From researching tips for buying commercial property up to closing a sale, you’re now ready to reap your financial rewards. With the help of a trusted broker and a solicitor, you found a buyer with a vested interest in your property. As soon as someone makes an offer on a commercial property for sale in Brooklyn, New York or wherever you’re listing is located, then comes the legal formalities to actually complete the sale. Here’s what you need to know:
Drafting a Purchase Contract
Once you’ve set things in motion, your solicitor will draft a contract that details all the sales particulars. After a couple of consultations with you, he will then forward the contract to the buyer’s solicitor where it will be reviewed. Outstanding mortgages, property tax and insurance information, as well as all the nitty-gritty of the transaction will be discussed in this phase.
Both parties will then undergo a series of contract exchanges until both parties have agreed to every little detail in the contract. Typically, a buyer submits a deposit with their offer to purchase. The deposit is considered part of the purchase price and eventually will be credited to the final sale. At the drafting phase, some of the documents that come into play are:
- Letter of Intent – used to begin negotiations between the seller and the buyer.
- Exclusive Right to Sell Listing Agreement – an agreement that gives a broker the sole right to sell property on behalf of the owner.
- Purchase and Sale Agreement – a legal contract that obligates a transaction between the buyer and the seller.
- Non-Disclosure Agreement – used only if there are certain details that you should tell the buyer but you don’t want the public to know.
Performing Due Diligence
While the buyer and their solicitor are reviewing the contract, the buyer will now perform an investigation of the property called due diligence. This is often stipulated in the contract to the benefit of the buyer. Given a certain period, the buyer has a right to make sure that the property is in good condition and that they are getting what they’re paying for.
For example, if you have a commercial property for sale in Long Island, the buyer can perform zoning checks, environmental inspections, as well as review title insurance coverage options. Every little information will be scrutinized and considered about the commercial property for sale. New York City has its own zoning laws that may be different from other locations. During due diligence, the buyer will look into this and consider its implications on the sale. Some legal documents covered by this phase are as follows:
- Due Diligence Request List – highlights the most critical information that due diligence should cover.
- Environmental Due Diligence Access Letter Agreement – allows the buyer to enter the seller’s property and conduct environmental due diligence.
- Fire Risk Assessment – indicates whether your property complies with fire-safety standards.
- Commercial Property Standard Enquiries (CPSE) – a series of questions that details crucial information about the property.
- Due Diligence Summary Chart – used to summarize a party’s investigation findings
Negotiating and Closing the Sale
Once due diligence is complete, negotiations will take place and both parties attempt to settle upon the terms of sale. It’s possible to make counter-offers if you are not satisfied with the terms laid out by your buyer while exchanging contracts. This bargaining process will eventually be the basis of the final sales contract where all terms agreed upon by both parties are stipulated.
To facilitate the sales process, a couple more documents are required. These will keep both parties informed and it will act as proof that your property is legally compliant.
- Assignment and Assumption of Leases – a title document that declares all rights that a lessee possesses over a property are transferred to the buyer.
- Holdback Escrow Agreement (Commercial Real Estate Acquisition) – sets out the terms by which an escrow agent holds and distributes the portion of the purchase price placed in escrow, which assures the seller will finish agreed upon work.
- Purchaser’s Closing Transaction Checklist – enumerates every detail that should be addressed by both parties before closing.
- Release Agreement and Covenant Not to Sue – a legal agreement that releases all claims to the seller and legally obliges the buyer, who could initiate a lawsuit, not to do so.
Whether you’re listing a commercial property for sale in Queens, New York or closing a sale, seeking the help of a real estate expert will be beneficial for you. Contact Alex Meskouris at 917.741.4296 or send an email to info(at)alexandermeskouris(dotted)com to schedule a consultation.