On July 15, Paul Levin and Alex Belman published the article "When Title Insurance Isn't Enough: RWI and UCC Insurance in Equity Deals for Property-Owning Entities," published in the American Bar Association's Probate & Property magazine. The following is an excerpt:
Let’s say a client is an investor in commercial real estate. It buys and sells property across the country in many asset types and is used to the due diligence process. Then, the client tours a new property and is interested, but there’s one catch: The property isn’t being sold through a typical deed deal. The seller wants to convey 100% of the membership interests in an LLC that owns the property, or 100% of the interests in a REIT that owns the property, or 100% of the equity interests in some other form. What started as a dirt-and deed deal now looks more like a corporate transaction.
This scenario is increasingly common as real estate deals become more complex and structuring more detailed, especially in states with high deed recording taxes but without a controlling interest transfer tax. The drivers for these scenarios range from tax-efficient planning to the need to bring in different types of investors, and along the way the risks change as well.
Click here to access the article.