Experienced Foreign Investment Attorney

It is a well-known fact that the U.S. is a country of immigrants. New York City is the most populous city in the United States with a population of 8,258,035 as of July 2023. The NYC Department of City Planning states that “half of all New Yorkers speak a language other than English at home, and over 200 languages are spoken in New York City.”

However, foreign investors still face many challenges associated with language barriers. Language barriers can create significant challenges for foreign investors in tackling New York City’s laws and regulations. These barriers may lead to difficulties in understanding contracts, adhering to local regulations, or communicating effectively during negotiations. Misunderstandings stemming from language differences can result in delays, legal complications, or financial risks. One solution to this problem is to cooperate with law firms that can not only speak but also provide you with valuable legal advice in your native language. People with a similar background to you in terms of culture and/or language who can truly understand the mentality of foreign investors and address your needs to achieve results aligned with your goals.

A skilled foreign direct investment attorney from Sishodia PLLC can help overcome these challenges. With experience in assisting international clients, we can provide clear guidance, accurate translation of legal documents, and effective communication throughout the investment process. We can help you understand your obligations and opportunities as an investor in New York, enabling smooth transactions and protecting your interests in a new market.

The Financial Crimes Enforcement Network (FinCEN) has renewed its Geographic Targeting Orders (GTOs), from October 15, 2024 effective through April 14, 2025. 

These orders require U.S. title insurance companies to identify individuals behind shell companies involved in all-cash purchases of residential real estate in specific metropolitan areas, including New York City. The purchase amount threshold remains $300,000 as with previous GTOs. Financial information on all-cash purchases must be disclosed to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN).

These measures aim to curb illicit activities by increasing transparency in real estate transactions. FinCEN acknowledges the cooperation of title insurance companies and the American Land Title Association (ALTA) in these efforts. The GTOs have provided valuable data on purchases potentially linked to illegal enterprises, aiding in tracking illicit funds and informing future regulatory actions.

However, there have been several gaps in the above-referenced regulations, such as disclosure would apply only to all cash checks and not the wires received by the Title Companies; or the above regulation was a court order addressed to specific Title Company underwrites, so it can be interpreted that other underwriters are not required to disclose buyers identities.

For foreign investors, especially those unfamiliar with U.S. regulations, compliance with these orders is crucial. Our experienced foreign direct investment attorneys at Sishodia PLLC can provide guidance on these requirements, helping investors understand and adhere to the necessary legal standards, thereby facilitating smoother and compliant real estate transactions.

Most foreign investors buy all-cash newly developed properties, but, for example, with 3 million to invest, the same investors could invest in two different properties by putting 50% down and financing the rest.

The Community Reinvestment Act of 1977 (CRA) “applies to banking institutions with deposits insured by the Federal Deposit Insurance Corporation (FDIC), such as national banks, savings associations, and state-chartered commercial and savings banks. The CRA requires federal banking regulatory agencies to evaluate the extent to which regulated institutions are effectively meeting the credit needs within their designated assessment areas” (where institutions have local deposit-taking operations).

In spite of established banking regulations, challenges remain for potential investors planning to work with banking institutions in the U.S. In particular, new criteria in KYC banking regulations have led to a number of challenges from rising costs to the difficulty of implementation.

In addition, investors can be hindered by the absence of their own credit story. Some lenders in New York are friendly to investors and will require only proof of personal financial track records. However, in this case, investors will pay back for this kind of “friendship” by providing a huge down payment and a hefty interest rate.

Working with foreign investors, we observed that HSBC runs the most competitive investor-friendly lending program. Some other lenders that we would recommend for foreign investors to check are: Citi Bank, Guardhill Financial, and private lenders depending on the particular case, location of the property, and the investor’s background, investor’s portfolio, and liquidity. However, when you are a foreign investor, it is always better to work with the Mortgage Banker that has experience dealing with investors with particular backgrounds as it may affect the process. Experienced Mortgage Bankers can guide you accordingly and make the entire borrowing process as smooth as possible.

While for the American owner, it is a norm to pay Real Property Taxes on a property owned, many other counties do not have Real Property Taxes, thus it is not uncommon to meet foreign investors in the USA who miss their property tax payments and faced with the Tax Lien Situation.

When a homeowner fails to pay taxes, the government agency can place a tax lien on the property for the unpaid amount. The property that has a lien attached cannot be sold or refinanced until the taxes are paid and the lien is removed. In tax lien states, when a lien is attached to the property, the taxing authority issues a tax lien certificate. These certificates can be sold to a third party at auctions. In tax deed states, when a third party purchases a tax deed, it is purchasing an actual property. Thus, when a tax deed has been sold to a third party, the prior owner cannot reclaim their property.

According to the “State Guide To Tax Lien And Tax Deed Investing,” “New York is a mixed state. Some counties have tax lien sales and others have tax deed sales. Most of the state conducts deed sales. Nassau County sells liens, as do the five boroughs of NYC. The tax lien sales in NYC, however, are not open to investors. They are private sales where the liens are sold to city fund companies. Later on, these companies may have public sales.”

Once the lien is sold and a new owner threatens the investor with a summons to start foreclosure, it is an additional legal expense for the foreign owner. At that point, there isn’t much of a window for negotiations and to safeguard the property. The investor then has to pay off the lien amount along with any interest accumulated in full, cover the plaintiff’s attorney legal fees, and pay for their own legal fees related to the foreclosure and settlement procedure.

The IRS states that when a foreign person sells or transfers a U.S. real property interest, the transaction falls under the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). Under FIRPTA, buyers (transferees) purchasing U.S. real estate from foreign sellers are generally required to withhold 15% of the sale price to cover potential tax obligations. If buyers fail to withhold this amount, they may be held responsible for the tax, unless specific exceptions apply.

One notable exception is when the buyer intends to use the property as a residence and the sale price does not exceed $300,000. In this case, the buyer must be an individual, and only notification is required, eliminating the withholding requirement.

It’s important for real estate investors to be aware of these rules, as overlooking FIRPTA requirements can lead to unexpected costs. For instance, a foreign investor might face a 15% withholding on the sale price when selling the property if proper guidance wasn’t followed during the purchase.

Whether you’re a foreign seller or buyer, consulting with an international real estate attorney can provide valuable insights into FIRPTA withholding and help you understand your obligations.

The IRS states that nonresident aliens (individuals who are neither U.S. citizens nor residents) are subject to U.S. estate tax on assets located within the United States.

These U.S.-situated assets include real estate, tangible personal property, and securities of U.S. companies. Notably, a nonresident’s stock holdings in American companies are subject to estate taxation, even if the certificates are held abroad or registered in the name of a nominee.

The United States has estate tax treaties with several countries, which can provide more favorable tax treatment to nonresidents by limiting the types of assets considered situated in the U.S. and subject to U.S. estate taxation. Executors for nonresident estates should consult these treaties where applicable. 

For nonresident aliens, an estate tax return must be filed if the fair market value of the decedent’s U.S.-situated assets exceeds $60,000 at the time of death. The estate tax rates range from 18% to 40%, depending on the value of the taxable estate.

In addition, the article “Federal Estate Tax Considerations for Foreign Investing in the United States,” adds that “the estate of a nonresident alien may deduct from the gross estate the value of property passing to the decedent’s surviving spouse if the spouse is a U.S. citizen or resident alien regardless of whether the spouse lives in the U.S. or abroad. However, if a spouse is also a non-resident alien, the unlimited spouse exemption does not apply.”