Doing Deals in Louisiana

 

 

 

Lawyer: Isaac M. (Mack) Gregorie, Jr.
Email: mack.gregorie@keanmiller.com
Telephone: 225.382.3411
Location: One American Plaza, 301 Main Street, Suite 1800/PO Box 3513/ Baton Rouge, Louisiana 70825-3513
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Civil Law Legal System
Louisiana has a civil law system of laws; the only state whose laws are based on such system. You may remember Marlon Brando, as Stanley Kowalski in the movie version of Tennessee Williams’ A Streetcar Named Desire, telling Stella that we have something in Louisiana called the Napoleonic Code:

Did you ever hear of the Napoleonic Code, Stella?… Now just let me enlighten you on a point or two…Now we got here in the State of Louisiana what’s known as the Napoleonic Code. You see, now according to that, what belongs to the wife belongs to the husband also, and vice versa…It looks to me like you’ve been swindled baby. And when you get swindled under Napoleonic Code, I get swindled too and I don’t like to get swindled.

Yes, Stanley was right, at least partly. It is incorrect to equate the Louisiana Civil Code with the Napoleonic Code, although the Napoleonic Code strongly influenced Louisiana law. Spanish law also influenced the Louisiana Civil Code. The first Louisiana Civil Code in 1808 and its 1825 replacement were written in French and then translated into English. The Civil Code of 1870 was the first to be written in English only.

Purchase and Sale Transactions

  • Customary Allocation of Closing Costs. Seller pays for preparation of any required seller resolutions and buyer pays for preparation of the act of sale and (nominal) recordation fees. Buyer pays for its title and survey investigations and for issuance of the final title policy.
  • Tax Proration. Real estate taxes are assessed and prorated on a calendar year basis. Other than Orleans Parish, taxes are paid in arrears in December.
  • Earnest Money. If a deposit is termed “earnest money”, the seller may terminate the purchase agreement by returning double the earnest money, and the buyer may terminate by forfeiting the earnest money.
  • Redhibition. Implied warranty that the thing sold is free from redhibitory vices and defects. A waiver of this warranty must be express and detailed; the mere phrase “as is, where is” does not effectively waive the warranty.
  • Lesion Beyond Moiety. In the sale of corporeal immovables (i.e., real property), the seller may rescind the sale when the price is less than one-half of the fair market value.
  • Transfer Taxes. With limited exceptions, there are no transfer or mortgage taxes.

UCC

Louisiana has not adopted Articles 2 (Sales), 2A (Leases) or 6 (Bulk Sales). Sales and leases are governed by the Louisiana Civil Code. There is no bulk sales law.

Loan Transactions

  • Encumbrance Forms. Louisiana is a mortgage state: “straight” mortgage, collateral mortgage and multiple indebtedness mortgage.
  • Usury. With limited exceptions, usury is generally not an issue in commercial transactions in Louisiana.
  • Prepayment. Unless the instrument provides otherwise, a borrower may generally prepay a loan in full or in part at any time.
  • Remedies. Generally self help is not available; judicial foreclosure only through: “ordinary process” (slower process) and “executory process” (quicker process). Executory process is available only if the mortgage is in “authentic” form and certain other formalities are observed.

Title Matters

  • Public Records Doctrine. With very limited exceptions (e.g. Private Works Act mechanics and materialmen’s liens (called “privileges” in Louisiana)), Louisiana is a pure “race state” and rights and obligations established by unrecorded instruments affecting immovables (e.g., mortgages, sales, leases, options) are ineffective as to persons not a party to such instruments.
  • Title Insurance. Louisiana law requires that policies be based upon an opinion of title of an attorney.
  • Instruments of Conveyance. Louisiana recognizes acts of sale, rather than “deeds”, and there is no statutory form for “general”, “special” and “non-warranty” deeds. However, the parties may by contract modify or limit the seller’s warranty obligation. The Louisiana equivalent of a special warranty deed has become customary in commercial transactions, and a general warranty is customary in residential transactions.
  • Execution of Corporate Instruments. Execution of an instrument affecting immovable property by a corporate officer must be accompanied by a recorded resolution authorizing execution of the instrument by such officer.