Legal Checklist for Foreign Investors Buying Commercial Property in Florida

Short answer

Foreign investors purchasing commercial property in Florida must comply with federal and state regulations, including due diligence, tax reporting, and ownership disclosures. Failure to meet these requirements can result in costly delays, penalties, or even loss of investment opportunities.

Why it matters

Investing in Florida real estate as a non-US citizen offers significant opportunities, but it also exposes investors to unique legal and regulatory risks:

  • Regulatory compliance: US laws such as FIRPTA (Foreign Investment in Real Property Tax Act) and state-specific rules require strict adherence, or investors may face unexpected tax liabilities or restrictions.
  • Transaction security: Proper legal guidance helps prevent title disputes, fraud, or unenforceable contracts.
  • Asset protection: Structuring ownership correctly can protect assets from legal claims and optimize tax outcomes.
  • Market access: Understanding compliance requirements ensures smoother transactions and access to high-value properties.

For high net worth individuals and businesses, even minor oversights can lead to significant financial and reputational consequences.

Steps

To ensure a compliant and successful commercial property purchase in Florida as a foreign investor, follow these steps:

Engage a qualified Florida real estate attorney Choose a firm experienced with foreign clients and high-value transactions. Confirm the attorney’s familiarity with FIRPTA, OFAC, and state-specific regulations.

Conduct comprehensive due diligence Review title, zoning, land use restrictions, and environmental issues. Assess property value, income potential, and any liens or encumbrances.

Determine the optimal ownership structure Consider forming a US-based entity (LLC, corporation, or partnership) for liability protection and tax efficiency. Evaluate the impact of direct ownership versus entity ownership on reporting and taxation.

Understand and comply with FIRPTA Be aware that the IRS may withhold a percentage of the sale price when a foreign person sells US real estate. Ensure proper documentation and tax filings to avoid unnecessary withholding or penalties.

Register with appropriate authorities File required disclosures with the Florida Department of State and, if applicable, the US Treasury (for large transactions or certain nationalities). Comply with anti-money laundering (AML) and Know Your Customer (KYC) requirements.

Secure financing (if needed) Understand that US lenders may have stricter requirements for foreign borrowers. Prepare documentation on source of funds and business purpose.

Finalize the transaction Review and execute purchase agreements with legal counsel. Ensure all closing documents, title insurance, and escrow arrangements are in place.

Post-closing compliance File ongoing tax returns and maintain entity compliance. Monitor for changes in US or Florida law affecting foreign ownership.

Measuring success:

Transaction closes on time without regulatory delays. No unexpected tax withholdings or penalties. Property is held in a structure that meets the investor’s asset protection and tax goals.

Example

Scenario:

A UK-based investor wishes to purchase a $5 million commercial property in Boca Raton, FL. They engage Cruz Law Firm to guide them through the process.

  • The firm conducts due diligence, uncovering a zoning restriction that limits the property’s intended use. They negotiate a solution with local authorities.
  • The investor forms a Florida LLC to hold the property, optimizing for liability protection and US estate tax exposure.
  • Cruz Law Firm coordinates with the investor’s tax advisor to ensure FIRPTA compliance, avoiding unnecessary IRS withholding.
  • The transaction closes smoothly, and the investor receives ongoing legal support for annual filings and compliance.

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Common pitfalls

  • Ignoring FIRPTA requirements: Leads to unexpected tax withholding or IRS penalties.
  • Improper ownership structure: Can result in higher taxes, exposure to lawsuits, or difficulty repatriating profits.
  • Incomplete due diligence: Overlooking zoning, title, or environmental issues can derail the investment or reduce property value.
  • Failure to disclose beneficial ownership: May trigger federal investigations or block the transaction.
  • Assuming US financing is easily available: Foreign investors often face stricter lending criteria and higher rates.
  • Neglecting ongoing compliance: Missing annual filings or tax payments can jeopardize the investment and lead to fines.

Summary

  • Foreign investors in Florida commercial real estate must comply with federal and state legal requirements, including FIRPTA, entity formation, and disclosure rules.
  • Engaging an experienced Florida real estate attorney is essential for due diligence, structuring, and compliance.
  • Proper planning protects assets, optimizes tax outcomes, and ensures smooth transactions.
  • Common pitfalls include tax surprises, title issues, and regulatory non-compliance. Next steps:
  • Schedule a consultation with a Florida real estate attorney to review your investment plans.
  • Conduct a preliminary due diligence review of your target property and ownership structure this week.

FAQ

What is FIRPTA and why does it matter for foreign investors?

FIRPTA (Foreign Investment in Real Property Tax Act) requires that the IRS withhold a portion of the sale proceeds when a foreign person sells US real estate. This ensures tax compliance and can impact cash flow if not properly managed.

Can a foreign investor own commercial property in Florida directly?

Yes, but many choose to use a US-based entity (such as an LLC or corporation) for liability protection, tax efficiency, and easier estate planning.

Are there restrictions on the types of property foreign investors can buy in Florida?

Generally, there are no broad restrictions, but certain properties near military bases or critical infrastructure may have additional review or disclosure requirements.

What are the main tax considerations for non-US investors?

Non-US investors must consider US federal and state income taxes, FIRPTA withholding, and potential estate tax exposure. Proper structuring and tax planning are essential.

How can Cruz Law Firm help foreign investors?

Cruz Law Firm provides comprehensive legal guidance, due diligence, and representation to ensure foreign investors comply with all legal requirements and maximize their investment outcomes.