LOS ANGELES—Knowing the origin of a buyer's capital is becoming more prevalent in the Los Angeles market, according to Andrew Kirsh, a founding partner at law firm Sklar Kirsh. Foreign buyers and foreign capital is clearly becoming more and more common in the market, and as a result, sellers are using the same type of representations more commonly required by lenders. While these so-call know-your-buyer provisions have been in place for more than a decade, seller's have increased requirements over the past six to 12 months.
“From a legal perspective, you have Patriot Act and Know Your Buyer representations and warranties that make it clear that the people that you are transacting with are those that you are allowed to transact with or up the chain the buyer's money comes from governments or groups that we are not authorized to transact with,” Kirsh tells GlobeSt.com in this exclusive story. “With some foreign buyers, you try to do as much diligence as you can to have the buyers represent as much as you can get them to represent of the origin of money, who the members are, and that they comply with the know your buyer or borrower requirements.”
The process can mean a lengthier escrow period, considering that it requires lengthy pages of documentation provided by the buyer that outlines where their money is coming from and who they associate with, including anti-terrorism provisions. With capital amalgamated from multiple sources today, these requirements are important for both international and domestic buyers. “Even with domestic buyers, you still have buyers make the same type of representation,” adds Kirsh. “I just think that there is a heightened sensitivity when there is a foreign buyer that the money used for this purchase is not coming from groups precluded from transacting with.”
Even with heightened sensitivity for foreign buyers, sellers are requiring more information from both foreign and domestic buyers. “Irrespective of whether they are foreign or domestic, know-your-buyer provisions have been evolving over the last 12 to 15 years,” adds Kirsh. “Over the last six to 12 months, however, sellers have been requiring more information as to who the buyer is, the organizational structure of the buyer and where their money is coming from. It is almost akin to what an equity provider requires of a sponsor. It has certainly evolved into purchase and sale transactions.”
LOS ANGELES—Knowing the origin of a buyer's capital is becoming more prevalent in the Los Angeles market, according to Andrew Kirsh, a founding partner at law firm Sklar Kirsh. Foreign buyers and foreign capital is clearly becoming more and more common in the market, and as a result, sellers are using the same type of representations more commonly required by lenders. While these so-call know-your-buyer provisions have been in place for more than a decade, seller's have increased requirements over the past six to 12 months.
“From a legal perspective, you have Patriot Act and Know Your Buyer representations and warranties that make it clear that the people that you are transacting with are those that you are allowed to transact with or up the chain the buyer's money comes from governments or groups that we are not authorized to transact with,” Kirsh tells GlobeSt.com in this exclusive story. “With some foreign buyers, you try to do as much diligence as you can to have the buyers represent as much as you can get them to represent of the origin of money, who the members are, and that they comply with the know your buyer or borrower requirements.”
The process can mean a lengthier escrow period, considering that it requires lengthy pages of documentation provided by the buyer that outlines where their money is coming from and who they associate with, including anti-terrorism provisions. With capital amalgamated from multiple sources today, these requirements are important for both international and domestic buyers. “Even with domestic buyers, you still have buyers make the same type of representation,” adds Kirsh. “I just think that there is a heightened sensitivity when there is a foreign buyer that the money used for this purchase is not coming from groups precluded from transacting with.”
Even with heightened sensitivity for foreign buyers, sellers are requiring more information from both foreign and domestic buyers. “Irrespective of whether they are foreign or domestic, know-your-buyer provisions have been evolving over the last 12 to 15 years,” adds Kirsh. “Over the last six to 12 months, however, sellers have been requiring more information as to who the buyer is, the organizational structure of the buyer and where their money is coming from. It is almost akin to what an equity provider requires of a sponsor. It has certainly evolved into purchase and sale transactions.”
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