Commercial Real Estate Attorney
Buy or Sell Commercial Real Estate Closings
Retail, Office, Industrial & Land
At our Firm we are always happy to help our business clients buy or sell commercial real estate property to meet their business needs and goals. Our experienced real estate attorneys and business attorneys make sure that our clients are fully protected when buying commercial real estate property. We can handle all negotiation, drafting, lender requirements, transfer documents, and funds through escrow.
For Buyers, we make sure the property is suitable for our clients purpose, that they are getting clear and marketable title, that they meet all lender requirements, and that they are fully informed the whole way.
For Sellers, we make sure that they have the legal right to sell the property, that all transfer documents are properly drafted, and that they can and do meet all of their obligations as Seller.
For all of our commercial real estate clients, WE ALWAYS MAKE SURE THE MONEY IS RIGHT.
What is a commercial real estate closing?
Commercial real estate closings involve real estate property that is either bought for business purposes, such as retail, office, industrial or land properties, and any property that is bought by a business for investment purposes. Therefore, a doctor buying office space, a store buying retail space, a manufacturer buying a factory and a business buying a condo to rent out or a house to flip, are all considered commercial real estate closings.
Commercial real estate closings are different in a few keys ways from residential real estate closings.
- The level of paperwork is much greater – corporate documents will have to be drafted such as meeting minutes, corporate resolutions, corporate authorizations, and powers of attorney.
- Business health – the business must be properly formed and in good standing with the State of Connecticut. State documents and an Attorney Opinion Letter will have to be provided to interesting parties certifying the legal existance of the business.
- Zoning becomes much more important depending on the intended use of the property
- Certain loan packages are not available to business and investors
- Commercial real estate transactions are not covered by Consumer Protection Law, therefore the level of due diligence must be much greater.
What are the steps of a commercial real estate closing?
- Hire a commercial real estate attorney so that they are around to give advice and review documents before you sign them.
- Contact a real estate agent that specializes in commercial real estate and is familiar with the town in which you plan to buy property. The realtor will expect you to sign an Exclusive Right to Buy or Sell. This agreement between the realtor and the business should be the first document reviewed by a commercial real estate attorney.
- Once you find a property or a buyer for your property, the Buyer will make an Offer to Purchase to the Seller. While the Offer is not the final Purchase and Sale Contract, it could be binding and create liability for the business, and must therefore be reviewed by the commercial real estate attorney.
- The Purchase and Sale Contract must be negotiated and drafted. This contract will contain all of the terms of the transaction. This contract is binding and can created liability for the business and the individuals signing on its behalf. Certain contingencies must be negotiated, mostly to protect the Buyer. A Due Diligence period containing a mortgage contingency and an inspection contingency are the minimum requirements.
- There will be a due diligence period during which the Buyer will investigate the property to make sure it is fit for their purpose, to perform an inspection, to get a title search and municipal departments search, and to try and get a loan to buy the property. A UCC Lien and judgment search should also be performed to make sure there are no encumbrances on the property. Flaws discovered during the due diligence period should void any obligations under the contract.
- Documents must be compiled and drafted by Buyer’s Attorney to secure loans. Lenders have many documentation requirements for commercial real estate loans. The Buyer will need to establish legal existence for the business, prove that it is in good standing with the State, and draft internal documents such as corporate resolutions, authorizations, and certificates. there will also be title insurance policies that must be drafted and purchased.
- Documents will have to be drafted by Seller’s Attorney to transfer title. At minimum these involve a Deed to transfer title, an Owner’s Affidavit for the Buyer’s title insurance company, and a Non-Foreign Persons Affidavit so that funds do not have to be held in escrow after closing.
- The closing is conducted assuming all lender requirements are met and there are no title issues. The Buyer’s Attorney will compile purchase funds from the Lender (loan amount) and the Buyer (down payment, closing costs, hazard insurance, title insurance) and help the Buyer sign all of the Lender documents. The money is then exchanged for the Deed.
- There is follow through with the documentation such as recording the deed and mortgage on the land records, along with any powers of attorney or notices of lease, and all liens and encumbrances from the previous owner must be paid off and released. Once the Deed is recorded on the land records, the property now belongs to the Buyer.
This can get a little complicated. It depends on whether the property is owned by the same business as is being sold, or by a separate holdings company. It depends on whether the entire business entity is being purchased, or only it’s assets. The steps that are affected the most are the offer and contract steps because they may be completely covered by the business purchase and sale contract.
What if the commercial real estate property already has tenants?
Many times commercial properties are purchased specifically because they already have paying tenants. If there are already tenants in the property, the Buyer will have a few options. First, leases between the Seller and the Tenants must be reviewed to see if they are voided by sale of the property, if they are assumable by the Buyer, or if they MUST BE ASSUMED by the Buyer (this should be done before the property is purchased). In all cases, either a new lease or an assumption of lease must be drafted and signed. The Buyer or Tenant may also wish to record a notice of lease on the land records.
If there are non-paying tenants, hold-over tenants, or tenants who simply don’t want to return phone calls, those tenants will need to be noticed and evicted.