The main source of real estate law in Louisiana is derived from French civil law, specifically the Napoleonic Code. As a civil law jurisdiction, Louisiana law focuses closely on the Louisiana Civil Code, the Louisiana Revised Statutes and the Louisiana Code of Civil Procedure. Of course, jurisprudence remains an important source of law as well.

Development of infrastructure projects continues to be strong in Louisiana, with growth in both petrochemical industry expansion and sustainable energy projects, particularly solar facilities and carbon capture developments along the industrial corridor between Baton Rouge and New Orleans.

The hospitality industry in New Orleans continues to strengthen and diversify, with significant investment in mixed-use developments throughout the New Orleans central business district, warehouse district and surrounding areas. The Charity Hospital redevelopment represents a USD600 million investment by the developer and Tulane University to transform the historic structure into a biomedical innovation hub. The Four Seasons Hotel and Residences, a landmark conversion of the former World Trade Center building, opened after an approximately USD550 million renovation. Hyatt Hotels has expanded its presence in New Orleans with Maison Métier and The Barnett, two historic properties that joined Hyatt’s independent collection of brands as part of the company’s continued push in the luxury lifestyle segment. The Memoir Warehouse hotel, together with Common House, a modern social club, opened in June 2024 at 420 Julia Street, revitalising the former Louisiana Children’s Museum in the warehouse district. The New Orleans Ernest N Morial Convention Center’s ambitious improvement plan continues, including the ground breaking of the adjacent river district mixed-use development.

Alternative financing sources, including private equity and opportunity zone funds, have gained prominence as traditional lending has tightened.

The most significant legislative reform affecting the real estate market pertains to property insurance. The reforms aim to attract more insurance carriers to Louisiana’s market, addressing the crisis precipitated by the withdrawal of major insurers following recent hurricane seasons.

In the renewable energy sector, significant policy shifts continue to occur. Louisiana established the Louisiana Department of Energy and Natural Resources (LDENR), which consolidates energy and natural resources functions to improve efficiency, streamline regulatory processes for clean and traditional energy, and enforces environmental standards. As of printing, the state legislature is contemplating additional regulations on solar farms and carbon sequestration, both large growth industries in Louisiana over the past few years.

Additionally, several parishes have proposed or implemented zoning reforms to encourage transit-oriented development and affordable housing, with the New Orleans City Council considering expanded inclusionary zoning requirements beyond the current mandatory requirements in certain neighbourhoods.

Real estate may be owned by one or more persons or juridical entities. Ownership of real estate by two or more persons or juridical entities is referred to as “ownership in indivision”. Although the Louisiana Civil Code provides for the management and common use of property owned in indivision, commercial practice is for common ownership of property to be held indirectly through a single juridical entity such as a corporation, limited liability company (LLC) or limited partnership.

In addition to full (fee) ownership, which includes the right to use and enjoy the property, a person or juridical entity may obtain the following interests in real estate:

• a leasehold interest for up to 99 years;
• a servitude (easement in common law), such as a right of passage;
• a usufruct (life estate in common law);
• a right of habitation (right to dwell in the house of another); or
• a personal servitude of right of use (right of specified use).

Real property is referred to in Louisiana as immovable property, and is transferred by a contract between the owner and transferee. Such a contract is typically referred to as an act of sale.

While there is no legal requirement for an act of sale to be witnessed or notarised, the Louisiana uniform title standards require that such instruments be “in a form which would allow their introduction into evidence in a court proceeding as prima facie proof of their contents”. Accordingly, an act of sale should always be executed in “authentic form” in the presence of a notary public and two witnesses, which is the only form of a “self-proving” act.

An act of sale must be signed by the individual who owns the property or by an individual properly authorised to sign and deliver the act of sale on behalf of the legal entity that owns the property. Corporate resolutions or appropriate evidence of authority should be attached to the act of sale or separately recorded.

As between the parties, the transfer of ownership takes place immediately upon the execution and delivery of the act of sale. In order to be effective against third persons, the act of sale must be recorded in the conveyance records of the parish (the Louisiana equivalent of a county) in which the immovable is located.

It is common in all commercial real estate transactions for the buyer to obtain an owner’s policy of title insurance. Louisiana is a “fixed rate” state, which means that premiums for title insurance are submitted for and approved by the Louisiana Department of Insurance. Agents are prohibited from modifying such rates or rebating insurance premiums.

For commercial transactions, buyers are usually afforded a due diligence period under the purchase agreement, and typically obtain a Phase I environmental report, an American Land Title Association/National Society of Professional Surveyors (ALTA/NSPS) survey and a commitment for title insurance. Unless there are unique circumstances, the buyer’s lawyer will typically obtain the survey and title commitment at the buyer’s expense. Additional diligence may be necessary – for example, if the Phase I environmental report indicates a potential site condition such as a recognised environmental condition (REC). Zoning diligence and real estate appraisal are also completed during the due diligence period.

Increasingly, buyers are conducting property resilience assessments to evaluate climate-related risks, particularly for properties in coastal areas or flood zones, and reviews of digital infrastructure capabilities, reflecting the growing importance of technology in commercial properties.

Unless there are unique circumstances, most commercial properties are sold with limited representations or expressed or implied warranties, other than the typical authorisation representations of selling entities.

As a default rule, Louisiana law provides that the seller warrants title to the property. Lawyers representing a seller will often negotiate a more limited warranty of title so that the seller provides either a warranty against their own acts (referred to as a special warranty deed in other states) or no warranty of title whatsoever. In such circumstances, the buyer will rely on a policy of title insurance in lieu of a seller’s limited warranty.

Regarding the condition of the property, Louisiana law provides that the seller warrants the buyer against “redhibitory” defects or vices which, generally, are defects that render the thing useless or inconvenient (or diminish the property’s usefulness) such that prior knowledge would presume “that a buyer would not have bought the thing”. Depending on the defect, the buyer may have the right to rescind the sale or obtain a price reduction. Defects known to the buyer (or which should have been discovered through inspection by a “reasonably prudent buyer”) are not covered. Almost all commercial sales include a waiver of such warranty of condition.

A foreign investor must consider federal, state and local income, franchise, sales/use, property and occupational licence taxes when acquiring real estate in Louisiana. Special considerations must also be made in relation to foreign notaries.

Critical areas to understand include Louisiana’s civil law system, which differs significantly from common law jurisdictions throughout most of the United States, the state’s property tax structure, and environmental regulations given Louisiana’s coastal location and industrial history. For coastal properties, investors should understand the coastal zone management programme and wetlands regulations.

Provided that a purchaser obtains a “clean” Phase I environmental site assessment where no RECs are found to exist, and that such assessment is compliant with the American Society for Testing and Materials (ASTM) legal standards, the purchaser will be entitled to an “innocent landowner” defence to clean up liability under federal (CERCLA 42 USC 9607(b)) and state law (Louisiana Revised Statutes 30:2271, et seq). “Innocent landowner” status means the owner has no legal obligation to clean up the property from offsite environmental conditions. If the owner later finds evidence of contamination, they are required to report to the Louisiana Department of Environmental Quality and allow that agency to access the property.

While “innocent landowner” status entitles the purchaser to a defence to clean-up liability, it is not a defence to toxic tort liability – eg, vapour intrusion resulting from substances that may have migrated from offsite. This risk is common in many transactions, and confirmation of whether there is a risk of substances migrating from offsite onto the property may only be determined by obtaining a Phase II report.

Purchase and sale agreements typically allocate risk for environmental liability in such a way that the seller is responsible for environmental conditions that exist before the sale, and the buyer is responsible for environmental conditions that arise after the sale. However, this is often negotiated.

Zoning and planning laws vary by municipality and parish. Many cities and parishes, including the City of New Orleans and East Baton Rouge Parish, have online portals with zoning maps and copies of the current local zoning ordinance to determine the zoning designation and permitted uses. Local governing bodies will also provide a zoning verification letter. In addition to zoning ordinances, a buyer should determine whether the property is subject to a historical district, which may restrict the construction or renovation of improvements. New Orleans has recently adopted mandatory inclusionary housing requirements.

Planned unit developments (PUDs) are provided for under many local zoning ordinances, but are often limited to larger sites.

Most parishes and municipalities have implemented online permit application and tracking systems, making the process more transparent and efficient. Development agreements or community benefits agreements with local authorities are increasingly common for larger projects.       

Public bodies and certain quasi-public entities, such as utilities, have the authority – after good-faith efforts to negotiate for the purchase of property – to expropriate property that is necessary for public purposes, pursuant to specific statutory authority. A property owner whose land is expropriated is entitled to compensation. Louisiana law also provides an expedited taking mechanism by which the Department of Transportation and Development can expropriate private property needed for “highway purposes” that cannot otherwise be acquired amicably.

The expropriation process typically begins with an appraisal commissioned by the condemning authority, followed by a formal offer to the property owner. If negotiations fail, the authority may file a petition for expropriation in the district court where the property is located.

Stamp Tax

Recording fees are set by state law and are generally based on the number of pages or established as flat fees. At the time of publication, only Orleans Parish charges a documentary stamp tax on the conveyance or encumbrance of immovable (real) property; this is a minimum of USD325, increasing up to USD2,525 depending on the number of pages. The statute also provides that, if a conveyance and mortgage are dated the same day, the tax will be waived for one of the instruments. Each parish has established formatting requirements, which incur a nominal fee for failure to comply.

Property Taxes

Sales of real estate in Louisiana will typically include a proration of ad valorem property taxes between the buyer and the seller. Ad valorem property taxes are assessed by the local parish assessor on an annual basis, and are based on the assessed value of the property. The assessed value is a percentage of the fair market value (10% for land and 15% for most other property).

In every parish except for Orleans Parish, ad valorem taxes are assessed in arrears. At the closing of the sale, the prior year’s tax bill is apportioned between the buyer and the seller, based on the number of days each will occupy the property during the current calendar year. Unless special circumstances exist, prorations of ad valorem taxes are considered final at the closing and are not re-allocated when the tax bill is issued, which is usually in the fall of each year.

In Orleans Parish, tax bills are generally issued in December or January, and the parties can allocate based on the current year’s tax bill. Taxes are due by 31 January of the current year and carry interest and penalties if not paid promptly. Pro-rated ad valorem taxes in Orleans Parish, assuming they have been paid, will be added to the seller’s proceeds at closing.

In equity deals where ownership of a property-holding entity changes hands, transfer taxes are generally not triggered.       

For US income tax purposes, the Foreign Investment in Real Property Tax Act (FIRPTA) rules, under Internal Revenue Code (IRC) Sections 897 and 1445, generally require a buyer to deduct and withhold 15% of the amount realised by the foreign seller from the disposition of US real property interests, and to treat gain realised by a foreign person from the sale of US real property interests as effectively connected income subject to US income tax.

Foreign investors should be particularly aware of restrictions introduced by Act 464 of the 2023 Louisiana Regular Legislative Session (codified as La. Stat. Ann. Section 9:2717.1). This legislation prohibits “foreign adversaries” and “persons connected with foreign adversaries” from purchasing, leasing or otherwise acquiring immovable property in Louisiana.

Acquisitions of commercial real estate in Louisiana are generally financed by both domestic and out-of-state financial institutions and other commercial lenders. Traditional financing from regional and national banks remains the primary source for commercial real estate transactions, though terms have tightened amid the higher-interest-rate environment.

Alternative financing sources have gained prominence, including private debt funds, family offices and specialised real estate investment trusts (REITs) that provide mezzanine financing and preferred equity investments. Life insurance companies have maintained a steady presence in the market, particularly for stabilised, high-quality assets.

Tax-exempt financing alternatives include tax-exempt municipal bonds, which are either government bonds (to finance government functions and services) or private activity bonds (by a state or local government issuer for private business financings). In order to finance a project with the proceeds of tax-exempt qualified private activity bonds, a borrower must identify a conduit issuer.

Local port, terminal and harbour districts are used for projects within the boundaries of a Louisiana port. The IRC provides that small-issue manufacturing bonds, subject to a limit of USD10 million, may be used for expansion and investment in existing manufacturing facilities or in the development of new manufacturing facilities. Exempt facility bonds may be used to finance other infrastructure projects, including docks and wharves, water, sewerage, qualified residential projects, green building and sustainable design projects and other similar projects, provided the projects comply with the restrictions imposed by the IRC.

Tax increment financing and community development districts may also provide tax-exempt or tax-reduced financing vehicles.

Typical Security Interests

Commercial real estate acquisitions are collateralised by security instruments that effect a mortgage, lien or security interest on the real estate, such as buildings and improvements, together with other collateral associated with the transaction, including, without limitation, pledges of leases and rents, security interests in tangible and intangible personal property, collateral assignments of insurance proceeds and contracts – ie, construction contracts and other security interests, including reserve accounts. Unlimited or limited personal guaranties may be required, depending on the structure of the transaction.

Deeds of trust are not recognised in Louisiana.

Forms of mortgage

Although three forms of mortgage are recognised in Louisiana, the primary form is the multiple indebtedness mortgage, which was created by statute in 1991 and may secure existing obligations, obligations contemporaneously incurred with the execution of the mortgage and specific, general or indefinite future obligations, provided the mortgage expressly and specifically sets forth the maximum amount of indebtedness it is intended to secure. The mortgage is effective upon execution; for third parties, it is effective from the date it is filed for registry in the proper records of the appropriate jurisdiction. Recordation of a mortgage is effective for a period of ten years from the date of recordation, unless the mortgage describes a note with a payment maturity of nine years or more, in which case it will remain effective for six years following the note’s stated maturity date.

Reinscription

To continue the effect of recordation beyond ten years, it is necessary to reinscribe the mortgage by filing a written notice of reinscription including the name of the mortgagor and the recordation information from the original mortgage, stating that the mortgage is reinscribed. The effect of reinscription lasts for ten years from the date the notice of reinscription is recorded.

Louisiana does not impose any regulations or restrictions on a foreign lender’s ability to make loans or accept mortgages or other security interests in Louisiana, subject to the caveat that foreign lenders may be subject to other federal laws and regulations. Louisiana Revised Statutes 12:302 provides that a foreign corporation shall not be considered to be transacting business in Louisiana, for the purpose of being required to procure a certificate of authority pursuant to Louisiana Revised Statutes 12:301, to the extent that it engages in certain activities, which include but are not limited to:

• maintaining bank accounts;
• creating evidence of debt, mortgages or liens;
• securing or collecting debts or enforcing any rights in property securing such debts;
• conducting an isolated transaction completed within a period of 30 days and not in the course of repeated transactions of like nature; or
• acquiring and disposing of a property or property interest not as a part of any regular business interest.

The statute also provides that, if the foreign corporation is a bank, real estate investment trust or insurance company, the entity may, among other things, acquire or make loans, including renewals, modifications and extensions of such loans, acquire property at a foreclosure sale or by deed in lieu of foreclosure, and manage, lease, operate and sell such property.

Foreign lenders should be aware of certain federal compliance requirements that may apply, including the Bank Secrecy Act, anti-money laundering regulations and Office of Foreign Assets Control (OFAC) restrictions.

Other than modest recordation and filing fees for the sale documents and security instruments, which are based on the type of document and the number of pages, mortgage taxes, transfer taxes and documentary transaction taxes are not imposed in Louisiana, except in Orleans Parish (see 2.10 Taxes Applicable to a Transaction).

Current recording fees generally range from USD105 to USD300 for mortgage documents, depending on the parish and document length. In Orleans Parish, the documentary transaction tax applies to both sales and mortgages at a rate of USD325 minimum to USD2,525 maximum.

In order to give valid security, an entity must comply with its own internal organisational documents and all requirements of its state of organisation. If a foreign entity intends to conduct business in Louisiana, it will have to qualify with the Louisiana Secretary of State.

In acquisition or financing transactions, a seller and borrower will also have to demonstrate that the entity has authorised the transaction and the signatory to act on behalf of the entity in the transaction.

Typically, this is accomplished by means of a resolution of the board of directors for a corporation, or by a written consent or certificate of authority for an LLC.

For corporate borrowers, lenders typically require copies of articles of incorporation, by-laws and resolutions authorising the transaction. For LLCs, articles of organisation, operating agreements and certificates of authority or written consents are reviewed.

Although borrowers are granted certain statutory protections in the event of a mortgage default, most commercial mortgages and loan documents contain waivers of statutory procedural and other protections, with such provisions being drafted heavily in favour of the lender. A sophisticated borrower may be able to negotiate some protections – typically, limited notice of default and cure rights. To give lender’s security interest priority over other creditors, commercial lenders typically use pre-closing lien and litigation searches and title insurance.

Enforcing Security Rights

In Louisiana, there are two methods to enforce security rights.

Ordinary process with pre-judgment sequestration

To enforce a mortgage by ordinary process, the lender files a petition in the district court where the property is situated, seeking a personal judgment against the borrower with recognition of the mortgage.

Executory process

In an executory process, the property can be seized and sold through an ex parte proceeding without a personal judgment against the borrower. A prerequisite to the executory process is that the mortgage is in proper form and contains a confession of judgment by the borrower/mortgagor for the full amount of the indebtedness, including attorney’s fees. An additional prerequisite to the executory process is the production of original or certified copies of evidence of authority of the signatory to act on behalf of the entity, typically by means of a resolution of the board of directors or by a certificate of authority.

Designating a keeper

Under either scenario, the parties to a mortgage may designate a keeper in the mortgage, whereupon the keeper will be appointed upon the filing of the foreclosure (the Louisiana equivalent of a receiver) of the property. Otherwise, a contradictory hearing is required, which may delay the keeper’s appointment considerably.

The keeper may be the seizing creditor or its agent, and the parties must also specify in the mortgage the method by which a keeper is to be selected. A keeper will be appointed in the order, without the requirement of a bond, if the mortgage contains the appropriate provisions for the appointment of a keeper pending the judicial sale of the collateral. Otherwise, an application must be filed with the court for the appointment of a keeper, and a bond will be required in an amount determined by the court.

Sale

Following the entry of a final judgment and the expiration of appeal delays in an ordinary proceeding, or the entry of an order of seizure and sale in an executory proceeding, the sheriff of the parish will set a sale date for the property. The sheriff must advertise the sale of the property at least twice and, typically, an appraisal of the property is submitted by or on behalf of the borrower and the lender. The lender must be careful to give notice of the judicial sale to any parties holding an interest in the property that may be affected by the sale.

At the sale, the property will not be sold if the highest bid does not exceed two thirds of the appraised value, and the sheriff must re-advertise for a second sale, at which time the mortgaged property will be sold for cash at any price. The judicial sale of the property is subject to superior liens, encumbrances and leases; all inferior liens, encumbrances and leases are cancelled. In some cases, a lender may be entitled to pursue a deficiency judgment against the borrower if the sale proceeds do not satisfy the judgment. Louisiana does not provide redemption rights to the borrower once the property has been sold at a foreclosure sale.

Typically, the filing of the mortgage or the financing statement in the appropriate registry will establish the priority of that security interest against other competing security interests. In some cases, a lender may elect to voluntarily subordinate its mortgage or security interest to a newly created mortgage or security instrument through a subordination agreement. There are some circumstances in which new debt or liens may prime existing debt, including purchase money security interests, and priority treatment may be established for certain classes of lien claimants under the Louisiana Private Works Act.

Federal law exempts a lender who acquires title to property pursuant to a foreclosure sale or by dation en paiement (deed in lieu of foreclosure) from liability for clean-up costs due to contamination of the property, provided that the lender does not – before or after acquisition of the title – participate in the management of the property such that the lender exercises decision-making control over environmental compliance, or comparable to a manager of the property. Louisiana law provides that it is the intent of the legislature that secured lenders will have no greater exposure to environmental liability and financial responsibility under state law than they would under federal law.

To minimise environmental liability risk, lenders typically require environmental assessments before loan origination and incorporate specific covenants in loan documents regarding environmental matters.

The filing of a petition by or against a borrower in federal bankruptcy court effects an automatic stay (hold) of the foreclosure proceedings and makes enforcement of the mortgage and the sale of the property more difficult. It is not unusual for a borrower to file a bankruptcy on the date of the sheriff’s sale in a foreclosure, which delays the sale through the imposition of the automatic stay. If the sale has already occurred, the borrower is no longer the owner of the property, unless the purchaser at the foreclosure sale fails to pay the purchase price on time, in which case the borrower has no right of redemption.

Security interests created within the 90-day period (or one year for insiders) prior to a bankruptcy filing may be subject to avoidance as preferential transfers if they secure previously unsecured debt. Security interests may also be challenged as fraudulent transfers if the debtor received less than reasonably equivalent value and was insolvent at the time of the transfer.

There are no existing, pending or proposed rules, regulations or requirements that lenders or borrowers pay any recording or similar taxes in connection with mezzanine loans related to real estate.

Zoning ordinances in Louisiana may be enacted at both the municipal and parish levels, and can restrict owners’ enjoyment of real estate, typically by providing limitations on permissive uses and establishing building site plan requirements. State law specifically allows for local regulations aimed at historic preservation.

While such regulations have been adopted and are prevalent throughout Louisiana, they are most restrictive in the City of New Orleans and the Parish of East Baton Rouge. Although Louisiana is heavily industrialised, zoning regulations are also generally restrictive with regard to industrial uses.

For commercial projects, it is customary to obtain a zoning endorsement in connection with the title policies issued for a particular project, which ensures that the intended use and the proposed plans are permitted under the applicable zoning laws.

Design and construction standards are primarily regulated at the local level, with each parish or municipality having its own building codes and design guidelines. Most jurisdictions have adopted the International Building Code with Louisiana amendments. Historic districts, particularly in New Orleans and other older municipalities, have additional design and appearance controls administered by historic district commissions or architectural review boards.

New construction must also comply with the Louisiana State Uniform Construction Code, which includes provisions for energy efficiency, structural integrity, and hurricane resistance. Coastal parishes typically have more stringent building elevation requirements to address flood risks.

Subdivision Regulations

Louisiana Revised Statutes Annotated Section 33:5051 requires that real estate must be surveyed and platted before the owner can sell off lots or squares. An owner of land within a subdivision may not transfer a portion of a subdivided lot without approval from the planning commission of a plat of resubdivision. If a landowner attempts to transfer property that is not properly subdivided, state law provides for a monetary penalty, and the local parish or municipality may enjoin the transfer. There are restrictions on the use of property that is not properly subdivided; for example, a parish or municipality may withhold the issuance of a building permit.

Local governing authorities are primarily responsible for regulating the development and use of real estate. A planning commission and board of zoning adjustments are typically empowered under the local ordinance to administer the zoning and land use laws discussed in 4.1 Legislative and Governmental Controls Applicable to Strategic Planning and Zoning, as well as the subdivision regulations discussed in 4.2 Legislative and Governmental Controls Applicable to Design, Appearance and Method of Construction.

For projects in coastal areas, the Louisiana Department of Natural Resources also has jurisdiction through its coastal zone management programme. Projects affecting wetlands or waterways also require permits from the US Army Corps of Engineers and the Louisiana Department of Environmental Quality.

In New Orleans, the City Planning Commission, the board of zoning adjustments and the Historic District Landmarks Commission share regulatory authority. The Vieux Carré Commission has specific jurisdiction over the French quarter. In Baton Rouge, the Planning Commission and the East Baton Rouge Parish Metro Council serve as the primary regulatory bodies.

Special districts with specific land use authority also exist, such as the New Orleans sewerage and water board (with authority over drainage impacts) and various levee districts with authority over development near flood protection structures.

Applications for entitlements such as conditional use permits and variances are made to the local planning commission or board of zoning adjustments. The request process varies by municipality or parish, and is provided for in the applicable local comprehensive zoning plan. Public notice and a public hearing are almost always required in order to obtain an entitlement not permitted by right.

Development approvals may include conditions related to infrastructure improvements, environmental mitigation or design modifications. The timeline for obtaining approvals varies significantly by jurisdiction and project complexity, ranging from a few months for simpler projects to 12–18 months for complex developments in highly regulated areas.

Third parties, particularly adjacent property owners, may have significant rights to participate in the entitlement process, including the right to speak at public hearings and the right to appeal decisions to the appropriate governing body and, ultimately, to the courts.

Zoning ordinances and acts of zoning commissions, boards of adjustment or zoning administrators are subject to judicial review on the basis of “abuse of discretion, unreasonable exercise of the police powers, an excessive use of the power herein granted, or the denial of the right of due process”. Local zoning ordinances typically establish the time period to file such a review, although there is limited state law regarding when an appeal must be filed.

Appeals of administrative zoning decisions typically proceed first to a board of adjustment or similar local body before judicial review is available. Appeals to the courts are generally heard by the district court in the parish where the property is located.

The timeframe for filing appeals is set by the zoning ordinances but is typically short. The appeal process can add several months to a year to the development timeline.

Local government involvement in projects varies by parish or municipality. Certain parishes, such as East Baton Rouge Parish, often enter into PUDs while planned developments are less prevalent in the City of New Orleans, given that the minimum size is generally five acres.

Development agreements and community benefit agreements are becoming increasingly common for larger projects, allowing developers to negotiate specific terms regarding infrastructure contributions, public amenities and phasing schedules in exchange for zoning flexibility or other incentives. These agreements can provide developers with greater certainty about development rights over time while giving local governments assurance that necessary infrastructure and community benefits will be provided.

Public-private partnerships are also utilised for major developments, particularly those involving significant public infrastructure or economic development components. Examples include the New Orleans Convention Center District Development and various port-related industrial developments.

Tax increment financing districts and payment in lieu of taxes (PILOT) agreements represent other collaborative mechanisms between developers and local governments, particularly for projects in areas targeted for economic revitalisation.

The municipal or parish governing body may enforce zoning ordinances by injunction. In addition, neighbouring property owners may seek an injunction to enforce a zoning ordinance. In practice, the enforcement of zoning ordinances is handled during the permit process.

As a general rule, an action to enforce a zoning restriction, building restriction or subdivision regulation must be brought within five years, although there are exceptions, such as for properties in the French quarter.

Enforcement typically begins with a notice of violation from the local code enforcement department, followed by administrative hearings and potential fines for non-compliance. For continuing violations, local authorities may issue stop-work orders, revoke permits, place liens on property or seek court orders to enforce compliance.

Neighbouring property owners and community organisations may have standing to bring private actions to enforce zoning restrictions if they can demonstrate particularised harm from the violation. Some jurisdictions have established specialised administrative hearing procedures to address code violations more efficiently than through traditional court proceedings.

Real estate assets may be owned by state-law corporations, partnerships, trusts or LLCs. An LLC is the most common type of entity used to hold real estate.

For commercial properties, the single-member or multi-member LLC structure dominates the market due to its liability protection and tax advantages. Limited partnerships with corporate or LLC general partners are also used, particularly for projects involving multiple investors or institutional capital. S corporations are less common but may be utilised in certain circumstances, particularly for operating businesses that own their real estate.

Special purpose entities (SPEs) or bankruptcy-remote entities are frequently required by lenders for significant commercial properties to isolate the asset from other liabilities and simplify the foreclosure process if necessary.

From a US income tax perspective, LLCs generally provide the most flexibility to mitigate federal and state income taxes.

LLCs offer pass-through taxation (avoiding double taxation of corporate structures), limited liability protection for all members, management flexibility (member-managed or manager-managed) and minimal corporate formalities. They can be structured as disregarded entities, partnerships, or corporations for federal tax purposes, providing significant planning opportunities.

Limited partnerships offer similar tax benefits but require at least one general partner. S corporations provide pass-through taxation but have significant restrictions on ownership. C corporations face double taxation but may be advantageous for foreign investors seeking to minimise FIRPTA exposure.

REITs are available in Louisiana. REITs must satisfy specific requirements under federal tax law. Several Louisiana-focused REITs have emerged in recent years, particularly in the healthcare, multifamily and industrial sectors.

There is no minimum capital requirement under Louisiana law for entities used to invest in real estate. However, adequate capitalisation is advisable from both a business and legal perspective to maintain the limited liability protection offered by corporate structures.

There are no special governance requirements for real estate investment entities; the general rules of governance for the various types of entities apply. However, certain best practices have evolved, particularly for entities holding significant real estate assets.

For LLCs, operating agreements typically address management structure, voting rights, capital calls, distribution schedules and transfer restrictions. For corporations, standard corporate governance applies, including board oversight, officer responsibilities and shareholder rights.

The Corporate Transparency Act, which became fully effective on 1 January 2024, imposes beneficial ownership information reporting requirements on most entities, including those used for real estate investment. However, enforcement remains unknown at this time pending possible additional rule making.

Annual maintenance costs for real estate investment entities in Louisiana typically include nominal state filing fees, any fees to a commercial registered agent, accounting and tax preparation fees, entity level tax filings and local business licence fees.

Louisiana law recognises several types of grants that allow a person to occupy and use real estate. The right of exclusive use of real estate may be granted by a lease of improved or unimproved real estate for a term not exceeding 99 years. A grant of servitude establishes the (usually non-exclusive) right of an estate or person to use real estate for specific purposes, such as passage or access. Servitudes may be predial or personal.

Predial servitudes are established in favour of an estate and may not be separated or assigned separately from the estate, while personal servitudes are established in favour of a person or juridical entity and may be freely assigned. Usufruct is a personal servitude that confers the exclusive right to the use of real estate and to occupy and/or collect the fruits, rents and revenues from the real estate. A usufruct may be established by contract or by operation of law and usually terminates on the death of the grantee.

The right of habitation may be granted to a person, conferring the right to occupy the real estate.

There are two basic types of commercial lease: the ground lease and the commercial lease. A form of ground lease is utilised for the lease of undeveloped land on which a tenant intends to construct buildings and improvements. Ground leases usually have a longer term, which may extend to a maximum of 99 years. A form of commercial lease is utilised for the lease of commercial buildings or for space in commercial buildings.

Within the commercial lease category, several specialised forms have evolved to address specific property types, including:

• office leases – typically structured with base rent plus operating expense pass-throughs;
• retail leases – often include percentage rent provisions based on tenant sales;
• industrial/warehouse leases – usually net leases with tenant responsibility for most operating expenses; and
• medical office leases – specialised provisions for medical waste and healthcare compliance.

Rents and lease terms are not regulated in Louisiana, except that the maximum term of a lease is 99 years.

Commercial leases are generally considered contracts between sophisticated parties, and courts tend to enforce their terms as written. However, certain provisions may be unenforceable as against public policy, such as waivers of the right to a judicial proceeding for eviction.

Ground leases are usually longer, so that the tenant who constructs buildings and improvements on the leased premises may have the opportunity to enjoy the buildings and improvements throughout their useful life. Other commercial leases have shorter terms.

In the absence of specific provisions in the lease, the Louisiana Civil Code governs the repair and maintenance obligations of the landlord and tenant. Most commercial leases have specific provisions governing those responsibilities. Ground leases usually require the tenant to provide all the repairs and maintenance. Other commercial leases usually provide that the landlord will provide repairs and maintenance, and that the tenant will pay the landlord its proportionate share of the cost of this work as additional rent.

Typical commercial lease terms in Louisiana’s major markets currently range from three to ten years, with larger tenants often securing longer terms with renewal options. Rent payments are typically due monthly on the first day of the month, with grace periods of 3–5 days common before late fees apply.

Rent remains the same for the full term of the lease, unless the lease provides for future increases in rent. Longer-term commercial leases and ground leases usually provide for periodic increases in rent in specific amounts or as determined by increases in the consumer price index (CPI) or other indexes.

Common rent escalation methods include fixed-percentage increases, CPI adjustments, step-ups at predetermined intervals and market rate adjustments for longer-term leases or renewal options.

Any increases in rent, including rent during any renewal term, must be specifically set forth in the lease.

For renewal options, the lease must specify the method for determining the renewal rental rate. Common approaches include specified fixed increases over the last year of the initial term, formula-based calculations or fair market value determinations, often with a process for resolving disputes if the parties cannot agree.

There are no taxes in Louisiana on rentals of real estate, other than as may be payable for US and Louisiana income tax purposes. In Louisiana, state and local sales/use taxes are levied on most rentals of tangible personal property.

In addition to any required rent payment, the tenant may be required to pay all or part of the cost of improvements to the leased premises that are necessary for the use intended by the tenant.

Common upfront costs include security deposit (typically one to three months’ rent), first month’s rent, tenant improvement contributions beyond any landlord allowance, design fees and lease documentation fees.       

The tenant under a commercial lease usually pays a proportionate share of the cost of maintenance and repair of common areas, landscaping and other common costs.

In triple-net (NNN) leases, tenants are responsible for virtually all operating costs, including common area maintenance, property taxes and insurance. In multi-tenant buildings, these costs are typically allocated based on the tenant’s proportionate share of the total leasable area.

Landlords typically maintain structural elements (foundation, roof, exterior walls) in most lease structures except absolute NNN arrangements.

If public services, utilities and telecommunication services may be separately metered, tenants are required to pay for their services directly. If not, each tenant typically pays a proportionate share as additional rent.

For multi-tenant buildings without separate metering, landlords typically include utility costs in operating expenses and allocate them based on square footage or other usage formulae.

In commercial leases, property taxes are typically the responsibility of the landlord, but tenants pay their proportionate share as part of additional rent or common area maintenance charges. This arrangement allows the landlord to maintain control over assessment challenges and ensure timely payment.

In NNN leases, which are common for retail, industrial and single-tenant properties, tenants reimburse the landlord for 100% of the property taxes applicable to their premises. For multi-tenant properties, each tenant’s share is typically calculated based on the ratio of their leased space to the total leasable area of the building.

Commercial tenants often negotiate the right to contest property tax assessments, particularly in single-tenant buildings where they bear the full tax burden.

Under commercial leases, the landlord usually obtains commercial property and general liability insurance, and the tenant is required to pay a proportionate share of the premiums. Commercial property insurance covers common casualties, and general liability insurance covers claims of damage to property and claims of injury to or death of persons against the landlord. The tenant is often also required to carry general liability insurance naming the landlord as an additional insured, and commercial property insurance covering the tenant’s property located in the leased premises.

Insurance requirements have evolved in response to climate concerns and increased catastrophic risk in Louisiana, with flood insurance becoming a standard requirement particularly within designated flood zones. Landlords increasingly require tenants to carry business interruption insurance that covers rent obligations during periods when the premises might be unusable due to casualty damage.

Commercial leases usually define the permitted uses and prohibit the tenant from using the premises for other purposes. In the absence of restrictions on use in the lease, the tenant may use the premises for any purposes permitted under local, state and federal law.

Use restrictions serve multiple purposes: ensuring tenant mix compatibility in multi-tenant properties, maintaining property value and reputation, controlling parking and common area impacts, and limiting wear and tear on building systems.

Beyond contractual restrictions, tenants must comply with applicable zoning ordinances, building codes and environmental regulations.

Commercial leases usually prohibit the tenant from making alterations, additions or improvements to the leased premises without the landlord’s consent. The tenant is required to submit plans and specifications to the landlord for approval, and the landlord often has the right of approval of the general contractor. The lease may also require the general contractor to provide a payment and performance bond.

Most leases distinguish between structural and non-structural alterations, with greater flexibility typically granted for cosmetic or minor non-structural changes.

There are no regulations in Louisiana that apply to leases of particular categories of real estate, except that local ordinances often regulate the short-term rental of residential property.

While commercial leases are largely unregulated, certain property types may be subject to specific requirements that indirectly affect lease terms, such as hospitality properties, healthcare facilities, industrial properties and properties in historic districts.

Commercial leases often contain default provisions under which insolvency, receivership or bankruptcy would constitute a default under the lease, but these provisions are generally unenforceable under federal bankruptcy law. The other effects of a tenant’s insolvency are governed by bankruptcy laws.

When a commercial tenant files for bankruptcy, the automatic stay prevents landlords from pursuing eviction or collecting pre-petition rent without court approval. Under the Bankruptcy Code, the tenant (as debtor-in-possession) or bankruptcy trustee has the option to assume or reject the lease within specified timeframes.

The tenant has no right to occupy the premises after the expiry of the term of the lease. If the landlord allows the tenant to remain in the premises, the lease may be tacitly reconducted under Louisiana law unless otherwise provided in the lease. A tacitly conducted lease of commercial property would be deemed to continue on a month-to-month basis.

The landlord should deliver a notice to vacate at the expiry of the lease, unless waived by the tenant in the lease, and take immediate steps to evict the tenant by legal proceedings in order to avoid tacit reconduction. Most commercial leases provide for “holdover” rent in the current market at 150–200% of the regular rental rate in the event a tenant does not vacate the premises at the expiry of the term.

Most commercial leases restrict a tenant’s right to assign their leasehold interest or sublease the premises without landlord approval. Typical assignment provisions require the landlord’s prior written consent.

Leases commonly include carve-outs permitting certain transfers without landlord consent, such as assignments to affiliated entities under common control, transfers resulting from corporate reorganisations or mergers and acquisitions.

The original tenant typically remains liable under the lease following an assignment unless expressly released.       

Both the landlord and the tenant have the right to terminate the lease in the event of a default by the other party under the terms of a lease. Commercial leases usually require written notice and an opportunity to cure the default before the right to terminate the lease is enforceable. Louisiana courts have complete discretion regarding whether to terminate a lease in the event of default, and lease provisions that give either party the right to terminate a lease without a judicial determination are unenforceable in Louisiana.

Beyond default scenarios, sophisticated commercial leases may include other termination rights, such as early termination options, contraction rights, or termination upon casualty if restoration cannot be completed within a specified timeframe.

Louisiana law does not require that commercial leases be recorded, but leases should be recorded to be effective against third parties. Recording a lease or memorandum of lease provides notice to subsequent purchasers and creditors of the tenant’s rights, which is particularly important in ground lease scenarios or for leases with significant tenant investments in improvements.

Current recording fees vary by parish but are generally nominal in the context of commercial transactions, and in New Orleans documentary transaction taxes apply as detailed in 2.10 Taxes Applicable to a Transaction.

Most parties opt to record a memorandum of lease rather than the full lease document to preserve confidentiality of sensitive lease terms while still providing public notice.

The tenant may be forced to vacate prior to the expiry of the term in the event of a default. For example, if the tenant fails to pay rent when due, the landlord may file eviction proceedings. Eviction proceedings are summary proceedings and can be completed in 30–90 days, depending on the particular judicial district and the facts of the case. The action for unpaid rent and/or damages against the tenant is brought through ordinary proceedings, which require longer to complete.

A lease may only be terminated by a third party or by a government entity through expropriation proceedings, as described in 2.9 Condemnation, Expropriation, or Compulsory Purchase. Both the landlord and the tenant are entitled to assert claims for just compensation in such an event. The time required for these proceedings varies greatly, depending on the judicial district.

In expropriation cases, compensation typically includes the value of the leasehold interest and any tenant improvements that cannot be relocated. Complete takings typically terminate the lease automatically, while partial takings may or may not trigger termination rights depending on the lease language.

In Louisiana, landlords facing tenant breach must choose between two mutually exclusive remedies: either cancel the lease and recover accrued rentals (forfeiting future rent), or enforce the lease and recover both accrued and future accelerated rentals if the lease contains an acceleration clause. Other remedies may be available to the landlord but they may not cancel the lease and demand accelerated rent.

For commercial leases, security deposits are typically held in either cash or as letters of credit, with the specific form and handling terms specified in the lease agreement. Letters of credit provide landlords with additional security as they can be drawn upon directly from the issuing bank upon tenant default without having to pursue the tenant directly. These deposits serve as security for both property damage and lease defaults.

Louisiana statutory law requires residential landlords to return deposits following lease termination, subject to deductions for defaults or unreasonable wear. While this law primarily governs residential leases, commercial lease practices often follow similar principles.

The most common compensation mechanisms for construction projects are fixed price (sometimes referred to as “lump sum” or “stipulated sum”) and “cost plus”, although other variations exist.

Fixed Price

Under fixed-price contracts, the contractor agrees to perform the work for the stipulated sum within the contract time, and bears essentially all the cost and schedule risks, such as the actual costs of labour and materials being higher than estimated. Fixed-price contracts are appropriate where the scope of the work and the schedule for performance are sufficiently definite to allow the contractor to reasonably estimate the cost of the work and contingency amounts for cost and schedule risks.

Cost Plus

Cost-plus contracts are used where the scope of work is too indefinite to allow for pricing on a lump-sum basis – ie, where an owner must begin the work before the design is complete, creating uncertainty as to the labour, material and equipment that will ultimately be required to perform the work. Under a cost-plus contract, the owner and contractor agree to the contractor costs that will be reimbursed. Additionally, the contractor is entitled to a fee (the “plus”), which is negotiated between the parties.

The allocation of responsibility for design and construction on a project is a function of the project delivery method selected by the owner.

Design-Bid-Build

Under the traditional design-bid-build model, a project is divided into three phases, which proceed sequentially. The design and construction responsibilities are strictly segregated, and the commonly used industry form contracts specifically provide that the design professional is not responsible for construction means and methods, and that the contractor is not responsible for providing design services.

Design-Build

In the design-build delivery method, the lead principal is typically a contractor, who is then responsible for engaging the design professional, giving the owner a single point of responsibility for all services. In industrial projects, engineering, procurement and construction (EPC) contracts are common, whereby the general contractor assumes full responsibility for delivering a “turnkey” facility.

Spearin Doctrine

Louisiana has adopted the Spearin Doctrine, under which the owner warrants the adequacy of the plans and specifications to the contractor, as defined in contract documents. If the project calls for the use of specific materials or equipment and they are installed in accordance with the plans and specifications, the contractor cannot be held responsible for the insufficiency of the specified item. This warranty, however, has been eroded through the adoption of performance specifications, under which the contractor is obligated to achieve a result and where the means of achieving that result are left to the contractor.

Appropriate contract terms and conditions represent a significant tool for the management of construction risk. Ideally, contract terms should allocate the project risks to the party best able to control and manage the risk, and which derives some benefit from doing so. Some of the more important contract provisions regarding risk allocation are as follows.

Scope of Work Definition

One of the best ways to avoid financial risk and disputes between the parties is by establishing a clear definition of the scope of work being undertaken, and how differences in the parties’ interpretation of that scope will be resolved over the course of the project.

Dispute Resolution Provisions

Parties must structure the dispute resolution process in these provisions before their relationship becomes contentious over the course of the project. Items to consider include step negotiation, the employment of dispute review or dispute adjudication boards, and whether the ultimate dispute resolution mechanism should be litigation or arbitration.

Indemnity

Indemnification provisions, an important component of risk management, make one party financially responsible for the occurrence of a specified risk. Under Louisiana law, construction contracts cannot contain “broad-form” indemnity provisions, whereby a party indemnifies another against personal injury and property damage claims arising out of the indemnitee’s own negligence. Rather, indemnity obligations are limited to occurrences arising out of the negligence of the party giving the indemnity.

Damage Waivers

It is common for construction contracts in Louisiana to include waivers of consequential damages, which are defined as damages that may arise directly but not necessarily from breach of the construction contract. Examples include loss of revenue, production, profits, use and rental income.

The first line of defence in managing schedule risk is the institution of appropriate reporting requirements and other project controls to ensure that the contractor is performing the work in a timely fashion, and that project risks that affect the schedule – such as differing site conditions or material delivery problems – are identified early and their impact on the schedule mitigated.

Contractually, Louisiana law permits an owner and a contractor to stipulate the damages to be recovered in case of non-performance, defective performance or delay in performance of an obligation in the construction contract. Most commonly, stipulated damages provisions relate to late completion of milestones or the overall project. In the case of a contractual breach, the liquidated damages clause relieves the non-breaching party of the need to prove actual damages.

Liquidated Damages

Liquidated damages may not be imposed as a penalty, and must be intended to compensate the owner for the contractor’s delay. Thus, the stipulated amount must represent a reasonable estimate of the anticipated or actual loss resulting from the failure to complete the work on schedule, made at the time the contract was executed.

The most commonly used device for securing contractor performance on a project is a contractual requirement that the contractor furnishes and maintains performance and payment bonds. Such bonds are required on public projects, but not on private projects, although they offer important protection to the private owner and its property, as discussed in 7.6 Liens or Encumbrances in the Event of Non-Payment.

The Louisiana Private Works Act, LSA-R.S. 9:4801, et seq, requires statutory bonds to be obtained from a solvent, legal surety. The Act also specifies the conditions of the bond, namely:

• that the surety guarantees to the owner and all persons having a claim against the contractor the payment of their claims or all amounts owed to them arising out of the work performed; and
• that the surety guarantees to the owner the complete and timely performance of the construction contract.

The amount of the bond is specified with reference to the amount of the contract price.

Louisiana has recently overhauled its Private Works Act with respect to privately owned construction projects, LSA-R.S. 9:4801, et seq, which serves the purpose of protecting persons who furnish labour, materials, equipment or services for the construction or repair of immovable property by creating privileges in their favour on the property.

In general, the Act creates two classes of claimants in the event of non-payment: persons who perform work or services directly for a property owner (eg, the general contractor) and persons who perform work or services for the owner’s general contractor (ie, subcontractors, sub-subcontractors and suppliers). In regard to the first category, the Act grants a claimant a privilege on the owner’s property that serves to secure payment of the claimant’s contractual claim against the owner. The second category of claimant is provided a claim against the contractor and owner, notwithstanding the lack of contractual privity with the owner, as well as a privilege on the owner’s property.

Filing Claims

The privileges are not self-executing. Rather, a statement of claim and privilege (referred to colloquially as a lien) must be filed in the mortgage records of the parish (county) where the project is located, in accordance with the requirements of the Act. Furthermore, because privilege merely acts as security for the payment of the underlying claim, a suit to enforce the claim and privilege must be filed within one year of the filing of the statement of claim and privilege, or both the claim and privilege will be extinguished by operation of law.

Protection From Claims

The act does provide a mechanism through which an owner can protect itself from claims and privileges, namely the filing of a notice of contract and a payment bond prior to the commencement of work. If a notice of the contract and bond is filed in accordance with the Act, the proper filing of the notice of contract and bond allows the owner to avoid personal liability to the second class of lien claimants (ie, those with whom the owner does not have contractual privity), and the lien attaches to the bond rather than the owner’s property.

Upon completion of construction, and in compliance with the Act, the owner and contractor will execute a notice of termination or substantial completion and record it in the mortgage records of the parish where the property is located. If a notice of contract was properly filed in a timely manner as set forth in the Act, then the filing of the notice of termination or substantial completion commences a 30-day lien period in which claimants under the Act have the right to file a statement of claim or privilege. Upon the expiration of the period, the clerk of the court will issue a lien and privileges certificate and, if clear, the owner and contractor will file a notice of cancellation of the notice of contract.

During this process, a certificate of occupancy is issued by a local government agency following an inspection of the building to certify its compliance with current zoning and building laws, including that all utility services are established and operating, and that all equipment has been installed and connected. In addition, the Louisiana state fire marshal will inspect the building and determine that it satisfies the National Fire Code and the Americans With Disabilities Act, and complies with the American National Standards Institute standards, the Underwriters Laboratories (UL) fire resistance standards, the Energy Code and the Office of State fire marshal manual.

There is no VAT in the USA, and there are no transfer taxes on real estate at the federal level other than those imposed by FIRPTA (see 2.11 Legal Restrictions on Foreign Investors). Some state and local government units may levy transfer taxes on transfers of real estate, but there are no such transfer taxes in Louisiana.

While Louisiana does not impose transfer taxes on real estate transactions, sales tax may apply to certain movable property included in real estate transactions.

There are no federal or Louisiana transfer taxes on real estate transfers. In some states, ownership of real estate assets in a legal entity and transfer of ownership of the legal entity may mitigate any applicable transfer taxes.

Although Louisiana does not impose transfer taxes on real estate transfers, sophisticated investors utilise various strategies to optimise their overall tax position, including entity structure planning, tax-deferred exchanges under IRC Section 1031 and opportunity zone investments.

In Louisiana, municipal occupational licence taxes are generally levied on real estate businesses. Specific licence tax rates vary by parish and municipality.

See the discussion of FIRPTA in 2.11 Legal Restrictions on Foreign Investors. In certain circumstances, the seller of real estate may apply to the Internal Revenue Service for a withholding certificate certifying an exemption from FIRPTA withholding or a reduction of the amount to be withheld.

Foreign investors receiving rental income from US real estate are generally subject to a withholding tax on gross rental income, though such withholding is beyond the scope of this article.

US income tax benefits for real estate includes preferential long-term capital gain rates on dispositions.

Additional significant tax benefits include:

• depreciation deductions;
• bonus depreciation for qualified improvement property;
• deductibility of mortgage interest and property taxes;
• 1031 tax-deferred exchanges to defer capital gains tax; and
• opportunity zone investments offering capital gains deferral and potential exclusion

Louisiana-specific incentives include the Restoration Tax Abatement Program, which provides property tax abatements for renovations of existing structures in designated districts, and various historic preservation tax credits.