Compared with other states such as California, Nevada doesn’t have many laws regulating commercial real estate.
But if you are involved in commercial real estate in Nevada, you need to know these laws and understand how they could affect your business.
■ Nevada’s “One Action Rule”: This rule generally requires that the holder of a mortgage or deed of trust first exhaust its rights to real property collateral before proceeding against a borrower on underlying debt. If such a holder brings an action to obtain a money judgment before proceeding against the real property collateral, the mortgage or deed of trust is discharged as a lien against the real property upon entry of a final judgment. Some acts do not constitute an “action” for and may be brought without violating the rule.
■ Commercial foreclosure process: In Nevada, most commercial foreclosures are conducted as nonjudicial foreclosures. The trustee of a deed of trust generally must record certain notices, provide copies of such notices and wait certain time periods before conducting a sale. The purchaser at such a sale takes title to the property free of any and all junior liens or encumbrances, and there is no right of redemption.
■ Deficiency judgments: If the commercial foreclosure sale amount is less than the amount of the outstanding secured indebtedness, the holder of the mortgage or deed of trust may pursue a deficiency judgment against the borrower and guarantor. Such holder must file a complaint for a deficiency judgment within six months of the date of sale. With the recent passage of Assembly Bill 195, the amount of the deficiency judgment is limited to the lesser of: (a) the amount by which the secured indebtedness exceeds the fair-market value of the property sold at the time of the sale, with interest, or (b) the difference between the amount for which the property was sold and the amount of the secured indebtedness, with interest.
■ Transfer tax: In Nevada, real property transfer tax is imposed on each deed or land sale installment contract. The amount, $2.55 for every $500 of value in Clark County, varies by county. Some real property transfers are excluded from such tax, including certain transfers between an entity and certain of its affiliates.
■ Mechanic’s liens: Landlords and their property are not subject to mechanic’s liens arising from tenants’ improvements. Generally speaking, this procedure requires that a landlord record a notice of nonresponsibility and that a tenant: (a) establish and fund a construction disbursement account or record a surety bond, and (b) record a notice of posted security. Both landlord and tenant must also comply with the other detailed statutes regarding this procedure.
Note: These laws are subject to change.
Angela Turriciano Otto is a shareholder at the law firm of Brownstein Hyatt Farber Schreck.