Seller Processes

There are many details in commercial real estate that require hard work and knowledge. Because we have the experience and expertise, we can help you through any or all of these with a minimum of stress and a maximum opportunity for creating wealth.

Elements We Handle for You

Term sheets and letters of intent

Once a purchaser and seller agree to enter into a transaction for a specific property, the parties typically enter into either a term sheet or a letter of intent (LOI).

There is generally no substantive difference between a term sheet and an LOI -these are usually not binding., and most time the parties only want to memorialize the most basic terms of the transaction; other times, the parties draft extensive and detailed preliminary agreements that include very specific and detailed deal terms and provisions.

Negotiating key provisions in the purchase and sale agreement Due diligence period

A due diligence period gives the purchaser the right to investigate various aspects of the property and the seller, and to terminate the purchase and sale agreement and receive a refund of its deposit if it finds any matters unsatisfactory.

While the term of the due diligence period is typically included in the LOI, many details are often left to be negotiated in the purchase and sale agreement such as:

The amount of insurance purchaser must provide to cover its actions on the property

The contingencies for purchaser's election to continue or terminate the contract at the end of the period

Any due diligence extension rights

Representations and warranties

The primary role of representations and warranties is to set out the facts the parties relied on in agreeing to enter into the transaction.

These usually cover:

The seller's formation and authority

Leases

Environmental matters

Management and other service contracts

Litigation, liens, and judgments

Covenants

Unlike representations and warranties, which are generally limited to a particular section of a purchase and sale agreement, covenants and rights appear throughout the agreement.

Rights of the seller to enter into new leases and contracts

Seller's obligations for maintenance and repairs

Maintaining insurance for the property at the same levels as existed on the contract date

Closing conditions

The closing conditions represent the purchaser’s last chance to retain its deposit after the due diligence period expires. In addition to these contingency-related conditions, the most common conditions to the purchaser’s obligation to close are:

The continued accuracy of the seller’s representations and warranties

The seller’s execution and delivery of the closing documents

The seller’s ability to deliver actual, physical possession of the property to the purchaser

Customary conditions to the seller’s obligation to close the transaction are:

Purchaser’s funding of the purchase price (net of all credits and prorations as specified in the purchase and sale agreement)

Continued accuracy of the purchaser’s representations and warranties

Purchaser’s execution and delivery of the closing documents

Prorations & credits

These detail how prorations and apportionments will be made between the parties.

The purchase and sale agreement should provide:

The date on which proration calculations are based, customarily the date before the closing date, such that the purchaser is treated as the owner of the property (for proration purposes) as of the closing date.

Any specific revenue or expense items unique to the property that are to be prorated. These include any assessments due to a property owners’ association or government body.

Commercial real estate purchase and sale agreements are complex documents, and the above points are only samples of the many key negotiations that occur between purchasers and sellers of commercial real property.