Law and Practice
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GLOBAL PRACTICE GUIDEs Definitive global law guides offering comparative analysis from top ranked lawyers USA Regional Real Estate Montana Crowley Fleck PLLP chambersandpartners.com 2018 MONTANA LAW AND PRACTICE: p.3 Contributed by Crowley Fleck PLLP The ‘Law & Practice’ sections provide easily accessible information on navigating the legal system when conducting business in the jurisdic- tion. Leading lawyers explain local law and practice at key transactional stages and for crucial aspects of doing business. LAW AND PRACTICE MONTANA Contributed by Crowley Fleck PLLP Authors: Kevin Heaney, Matthew McLean, Michael Tennant, Alissa Chambers Law and Practice Contributed by Crowley Fleck PLLP CoNTENTS 1. General p.5 4. Planning and Zoning p.11 1.1 Main Substantive Skills p.5 4.1 Legislative and Governmental Controls Applicable 1.2 Most Significant Trends p.5 to Design, Appearance and Method of Construction p.11 1.3 Impact of the New US Tax Law Changes p.6 4.2 Regulatory Authorities p.11 2. Sale and Purchase p.6 4.3 Obtaining Entitlements to Develop a New 2.1 Ownership Structures p.6 Project p.11 2.2 Important Jurisdictional Requirements p.6 4.4 Right of Appeal Against an Authority’s 2.3 Effecting Lawful and Proper Transfer of Title p.6 Decision p.12 2.4 Real Estate Due Diligence p.6 4.5 Agreements with Local or Governmental 2.5 Typical Representations and Warranties for Authorities p.12 Purchase and Sale Agreements p.6 4.6 Enforcement of Restrictions on Development 2.6 Important Areas of Laws for Foreign Investors p.8 and Designated Use p.12 2.7 Soil Pollution and Environmental 5. Investment Vehicles p.12 Contamination p.8 5.1 Types of Entities Available to Investors to 2.8 Permitted Uses of Real Estate under Hold Real Estate Assets p.12 Zoning or Planning Law p.8 5.2 Main Features of the Constitution of Each 2.9 Condemnation, Expropriation or Type of Entity p.12 Compulsory Purchase p.9 5.3 Tax Benefits and Costs p.12 2.10 Taxes Applicable to a Transaction p.9 5.4 Applicable Governance Requirements p.12 2.11 Rules and Regulations Applicable to Foreign Investors p.9 6. Commercial Leases p.13 6.1 Types of Arrangements Allowing the Use of 3. Real Estate Finance p.9 Real Estate for a Limited Period of Time p.13 3.1 Financing Acquisitions of Commercial 6.2 Types of Commercial Leases p.13 Real Estate p.9 6.3 Regulation of Rents or Lease Terms p.14 3.2 Typical Security Created by Commercial 6.4 Typical Terms of a Lease p.14 Investors p.9 6.5 Rent Variation p.14 3.3 Regulations or Requirements Affecting Foreign Lenders p.10 6.6 Determination of New Rent p.15 3.4 Taxes or Fees Relating to the Granting or 6.7 Payment of VAT p.15 Enforcement of Security p.10 6.8 Costs Payable by Tenant at Start of Lease p.15 3.5 Legal Requirements Before an Entity Can 6.9 Payment of Maintenance and Repair p.15 Give Valid Security p.10 6.10 Payment of Services, Utilities and 3.6 Formalities When a Borrower is in Default p.10 Telecommunications p.15 3.7 Subordinating Existing Debt to Newly 6.11 Insuring the Real Estate That Is Subject to Created Debt p.10 the Lease p.15 3.8 Lenders’ Liability Under Environmental Laws p.11 6.12 Restrictions on Use of Real Estate p.16 3.9 Effects of Borrower Becoming Insolvent p.11 6.13 Tenant’s Ability to Alter and Improve Real Estate p.16 6.14 Specific Regulations p.17 3 MONTANA LAW AND PRACTICE Contributed by Crowley Fleck PLLP Authors: Kevin Heaney, Matthew McLean, Michael Tennant, Alissa Chambers 6.15 Effect of Tenant’s Insolvency p.17 6.16 Forms of Security to Protect Against Failure of Tenant to Meet Obligations p.17 6.17 Right to Occupy After Termination or Expiry of a Lease p.17 6.18 Right to Terminate Lease p.18 6.19 Forced Eviction p.18 6.20 Termination by Third Party p.18 7. Construction p.18 7.1 Common Structures Used to Price Construction Projects p.18 7.2 Assigning Responsibility for the Design and Construction of a Project p.18 7.3 Management of Construction Risk p.19 7.4 Management of Schedule-Related Risk p.19 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance p.19 7.6 Liens or Encumbrances in the Event of Non-Payment p.19 7.7 Requirements Before Use or Inhabitation p.19 8. Tax p.19 8.1 Sale or Purchase of Corporate Real Estate p.19 8.2 Mitigation of Tax Liability p.20 8.3 Municipal Taxes p.20 8.4 Income Tax Withholding for Foreign Investors p.20 8.5 Tax Benefits p.20 8.6 Key Changes in Federal Tax Reform p.20 4 LAW AND PRACTICE MONTANA Contributed by Crowley Fleck PLLP Authors: Kevin Heaney, Matthew McLean, Michael Tennant, Alissa Chambers Crowley Fleck PLLP is a regional firm serving clients through- international businesses representing virtually every industry out the Northern Rockies region of Montana, North Dakota with interests in the region. Its attorneys’ extensive knowledge and Wyoming that traces its beginning to 1895 and has over covers the intricacies involved in commercial leasing and sales; 150 attorneys throughout its offices in Billings, Bozeman, He- farm and ranch acquisitions and sales; water rights; conserva- lena, Butte and Kalispell, Montana; Williston and Bismarck, tion easements; real estate lending; planned unit development North Dakota; and Casper, Cheyenne and Sheridan, Wyoming. documents; zoning regulation and permitting; the tax effects of The firm historically represented business owners, farmers and real estate transactions; and all work involved in the acquisition, ranchers, lending institutions, hospitals and physician groups, disposition, development, leasing and access rights associated energy pioneers, power generators and mining interests. It con- with commercial, energy, industrial, agricultural and major tinues to serve those same clients today, joined by national and residential and recreational properties. Authors Kevin Heaney, a partner, focuses on Michael Tennant, a partner, focuses his commercial real estate acquisitions, sales practice on personal and business tax and leasing, contracts and finance, planning, projects and transactions, such representing many national, state-wide as planning and administration and and local businesses. He is a member of business formations, reorganizations, the State Bar of Montana, the American M&A, and succession planning. He is a Bar Association and the Yellowstone Area Bar Association, member of the State Bar of Montana and the American having simultaneously earned an MBA degree and a Juris Bar Association, and holds an LLM degree in taxation Doctorate, both with honors, from the University of from New York University Law School and an MBA from Montana. the University of Montana. Matthew McLean, a partner handles Alissa Chambers, a partner, has extensive matters throughout Montana and Wyo- experience in business acquisitions and ming, with a practice that focuses on sales, who also practises in real estate, construction law. Matt is a member of the banking and finance, labor and employ- State Bar of Montana, the Montana ment, trusts and estates, and M&A. A Defense Trial Lawyers Association and the member of the State Bar of Montana and Defense Research Institute, and received his Juris Doctor- the North Dakota State Bar Association, Alissa graduated ate with honours from the University of Wyoming College with a Juris Doctorate from the Willamette University of Law. College of Law and is actively involved in providing access to justice to low-income Montanans. 1. General 1.1 Main Substantive Skills 1.2 Most Significant Trends The juxtaposition between Montana’s small population and Significant recent trends in Montana’s real estate market in- large geography requires real estate attorneys to possess clude: a diverse skill set. The small population generates a wide breadth of real estate matters, but can present challenges for • high residential real estate demand in urban areas; the practitioner wanting to focus on a narrow subspecialty. • oil development and production recovering, and coal pro- It is necessary to have substantive skills with the breadth and duction continuing to decrease; depth to handle sales and acquisitions, leasing, development, • access to and management of public lands; finance and entity formation. The large geography creates • strong demand for recreational and vacation property; and a diverse economy and requires that real estate attorneys • multi-use developments in urban cores. have experience with commercial, industrial, agricultural, recreational and natural resources enterprises. There have been recent significant transactions in these -ar eas. 5 MONTANA LAW AND PRACTICE Contributed by Crowley Fleck PLLP Authors: Kevin Heaney, Matthew McLean, Michael Tennant, Alissa Chambers 1.3 Impact of the New US Tax Law Changes 2.3 Effecting Lawful and Proper Transfer of Title Commentators anticipate tax reform will lead to an increase Subject to limited exceptions, transfers of real property must: in real estate activity, but it is difficult to predict how that will unfold. It appears unlikely any state or local reform will • be in writing; occur that helps or hinders real estate activity. Two relevant • identify the transferor and the transferee and state the ongoing state-level legislative discussions are: 1) whether transferee’s address; to give local governments the ability to implement a local • contain an adequate property description; option tax that would generate revenue for project and in- • contain language of conveyance; and frastructure development; and 2) reforming tax increment • be signed by the transferor. finance districts.