A European institutional fund acquires a commercial property portfolio in the United States, only to discover weeks before closing that the title chain contains a decades-old lien that its home-country advisors never flagged. The transaction stalls. Escrow fees accumulate. The window to deploy capital closes. This scenario repeats itself with striking regularity when cross-border buyers engage US real estate without specialist legal support anchored in American transactional practice.
Real estate legal services in the United States cover the full lifecycle of property acquisition, ownership, financing, and disposition under a dual system of federal and state law. Each state maintains its own recording system, conveyancing rules, and title insurance regime, making jurisdiction-specific due diligence an absolute prerequisite. Transactions involving foreign buyers also engage federal investment legislation, tax withholding rules, and – in certain cases – national security review processes.
This page sets out the principal legal instruments, procedural stages, timelines, and strategic considerations that international clients must understand before committing capital to US real estate. It addresses the cross-border dimension for clients operating between the United States, Brazil, and the European Union, and closes with a self-assessment checklist designed to help business owners evaluate their readiness to transact.
The regulatory setting for US real estate transactions
The United States does not operate a single national land register. Each state – and in many cases each county – maintains its own recording system for property instruments. A title deed (the principal instrument of ownership transfer in US real property law) derives its legal validity from correct recording in the applicable county recorder's office or equivalent authority. Failure to record promptly exposes a buyer to intervening claims from third parties who record first.
Under US real estate and property legislation, the conveyancing process is governed at the state level. This means the form of deed required, the scope of title warranties, the mechanics of escrow, and the applicable closing procedures all vary significantly between states. A transaction in New York follows different formal requirements than one in Florida, Texas, or California. International clients who assume uniform national procedures consistently encounter avoidable complications.
Federal law intersects with state property rules in several important respects. Foreign investment in US real property is subject to specific tax withholding obligations under federal tax legislation – a requirement that applies at the point of sale and must be managed through the closing process. Large acquisitions involving foreign buyers from certain jurisdictions may also trigger review under national security investment legislation administered at the federal level. Buyers who fail to identify this exposure early face the possibility of a delayed or unwound transaction.
The conveyancing process in the US. the legal transfer of title from seller to buyer – is typically managed through a title company or escrow agent rather than through a notary or civil law practitioner. This distinguishes US practice sharply from Brazilian, Portuguese, or German transaction mechanics, where a notarial deed executed before a civil law notary is the legally required instrument. In the US, the title insurance policy issued at closing substitutes for much of the protective function that notarial process provides in civil law systems. Understanding that distinction is essential for any client whose home-country experience is rooted in civil law.
US property legislation also governs landlord-tenant relationships, zoning and land use, environmental liability, and the enforceability of purchase agreements. Each of these areas generates litigation risk that a thorough legal review should anticipate before the transaction closes.
Key instruments, procedures, and timelines
A US real estate transaction for a commercial or investment buyer typically moves through five sequential stages: letter of intent, purchase and sale agreement, due diligence, closing, and post-closing recording. Each stage carries distinct legal obligations and risk exposure.
The letter of intent establishes the commercial framework: price, deposit structure, due diligence period, and target closing date. Although often described as non-binding on its face, letters of intent in US practice can give rise to enforceable obligations if drafted imprecisely. Courts across multiple US jurisdictions have held parties to preliminary agreements where the language created a duty to negotiate in good faith.
The purchase and sale agreement is the binding contract. It must address title conditions, representations and warranties, indemnification obligations, closing conditions, and termination rights with precision. For international buyers, representations about the buyer's capacity and any regulatory approvals required for a foreign entity to hold US real property must be correctly structured from the outset.
The due diligence period – typically running between 30 and 90 days depending on asset complexity – is the buyer's principal opportunity to verify the condition of title. The physical state of the property, environmental status, zoning compliance, and existing lease arrangements. A title deed search conducted through the county recording system will reveal recorded encumbrances, easements, and liens. Title searches covering the required chain of title. often extending back several decades – are conducted by the title company or by legal counsel, and the results inform the scope of the title insurance policy.
Title insurance in the US operates differently from title guarantee mechanisms in civil law systems. The policy indemnifies the insured against losses arising from defects in the title that existed at the policy date but were not disclosed in the search. It does not prevent disputes – it funds their resolution. A land register search alone, without title insurance, leaves a buyer exposed to off-record risks that are peculiar to the US recording system.
Closing occurs when the purchase price is funded, title documents are executed, and the deed is delivered. In many states, closing takes place through escrow: funds and documents are deposited with a neutral agent who releases them simultaneously once all conditions are satisfied. The closing process for a mid-market commercial acquisition typically takes between 30 and 60 days from contract execution, though complex transactions with financing contingencies or regulatory review requirements can extend materially beyond that window.
Post-closing, the deed must be recorded in the appropriate county office to give constructive notice of the transfer. Recording fees and transfer taxes vary by state and county. In some states – including New York and certain California counties – transfer taxes represent a material cost that must be modelled into the acquisition economics before the contract is signed.
For international buyers structuring the acquisition through a US entity, the choice of holding structure matters enormously. A Delaware LLC is the most commonly used vehicle for real property investment by foreign buyers. Delaware limited liability company law is well-developed, flexible, and familiar to US counterparties and lenders. However, the tax treatment of a Delaware LLC held by a foreign investor differs substantially from that of a US-domestic holder. Additionally. The interaction between the holding structure and federal tax withholding obligations at disposition must be addressed in the structuring phase – not at closing. For detailed analysis of the tax dimensions of US real estate investment, see our coverage of tax law in the United States.
To discuss how the conveyancing and structuring process applies to your specific transaction in the United States, contact us at info@ferrazwhitmore.com.
Practical insights and common pitfalls for international buyers
International clients consistently underestimate the decentralised character of US real property law. The assumption that engaging a nationally recognised law firm provides uniform protection across all states is incorrect. State-specific rules on deed form, title warranties, recording requirements, and closing mechanics require practitioners with experience in the relevant state.
A common error is to treat the letter of intent as a purely commercial document and to engage legal counsel only at the contract stage. In practice, letters of intent frequently contain exclusivity and deposit provisions that create enforceable obligations. A buyer who signs a letter of intent without legal review and then withdraws may face a damages claim under the law of the state where the property is located.
Environmental liability is a persistent hidden risk in US commercial real estate. Under federal environmental legislation, current property owners can bear cleanup liability for contamination they did not cause. A Phase I environmental site assessment is standard practice for any commercial acquisition and is typically a condition of institutional financing. Omitting this step – or commissioning an assessment after the contract is signed – removes the legal protections that proper pre-contract assessment provides.
Foreign buyers acquiring US real property through a foreign entity rather than a US holding vehicle face procedural difficulties at closing. Title companies frequently decline to insure transactions where the buyer is a foreign company without a US taxpayer identification number. Establishing the correct holding structure before entering into a purchase agreement avoids a last-minute scramble to restructure that can jeopardise the transaction timetable.
Dispute resolution provisions in US real estate contracts deserve careful attention. Many commercial contracts in the US designate JAMS (Judicial Arbitration and Mediation Services) or AAA arbitration (American Arbitration Association) as the dispute resolution mechanism. These bodies provide efficient, commercially sophisticated resolution of real estate disputes. However, a buyer who accepts arbitration clauses without reviewing the applicable rules may waive rights. including rights to class action participation or to appeal on the merits. that would otherwise be available in a US District Court. The federal court system retains jurisdiction over certain categories of real estate dispute, particularly those involving federal regulatory compliance or claims under federal environmental legislation.
Brazilian and EU clients frequently ask whether their home-country legal structures can hold US real property directly. The answer is that they can, as a technical matter, but doing so creates significant tax and administrative complications. Transfers of US real property by foreign entities trigger the federal tax withholding regime, and the absence of a US entity in the ownership chain limits access to certain treaty benefits. Restructuring after acquisition is possible but costly. Addressing structure before signing is materially more efficient.
Cross-border and strategic considerations
For clients operating between the United States and Brazil, US real estate transactions raise a distinct set of cross-border issues. Brazil imposes its own tax reporting requirements on Brazilian residents who hold foreign assets – including US real property. The interaction between Brazilian tax legislation and US federal tax withholding rules on disposition creates a layered compliance burden that must be managed in both jurisdictions simultaneously. The firm's experience in parallel US and Brazilian real estate matters positions us to coordinate this cross-jurisdictional exposure. For comparison of structuring approaches in the Brazilian market, our analysis of real estate in Brazil provides a detailed reference point.
European Union investors face a different set of cross-border issues. EU-based funds investing in US real property must consider their home-country regulatory reporting obligations – including requirements applicable to alternative investment fund managers – alongside US federal and state requirements. The SEC (Securities and Exchange Commission) regulates certain investment vehicles used to pool capital for US real estate investment. Additionally. EU fund managers who structure US real property pools without engaging US securities counsel risk inadvertent registration obligations.
For buyers considering whether to hold US real property through a Delaware LLC or through an alternative structure such as a US corporation or a limited partnership, the decision turns on several intersecting factors: the intended holding period. The buyer's home-country tax residence, whether the property will generate rental income or be held for capital appreciation, and whether co-investors are involved. Each structure produces different outcomes under federal income tax legislation, estate tax legislation, and the bilateral tax treaty network. Buyers from treaty jurisdictions – including most EU member states and Brazil – may benefit from specific treaty provisions, but those benefits must be correctly claimed through the holding structure; they are not automatic.
National security review under US investment legislation applies to acquisitions of real property in proximity to certain sensitive federal facilities. The scope of this review has expanded in recent years. Foreign buyers from any jurisdiction should conduct a preliminary assessment of whether the target property falls within a designated sensitive zone before signing any binding commitment. If a review is required, it adds a material timeline element – typically several months – that must be built into the transaction schedule.
Dispute resolution strategy in cross-border US real estate matters deserves advance consideration. For international clients, arbitration through JAMS or the American Arbitration Association offers the practical advantage of a neutral, commercially experienced forum with enforceable awards. Awards rendered in AAA or JAMS proceedings are generally enforceable in most jurisdictions under the New York Convention framework. Federal court litigation in the US District Court system is the alternative for disputes that fall outside arbitration agreements or involve federal regulatory questions. In either case, engaging counsel experienced in both the US system and the client's home legal system is a material advantage when cross-border enforcement is in play. Detailed guidance on US entity formation – which underpins most acquisition structures – is available in our guide to company formation in the United States.
For a tailored strategy on real estate acquisition and structuring in the United States, reach out to info@ferrazwhitmore.com.
Self-assessment checklist before transacting in US real estate
The following checklist is designed to help international buyers evaluate their preparedness before committing to a US real estate transaction. It is not a substitute for legal advice – it is a diagnostic tool.
The US real estate transaction process is appropriate for your situation if:
- You have identified the state where the property is located and engaged counsel with state-specific experience.
- Your holding structure – US entity or direct foreign ownership – has been determined and documented before entering into a letter of intent.
- Your transaction timetable accounts for the due diligence period, title search, environmental assessment, and – if applicable – national security review.
- You have modelled transfer taxes, recording fees, and federal tax withholding obligations as part of your acquisition economics.
- Your dispute resolution preferences have been reviewed in the context of the proposed contract's arbitration clause.
Before initiating the purchase process, verify:
- That a preliminary title search has been commissioned or is scheduled for the due diligence period.
- That a Phase I environmental site assessment is included in the due diligence scope for any commercial or industrial property.
- That the holding entity – if a Delaware LLC – has been properly formed, capitalised, and provided with a US taxpayer identification number before closing.
- That your home-country tax and reporting obligations for foreign asset holdings have been assessed by qualified advisors in your jurisdiction of residence.
- That your legal counsel has confirmed whether the target property falls within any federally designated sensitive zone requiring national security review.
The transaction strategy should be reconsidered if:
- The title search reveals unresolved liens, easements, or competing ownership claims that the seller cannot clear before closing.
- The Phase I assessment identifies recognised environmental conditions that trigger a Phase II investigation – which extends the due diligence timeline and may affect property value.
- The seller refuses to provide representations and warranties on title and physical condition that are customary for the asset class.
- The closing timeline does not accommodate the time required for national security review, financing approval, or entity establishment.
Frequently asked questions
- How long does a commercial real estate acquisition typically take in the United States?
- From letter of intent to closing, a mid-market commercial acquisition in the United States typically takes between 60 and 120 days. The due diligence period – usually 30 to 60 days – accounts for title search, environmental assessment, physical inspection, and financing review. Transactions requiring national security review or involving complex title issues can extend materially beyond that range. Buyers should build contingency time into their capital deployment schedules from the outset.
- Is it true that a foreign buyer does not need a US entity to acquire real property in the United States?
- This is a common misconception. While foreign entities and individuals can technically hold US real property directly, doing so creates significant tax withholding complications at disposition. Limits access to bilateral tax treaty benefits. Additionally, can create difficulties in the title insurance and closing process. Most experienced advisors recommend establishing a US holding entity – most commonly a Delaware LLC – before executing a purchase agreement. The structuring decision is most efficiently made before any binding commitment is signed.
- What happens if a dispute arises after a US real estate transaction closes?
- Post-closing disputes in US real estate transactions are resolved through the mechanism specified in the purchase agreement. either contractual arbitration through JAMS or the American Arbitration Association. Alternatively. Litigation in a US District Court or relevant state court. Arbitration awards under AAA or JAMS rules are generally enforceable internationally under the New York Convention framework. Engaging a lawyer in the United States with cross-border dispute experience is particularly important where enforcement of any award or judgment will be sought in a foreign jurisdiction.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. Our real estate practice supports international buyers, institutional investors, and private clients through every stage of US property transactions – from holding structure design and pre-contract due diligence through to post-closing compliance and dispute resolution. As an international law firm in the United States market, we combine English common law tradition with deep familiarity with civil law systems in Europe and Latin America. Enabling us to coordinate the cross-jurisdictional dimensions that pure US-domestic counsel cannot efficiently address. The firm's attorneys have advised on real estate and cross-border investment matters before the American Arbitration Association and in federal court proceedings. Our Lisbon base provides direct access to EU and Lusophone regulatory systems, while our common law expertise supports enforcement and arbitration strategies in English-speaking jurisdictions. The real estate team works alongside our tax and corporate practices to deliver structurally coherent advice across the full investment lifecycle. To explore legal options for your real estate investment in the United States, schedule a consultation at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.