Sale and purchaseDue diligence
Are there any particular due diligence considerations for real estate sale contracts concluded in your state?
In Delaware and under existing requirements promulgated by the Department of Natural Resources and Environmental Control (DNREC), sellers of real property should be particularly cautious of permitting invasive Phase II environmental testing. Under DNREC regulations and Delaware law, owners of real property may be required to make mandatory reporting of releases or discharges. 7 Del. C. § 6028; 7 Del. Admin. Code § 3.1.1.
Additionally, environmental firms engaged in testing real property may have their own professional requirements of mandatory reporting, so owners of real property should not assume that a firewall of that information could avoid triggering mandatory reporting requirements.Contracts
Are sale contracts in your state subject to any formal or substantive requirements?
Under Delaware law, contracts for the sale of unimproved real estate in Delaware must contain a disclaimer that such land is unimproved in the language prescribed in 25 Del. C. § 313. Further, contracts for the sale of real estate in which the seller agrees to provide seller-financing must be in compliance with 25 Del. C. § 314, including an amortization schedule and other technical requirements.
While not a requirement of Delaware law, parties to contracts involving Delaware real estate should be aware that documents executed under seal by the contracting parties have a presumption of payment after 20 years, which effectively operates as a 20-year statute of limitations. Whittington v. Dragon Group, L.L.C., 991 A.2d 1, 10 (Del. 2009). In general, actions to recover a debt not evidenced by a record or by an instrument under seal have a three-year statute of limitation. 10 Del. C. § 8106(a).
On 14 July 2000, the Delaware state legislature adopted a version of the Uniform Electronic Transactions Act, 6 Del. C. § 12A-101 et seq. As a result, no record or signature may be denied legal effect or enforceability solely because it is in electronic form.Obligations and liabilities
What are the seller’s disclosure obligations and other liabilities, and what are the consequences of breach?
Under Delaware law, the seller of residential real property is generally required to provide written disclosure to the buyer, agent and subagent of all material defects of the property known when the property is listed for sale and made known prior to final settlement. 25 Del. C. § 2572. Failure to provide such notice will provide the buyer with a cause of action against the seller. 25 Del. C. § 2575.
Generally speaking, however, for a commercial sale, the underlying agreement of sale will govern the disclosure requirements and how a breach of any reporting requirement is to be addressed.
Are there any other obligations on the buyer, aside from paying the purchase price?
Under Delaware law, every person who executes, delivers, accepts or presents for recording any document transferring ownership in real property is required to present a Form RTT-Tax affidavit of transfer tax and pay the transfer tax associated therewith to the state. 30 Del. C. § 5402(a). A similar transfer tax affidavit is also to be presented to the Office of the Recorder of Deeds in the form prescribed by the statute of the applicable county or municipality in which the property lies. Additional obligations may also be imposed by the terms of any agreement of sale.
If the buyer of Delaware real property is a non-Delaware entity (whether incorporated in another state or foreign jurisdiction), there are additional operating and filing requirements. For example, the Delaware Racketeer Influenced and Corrupt Organizations (RICO) statute requires that non-Delaware entities desiring to obtain real property shall maintain a registered office and registered agent in Delaware, and file an annual report with the Delaware Secretary of State. 11 Del. C. § 1510.Special considerations
Are there any other special considerations for real estate sale and purchase transactions in your state?
The Delaware Supreme Court has held that the handling of a real estate closing and the distribution of funds is considered to be the practice of law. Therefore, the closing of the purchase and sale of real property in Delaware must be handled by a Delaware-licensed lawyer. Delaware lawyers must handle the real estate closing and distribution of funds through the lawyer’s IOLTA escrow account. In the Matter of Mid-Atlantic Settlement Services, Inc., UPL No. 95-15 (Bd. on the Unauthorized Practice of Law) (8 March 2000), approved 755 A.2d 389 (Table) (Del. 2000).