Taxes and Insurance Payments: Many mortgage lenders require that insurance and real property tax payments be made in advance and held in escrow so as to be sure that proper and timely payment will be made. If this is not done in a specific case, the borrower will be responsible for ensuring that taxes and insurance premiums are paid on time. The danger of not doing so is obvious. Nonpayment of real property taxes, for example, can result not only in a default under the mortgage agreement (with the attendant danger of foreclosure) but also in administrative liens being placed on the property and eventually, a tax sale of the property.

Condition of the Property: The foreign owner who does not travel often to the U.S. should make arrangements to have someone inspect the property periodically to make sure that nothing happens to violate any local ordinances or laws affecting any structures on it. The electrical and plumbing systems also should be checked.

Mail forwarding: It is extremely important to have any mail concerning the property forwarded promptly to a responsible person. In many U.S. cities, local authorities mail out administrative notices concerning the property to the owner at the address indicated on the public record. These notices can be very important insofar as the status of ownership of the property is concerned. Foreign owners must take every precaution to be sure that such mail is forwarded to the owner or to the owner's U.S. attorney or other responsible person.

CONCLUSIONS

Despite present market conditions, United States real property has generally proved to be an excellent investment and financing is in fact available to potential non-resident alien purchasers.

Potential purchasers should keep in mind that speculation is no longer advisable. Buying real estate for a quick resale at a profit is no longer as feasible as it was only a short time ago, although in certain locations this remains possible. It is now more important than ever, even indispensable, to consult qualified brokers and other professionals before incurring obligations involving Florida real property.

Financing the acquisition of U.S. real property entails particularly for non-resident borrowers, much paper work and the execution of numerous documents and instruments. The above discussion underscores important precautions to be taken by a foreign purchaser who obtains financing in connection with an investment in real property. There are, of course, other issues. We conclude, therefore, as we began, by recommending that the foreign investor obtain competent professional advice regarding any transaction in the U.S. The cost of this advice almost always is minor when compared to the dangers and pitfalls it allows the investor to avoid.