Q: Why do I need a real estate lawyer?
A: The number one reason to use a real estate attorney is for
protection. If you are purchasing, selling, or negotiating a real estate transaction, a real estate attorney will provide the much needed legal advice to determine the letter of the law and how it applies to the agreement. Real estate transactions may include many complex latent obligations that are not easy to recognize for an untrained person. Without the advice of an experienced, knowledgeable real estate professional, a transaction may obligate parties to commitments that they were not aware of.
Q: What are the details that should be included in a commercial real estate purchase contract?
A: Though every transaction is individually unique. The
usual considerations to be addressed in a commercial real estate purchase are:
- The description of the property that you are purchasing.
- The complete purchase price including the terms, and the amount that is due at signing.
- A list of all capitol equipment which may be included the purchase. I.E. security system, cameras, etc.
- Qualifying contingencies that are required for the performance of the agreement. I.E. mortgage, financing.
- The type of title insurance that is required.
- Closing date, delivery of possession.
- Remedies and recourse for default.
Q: What kind of commercial leases are there?
A: There are many types of commercial leases available. The types of leases will differ greatly depending on the environment. A commercial lease within a large city is typically much different than that of the rural cities. Five typical leases that may be created are:
Flat - Fixed Lease, Gross lease, Net lease (s), Shopping center lease, or a
land lease.
Q: What are contingencies, and what are they for? A: Contingencies are clauses that are included in the contract that are legal "If and then's".
For example,
if you qualify for the loan,
then you are obligated to make the purchase. The contingency is included to secure the contract prior to the determination of qualification.
Q: How does a letter of intent work and should I accept one?
A: A letter of intent is a wise idea, especially in complex real estate transactions. The purpose of the letter of intent is to iron out and agree upon the details of the transaction and to define the major terms of a proposed deal. However, it is important to include a clause which states that the agreement is not binding. The specific details in the letter of intent are very important, so it advisable to consult with a real estate lawyer for the creation and drafting of the document.
Q: Should I accept the title of the commercial property in my own name?
A: There are benefits and drawbacks to taking a commercial property into your own name. However, there too, are many benefits to forming a corporation, or a limited liability corporation (LLC), and holding the title of the property in the name of the business entity. The main benefit from having the commercial property in the corporations name is to limit personal liability for the property in the event there is a claim file against the owner of the property.
Q: Do I need to have a professional appraisal on a commercial property?
A: Highly recommended. In order to support a legal claim for the valuation of the property for possible litigation matters, or if you need an accurate pricing, or to ascertain a market valued tax assessment, a professional appraisal will provide accurate data that may be used when the time arrives.
Q: Are there any risks involved in a commercial real estate transaction?
A: There are always risks involved in real estate transactions. The majority of real estate litigation cases are caused by disputes in defects in title, lender or financial requirements, mechanics liens, land use and zoning, and
Q: What is a preliminary title report and is it important?
A: Once an escrow is opened on a real property, a preliminary title report is prepared. This action is taken prior to the closing. The report contains pertinent information for the buyer to review. For example, some of the content that may be on the report could be easements, liens, or encumbrances. The report will escalate into the final title report, and provide the basis for the title insurance.
Q: What is a Quiet Title?
A: It is actually an action that is performed in order to attempt to "quiet" any claims that have been filed against a property title. A quiet title action is performed on a property to establish a party's claim to that property.
Q: Why is it necessary to have a separate real estate purchase contract, when escrow instructions usually seem to be enough?
A: Amazingly enough, it is perhaps all too common for parties to close a commercial deal without having a formal real estate purchase contract in place. They can shake hands on a deal, show up at an escrow company and tell an escrow officer what they want to do. The escrow officer can then draft instructions for the parties to sign and they can proceed to close the deal. But it can become painfully clear that relying solely on escrow instructions is never the best way to do a deal. Among the things to take into account are:
- Escrow instructions are prepared primarily for the benefit of the escrow holder and not any of the parties to the transaction. They typically contain language that tries to absolve the escrow company of any liability. If something goes wrong, it's pretty hard to hold the escrow company responsible.
- Conditions that may excuse performance by one party or the other aren't likely to be spelled out clearly. A dispute is more likely to arise if problems come up with respect to a party's performance.
- The escrow instructions aren't going to cover any side deals the parties contemplated handling outside of escrow.
- The escrow holder isn't going to provide any legal or tax advice to cover issues typically addressed in a real estate purchase contract.
- Escrow instructions aren't going to contain representations and warranties from the parties that would typically be addressed in a real estate purchase contract.
- Escrow instructions won't spell out the consequences if someone breaks the deal.