Legal Notes....

Question: The listing agent has a seller who is a foreign national. He owns a vacant lot that he would like to sell. The listing agent is unsure of the verbiage that should be used in the listing contract to document that the seller will be subject to FIRPTA withholding. Where can the listing agent find some general information on this?

Answer: Real estate agents are no longer required or encouraged to provide the documentation for FIRPTA compliance. Given changes to the WB offers, the seller will complete the certification no later than closing, which means the title company or some other entity or person serving as the qualified substitute will likely have the seller execute the certificate at closing. Ideally this will allow the seller to complete the certification along with the other closing documents the seller executes with the title company for closing.

The offer provides that if the seller is a non-foreign person, the seller provides a sworn non-foreign status certification no later than closing. The certification may be delivered to the buyer or a qualified substitute. If the seller works with the title company as a qualified substitute, the title company should provide the buyer with a statement confirming the title company’s receipt of the document. The title company may provide this to the buyer along with any other closing documents. The real estate firm is not required to obtain or maintain copies of the FIRPTA certification forms.

Additionally, the Vacant Land Disclosure Report (VLDR) asks whether the owner of the property is a foreign person as defined by the Internal Revenue Code. As such, the seller may use the VLDR to disclose that FIRPTA may apply.

Item F10 on the VLDR provides:

“Is the owner a foreign person, as defined in 26 USC 1445 (f)? (E.g. a nonresident alien individual, foreign corporation, foreign partnership, foreign trust, or foreign estate.)

Section 1445 of the Internal Revenue Code (26 USC 1445), also known as the Foreign Investment In Real Property Tax Act or FIRPTA, provides that a transferee (buyer) of a U.S. real property interest must be notified in writing and must withhold tax if the transferor (seller) is a foreign person, unless an exception under FIRPTA applies to the transfer.”

The WRA-VLD Vacant Land Disclosure Report can be found at Transactions (zipForm edition) and the WRA Forms Library.