There are many types of leases that can be structured for the leasing of real property. The type of lease that is appropriate for any given transaction will depend on the parties’ objectives, financial strength, long term or short term intentions for the property and the management skills of the landlord. One of the structures often used by landlord who do not have management capabilities or who desire to simplify and take the risk out of leasing is the triple net form of lease.
In triple net leases, generally, the tenant is required to pay for the utilities, taxes, insurance and maintenance. This form of lease is often favored in sale-leaseback deals. While it may be clear that the tenant has responsibility for payment of the real estate taxes, questions can arise as to rights and responsibilities of the parties related to disputes over taxes.
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Q. Are there any legal ramifications if my client is not a U.S. citizen and is selling his residential property located in Florida?
A. Yes. Your client may be subject to the Foreign Investor in Real Property Tax Act (FIRPTA). FIRPTA requires that the buyer involved in your transaction withhold 10 percent of the “amount realized” by your client who is a “foreign person” in connection with the subject purchase and sale transaction. The buyer or the agent is then required to remit the 10 percent withholding tax to the I.R.S. together with the required I.R.S. forms within 20 days of the closing.
Q. My client is a non-U.S. citizen who is selling his residential property located in Florida. He does not want 10 percent of his net sales proceeds withheld by the buyer. Are there any exemptions to FIRPTA?
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