Over the past twenty plus years, it has been our honor and privilege to work as part of a team with many real estate agents. The most successful real estate agents often share one thing in common – they proactively issue-spot and facilitate transactions. These agents understand that the “ostrich’s head in the sand” approach typically results in a delayed closing, and time kills deals. What even the most successful agents may not realize, however, is that before the transaction even goes to an attorney, the agents can look for ways to expedite the Contract of Sale and Closing Date. Below are a few items for experienced agents to think about when working on these types of large commercial deals.
- Title – Obtaining a copy of the Seller’s (owner’s) title insurance policy can help verify the correct name of the Seller and expedite the updated title report. These policies are often found in the Seller’s “closing binder” that they received from their attorney when they initially purchased the property. The policies are often issued by First American, Commonwealth, Stewart of Chicago Title. The policy will often have a cover page that states “Owner’s Policy of Title Insurance.” The Deed may also reference a Title Number or Policy Number.
- Survey & Plans – Obtaining the Seller’s boundary survey and any site plans, architectural drawings and the like, can help expedite the Purchaser’s title review and diligence process. The boundary survey would show the metes and bounds of the subject property. A site plan, subdivision plan or zoning drawing would show the zoning information such as setbacks, parking calculations, drainage, topography, and other similar features. The architectural drawings may show the floor plans for the buildings. All of this information is typically disclosed to the Purchaser during the due diligence period. Locating and organizing these documents in advance can save a great deal of time.
- Environmental – Obtaining the Seller’s Phase I and II Environmental Site Assessments and other related documentation can help expedite Purchaser’s “All Appropriate Inquiries” environmental review. This is especially important given the United States Environmental Protection Agency’s recent adoption of the updated ASTM E1527-21 standard for commercial purchasers. Please keep in mind that any fuel storage tanks over 1,000 gallons in capacity should have documentation from the County Department of Health. On a large commercial property, the environmental documentation may be voluminous. Locating and organizing this documentation in advance can save a great deal of time.
- Existing Leases, Rent Schedules and Security Deposit Schedules and Vacancies – On a large commercial property, such as an office park or mixed use building, there could be many tenants. Obtaining copies of all leases, amendments and extensions, and a complete, current rent schedule and security deposit schedule can expedite the Contract of Sale. These leasing documents are typically exhibits to the Contract of Sale, so the inability to produce this information can slow down the execution of the Contract of Sale. Seller’s counsel should be made aware of any significant tenant defaults or disputes with existing tenants. The agents should also discuss how vacancies will be handled between contract and closing.
- Corporate Organizational Documents – Obtaining a copy of the Seller’s corporate organizational documents and a recent Certificate of Good Standing can help expedite the closing, because the title company will typically require these. For a LLC, the Seller would have Articles of Organization and an Operating Agreement. For a corporation, the Seller would have a Certificate of Incorporation and By-Laws.
- Physical Condition Issues – If the Seller is aware of a significant condition issue that will be discovered during due diligence (such as a nonfunctional boiler or HVAC unit or leaking roof), it is often beneficial to address this issue in advance. In some cases, the cost to repair the item may be split between the parties and the repair estimate will be an exhibit to the Contract of Sale. An experienced agent can help identify and negotiate these issues in advance, which can save the parties time and money.
- Zoning Compliance Issues. – Zoning Compliance issues can delay a closing especially when the Purchaser is obtaining a mortgage. Experienced listing agents often check with the local municipality to determine whether there are any open permits or violations. This can save the parties time and money. Identifying any open issues early in the process can also give the Seller additional time to resolve the issues.
- Well Water – If the property includes private drinking water wells, the agent can coordinate the well tests.
- Existing Contracts – Large commercial properties often have written contracts in place for employees and vendors, such as HVAC maintenance and repair, landscaping and snow removal and security. Obtaining copies of these contracts early on in the process, can help to save time for the parties and attorneys.
- Other Potential Issues – Large commercial properties can have many different issues, such as casualty, condemnation, litigation, septic, sewer, drainage or pending litigation. To the extent that these issue may delay the closing, it may be beneficial to address these issues in advance.
In conclusion, there are many different ways in which a real estate agent can increase the likelihood of a smooth closing for a large commercial property.
For more information on commercial real estate issues in New York, please contact us at (914) 338-8050 or send an e-mail to email@example.com. We look forward to hearing from you.
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