Buying Commercial Property in California as a Foreign Investor: What You Must Know
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- September 3, 2026
Buying Commercial Property in California as a Foreign Investor: What You Must Know
California remains one of the most open major markets in the world for foreign real estate investment. There is no citizenship or residency requirement to own property in the state, and international capital continues to arrive at scale: in the National Association of Realtors’ 2026 international transactions report, California accounted for 19 percent of all foreign purchases of existing U.S. homes, second only to Florida, with nearly half of all foreign purchases nationwide completed in cash. That openness stands out even more in 2026, as more than two dozen U.S. states have adopted or proposed restrictions on foreign ownership of certain land types. California has not.
Commercial property, however, is a legally different purchase from the residential transactions most of that data describes. The disclosure rules are different, the due diligence burden sits differently, the contracts are negotiated rather than standardized, and a federal withholding regime called FIRPTA affects how money moves at closing. This guide covers what a foreign investor should understand before buying commercial property in California: how the commercial process differs from residential, the ownership structures available, what FIRPTA is in general terms, the due diligence that actually protects the buyer, how commercial leases are structured, and how financing works without a U.S. credit history.
Commercial Is Not Residential: Where the Legal Process Differs
Disclosure obligations shift to the buyer
Foreign investors who have previously bought a home or apartment in the United States often assume the commercial process works the same way. It does not. In a California residential sale, the seller owes the buyer a set of statutory disclosures about the property’s condition. In a commercial transaction, seller disclosure obligations are far more limited. Commercial properties are routinely sold on an as-is basis, and anything the buyer does not investigate before closing generally becomes the buyer’s problem after it.
The contract is negotiated, not standardized
The purchase and sale agreement in a commercial deal is not a standard form. Seller representations and warranties are negotiated point by point and heavily limited, and the diligence period, the conditions to closing, and the remedies if something goes wrong are all terms that get drafted, not assumed.
The professional cast changes
In residential deals, escrow and title handle much of the process. In commercial deals, buyers are represented by counsel as standard practice, because the protections exist only if someone drafts them.
Choosing the Ownership Structure
The available forms
Foreign investors can hold California commercial property in several ways: directly as an individual, through a U.S. entity such as a limited liability company or a corporation, or through a foreign entity, with layered combinations of these in larger transactions.
Liability and governance drive the legal analysis
Direct individual ownership leaves the investor personally exposed to claims arising from the property, which matters more in commercial assets because tenants, contractors, and visitors generate more of them. A properly formed and maintained U.S. entity places a liability shield between the asset and the investor, defines how decisions are made when there is more than one investor, and simplifies the mechanics of financing, leasing, and eventual sale. Lenders also generally expect to see a U.S. entity as the borrower.
Tax treatment belongs with tax advisors
Each structure carries different tax treatment in the United States and in the investor’s home country, and that treatment often drives the final choice. Di Martino Law Group does not advise on tax matters. The firm structures the legal side of the acquisition and works alongside the investor’s tax advisors so that the entity choice, the financing, and the tax planning are made together rather than in sequence.
FIRPTA: General Information Every Foreign Investor Should Know
What the law is
FIRPTA, the Foreign Investment in Real Property Tax Act of 1980, is a federal law that affects most transactions involving a foreign party and U.S. real estate, and every foreign investor should know it exists before entering the market.
How it operates in general terms
FIRPTA operates as a withholding mechanism when a foreign person disposes of U.S. real property. The obligation sits on the buyer’s side of the transaction: when purchasing from a foreign seller, the buyer is generally required to withhold a percentage of the amount realized and remit it to the Internal Revenue Service at closing, as a prepayment against the seller’s U.S. tax obligations. Exceptions, reduced rates, and certification procedures exist, and escrow practice in California has developed established mechanics for handling all of this at closing.
Why it matters twice
For a foreign investor, FIRPTA is relevant once when buying, if the seller is also a foreign person, and again years later when selling, when the investor will be on the foreign-seller side of the same rule. The practical takeaway is that FIRPTA affects transaction mechanics and cash flow at closing, and it should be addressed with qualified tax advisors as part of planning the purchase, not discovered at the closing table. As with ownership structuring, the firm’s role is the legal side of the transaction, coordinated with the investor’s tax advisors who handle the FIRPTA analysis itself.
Due Diligence: Where Commercial Buyers Win or Lose
Environmental condition
Under federal environmental law, liability for contamination can attach to the current owner of a property regardless of who caused the contamination. The established protection is diligence done before purchase: a Phase I Environmental Site Assessment conducted to the current ASTM standard, followed by further investigation if the Phase I identifies concerns. For industrial, automotive, dry cleaning, and older commercial sites, this is not a formality. Skipping it can mean buying someone else’s cleanup.
Zoning, land use, and entitlements
The property’s current use, the use the investor intends, and what the local zoning code actually permits are three different things, and they need to be confirmed against each other. If the investment plan involves development, expansion, or a change of use, the entitlement process and California’s environmental review requirements can materially affect both timeline and feasibility, and they belong in the underwriting before the purchase price is agreed.
Title, survey, and tenant matters
Commercial title review goes beyond confirming ownership. Easements, use restrictions, reciprocal agreements with neighboring parcels, and recorded encumbrances can all limit what the buyer can do with the property, and an ALTA survey read together with the title commitment is how those limits surface. Where the property is tenant-occupied, the leases are part of what is being purchased, and estoppel certificates from tenants confirming the lease terms, the rent, and the absence of defaults are a standard closing condition that protects the buyer from inheriting disputes.
Two checks specific to foreign buyers
Accessibility compliance carries disclosure requirements in California commercial leasing, and it should be assessed during diligence rather than after tenants raise it. And in a small set of cases, federal review can apply to foreign acquisitions of real estate near sensitive military or port facilities, a screening question that takes minutes to check early and can be a serious problem if discovered late.
Understanding Commercial Lease Structures
The three structures a buyer will encounter
For an income property, the leases are the investment. The triple net lease has the tenant pay property taxes, insurance, and maintenance in addition to rent, leaving the landlord with a comparatively predictable net income stream. The gross lease has the landlord cover those operating costs out of a higher stated rent. The modified gross lease divides specific cost categories between the parties by agreement.
Why the structure changes the investment
The lease structure determines who bears rising operating costs, how the property’s income should be underwritten, and what obligations the new owner inherits on day one. Two buildings with identical rent rolls can be very different investments once the lease structures are read, which is why foreign investors need to read leases the way a lender would.
Financing Without a U.S. Credit History
Commercial lenders underwrite the asset
Foreign nationals frequently assume that the absence of a U.S. credit history closes the door on financing. In commercial lending it does not, because commercial lenders underwrite the asset before the borrower. The property’s income, expenses, and debt service coverage carry the analysis, supported by the investor’s financial documentation from their home country.
What to expect as a foreign borrower
Foreign borrowers should expect different terms rather than no terms: larger equity requirements than domestic borrowers, more extensive documentation, and a lender requirement that the borrower be a U.S. entity with its own tax identification and U.S. bank account. Building that infrastructure takes time, which is one reason the entity formation and banking steps should begin well before a target property is identified. The high share of foreign purchases completed in cash reflects preference and speed for some investors, not a rule.
Attorney and Broker: What Each Does
The broker’s work is the market
Foreign investors sometimes arrive with the assumption that a commercial broker covers the legal side of the transaction. The roles are complementary and they do not overlap. The broker identifies properties, advises on pricing and comparable transactions, and negotiates the business terms of the deal.
The attorney’s work is the transaction
The attorney drafts and negotiates the purchase and sale agreement, forms the ownership entity, reviews title, survey, leases, and diligence findings, coordinates escrow, and manages the closing. In California commercial practice, buyers who proceed without counsel are not saving a cost. They are leaving the negotiated protections out of the transaction entirely.
Working With an International Real Estate Attorney
For a foreign investor, the transaction has a dimension that a purely domestic deal does not. Funds arrive from abroad and must be documented for escrow and lender requirements. Corporate documents from the investor’s home country need to be usable in a California closing. Powers of attorney may need to work across two legal systems, and the investor may be reviewing documents in a second language while wiring the largest payment of the year.
This is the specific role of an international real estate attorney: running the California legal process to California standards while managing the cross-border layer that domestic counsel rarely sees. For Italian and European investors, working with an Italian real estate attorney in the US means the transaction can be handled in the investor’s own language, with the home-country documentation understood rather than merely translated, and with the international business law questions that surround the purchase, from entity structuring to cross-border agreements, handled in the same engagement.
Di Martino Law Group represents international investors in California commercial real estate acquisitions, working in English and Italian from Los Angeles, and coordinating with the investor’s tax and financial advisors throughout the transaction.
Entering the Market Prepared
Real estate investments in the US continue to reward foreign investors who prepare properly, and California’s combination of market depth and openness to foreign ownership keeps it at the center of that activity. The investors who do well in this market are the ones who treat the legal process as part of the investment: structure decided before the offer, diligence done before the contingencies expire, leases read before the price is agreed, and advisors coordinated rather than consulted one at a time.
If you are considering a commercial property acquisition in California, speak with an international real estate lawyer before you sign anything. Contact Di Martino Law Group to discuss your investment.