Real estate in the asset deal: business properties in a company acquisition

If the company owns a property and the company is sold as an asset deal, the property is transferred along as a single asset. In Austria ownership only passes with the registration in the land register. The purchase contract supplies only the title; the acquisition of ownership follows from the entry. Until then the seller remains the registered owner.

The transfer triggers real estate transfer tax. In principle it arises on the acquisition of domestic real estate and is measured by the value of the consideration, at least by the property value. In addition comes the registration fee for the entry in the land register. These ancillary costs belong in the calculation of the transaction.

In the purchase contract the property-related points must be cleanly governed: the moment of handover, the passing of benefits and burdens, the assumption or deletion of existing mortgages and the allocation of the ancillary costs. How these steps fit into the overall transaction is shown in the post on the due diligence checklist.

If, by contrast, the property-holding company itself is acquired through a share deal, the property remains in the ownership of the company. A land register entry in favour of the buyer does not take place, because only the holder of the shares changes. At first sight no real estate transfer tax therefore seems to arise.

Austrian law, however, captures this structure through the so-called consolidation of shares. If a person or group consolidates a sufficiently high stake in a property-holding company, this counts as an event subject to real estate transfer tax. Decisive under the applicable law is a threshold of 95 percent of the shares; the tax in this case amounts to 0.5 percent of the property value.

This rule prevents the real estate transfer tax from being avoided simply by choosing the share-deal structure. Anyone who acquires a property-holding company should therefore consider the tax consequence from the outset. How asset deal and share deal differ in principle is covered in the post on share deal and asset deal.

Beyond ownership and tax, further restrictions shape the value of the property. Leases and rental contracts determine whether areas are let or used by the company itself. In an asset deal the buyer does not simply enter into a lease; often the consent of the contractual partner is needed. In a share deal the contracts remain with the company.

Encumbrances entered in the land register deserve particular attention. Easements and servitudes, such as a right of way, a building right or a real charge, can restrict the use. Mortgages secure loans and must be assumed or deleted. A current land register extract is therefore indispensable.

In addition come public-law restrictions: the zoning determines the permissible use, an operating-plant permit is required for the operation, and contaminated sites or environmental risks can trigger considerable costs. Anyone who takes over a property together with a business should review these restrictions, because they carry the future operation. We explore the concept of due diligence on our focus page on due diligence.

The property feeds into the valuation of the company, whether as a separate item in the asset deal or as an asset of the company in the share deal. Decisive are the condition, the usability and the encumbrances. A let area brings income, a self-used hall secures the operation, an encumbered property reduces the value.

At the same time the boundary to the pure real estate transaction must be observed. If it concerns exclusively the purchase of a property without a company, different priorities apply, which we cover on the sister world dedicated to the real estate purchase contract. Here, by contrast, the property stands in connection with the remaining business assets, with employees and contracts.

In practice it is worth involving the property early in the review, because it sets tax and legal courses. How the business passes over with employees and contracts is covered in the post on the transfer of business. An initial assessment of the overall risks is provided by our M&A transaction risk profile.