Commercial Real Estate Transactions differ widely from the manner in which a residential real estate transaction is conducted.
While many aspects are similar, a commercial real estate transactions usually requires more extensive original drafting of contracts, significantly more environmental issues, and a greater responsibility on the part of the buyer to diligently research the property.
The basic steps are:
1. Review the terms of the offer for purchase of real estate and determine the manner in which earnest money will be held and establish strict joint order escrows as required.
2. Review the engagement with the client and consult as to contract terms
3. Draft the contract for purchase (especially on behalf of the Buyer), consult with the client in regard to the terms of the contract, means of taking title, and any contract modifications proffered by the Buyer or Seller, recommend further modifications where needed and negotiate all changes.
4. Assist the client when requested in matters pertaining to the due diligence period of the contract or documents related to the commercial loan as required
5. Monitor contingency deadlines set forth in the contract and send notices requesting extensions of deadlines, or cancellation of the contract, if necessary.
6. Timely raise the inspection issues, environmental concerns and final inspection walk-through deficiencies that have been brought to my attention;
7. Schedule and attend the closing,
8. Prepare Seller’s transactional documents to ensure compliance with the contract (or review them on Buyer’s behalf), including the Seller’s closing documents, ALTA survey where applicable, title insurance commitment and documents, and review of the final closing statement and other such documents as required to fulfill the agreement between the parties.
9. Review the loan documents where applicable to ensure they conform to with your mortgage loan commitment or financing letter as applicable
10. Compile and provide closing figures as needed and prepare or assist in preparing the Escrow Closing Instructions which guide the closing transaction at the time of closing
11. At any time during the course of the transaction please feel free to call and discuss matters that are of concern to you.
Attorney Compensation and Billing
I will attend the closing with you. I make every effort to insure that my fee is sufficient to cover the reasonably anticipated typical attorney time for this transaction. In the event of prolonged discussions between the parties or if any unusual matters arise and I am required to perform additional services, any additional time will be billed at my regular hourly office rates and must be agreed to by you. Some examples are protracted negotiations and discussions pertaining to the due diligence period, negotiations and drafting regarding environmental issues, amendment or creation of entities to hold title to the real estate, post-closing issues, matters unrelated to the real estate transaction, or prolonged negotiations over contract modifications and inspection issues.
Closing Funds
This sum must be in the form of CERTIFIED FUNDS OR WIRE TRANSFER ONLY. If funds to close from any party exceed $50,000, Illinois law does NOT allow the use of a cashier’s check or bank check. Certain types of checks such as checks from a Title Company are allowed. Wire transfers may be the best option. Consult with me to discuss your alternatives.
Property Tax Assessments
There is a property tax analysis for the purposes of the transaction. I will determine the time for which your property is scheduled for reassessment. A township reassessment has a bearing on the real estate tax proration factor employed in the transaction. I would be happy to discuss those prorations with you.
“Caveat Emptor” Aspects of the Transaction
As you may know, commercial transactions typically require the Buyer to make its own inquiry as to the suitability of the property for purchase. Much of this inquiry by the Buyer occurs during the “Due Diligence Period”. The Buyer should understand that there are sometimes expenditures of funds for inspections, environmental studies and other expenses which may arise. The Buyer must bear those expenses where agreed to regardless of the outcome of the transaction. Unless the period is extended by agreement, the Buyer must render its judgment as to whether the property is acceptable within the time set by the contract. If the Buyer needs to take more time, please contact me within the time allowed for the Due Diligence Period so that additional time may be requested from the Seller.
The Buyer agrees that the Buyer is responsible to make reasonable and diligent inquiry during the Due Diligence Period to make sure that the property is properly zoned, and the intended uses allowed by any local municipality with jurisdiction over the property prior to the expiration of the period.