Commercial Investment Real Estate March/April 2018 | Page 16

FINANCING
FOCUS
Silver Lining
Developers and investors will find new opportunities in Puerto Rico.
by Andrew Maguire, Esq.
W
Transactional Norms
Although Puerto Rico is a U.S. territory, its applicable laws and
customs often differ from U.S. states. For example, the seller
delivers the title to real property through a deed of sale, which is
filed in the Puerto Rico Property Registry.
Transfer tax is due at closing, with the seller paying the cost
of stamps on the original deed, and the buyer paying the cost of
stamps on the certified copy of the deed and recording vouchers.
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March | April 2018
The amount of transfer tax due is based on a tiered scale, with the
percentage due increasing with the amount of the purchase price.
At closing, the seller must pay a notary fee based on the pur-
chase price. The notary fee must equal at least 0.50 percent of
the purchase price for acquisitions up to $5 million, but the fee is
negotiable when the purchase price is higher than this amount.
Due Diligence
In any real estate acquisition, the buyer’s due diligence centers on
physical inspection of the property. In Puerto Rico, a thorough
property inspection is even more critical after Hurricane Maria.
Buyers should hire qualified engineers and construction pro-
fessionals to ascertain the building’s structural integrity, while
considering design changes to guard against future storms.
Although environmental testing typically is advisable for any
buyer, mold inspection is outside the scope of the standard Phase
I environmental site assessment. Accordingly, prospective buyers
concerned about the aftermath of flood damage may consider hir-
ing an industrial hygienist to perform a specialized mold survey.
COMMERCIAL INVESTMENT REAL ESTATE
hen Hurricane Maria descended upon Puerto Rico
on Sept. 20, 2017, the fate of the island and its
people changed forever. In addition to the vast
human toll taken by Maria, the storm demolished
much of the island’s infrastructure while severely damaging a
wide swath of Puerto Rico’s commercial buildings.
Although the well-being of affected Puerto Ricans remains
paramount in the hurricane’s aftermath, the tragedy of Maria will
spawn opportunities for commercial real estate developers and
investors that participate in its recovery and rebuilding.