COMMERCIAL INVESTMENT REAL ESTATE
18 July | August 2017
Queen's Gambit
T
he fully executed contract is ready for signatures. All too
often, however, the end is not near. Instead, the game
of chess begins.
With the commercial and real estate markets in fl ux,
more real estate litigation is happening because buyers and sellers
are trying to back out of closings. To help prevent an escape hatch,
prepare beforehand and draft the most airtight contract possible.
Real estate investors and professionals must have safety valves
placed into a sale and purchase contract, fi rst gently and then
more rigorously, to remind the buyer about the pain of backing
out. Various options are available on how to dissuade a reluctant
buyer from not signing a contract.
Concise Contracts
Before beginning to write a contract, prevention involves several
steps. While it may sound obvious, including the closing date
is crucial.
Also, a seller should specify the length of allowed extensions,
limit the number of extensions, and decide on the ramifi cations
for each extension. For example, an extension may call for a non-
refundable deposit.
If a buyer walks, he loses the property. Another option is to
specify additional escrow money for each requested extension.
The agreement should specify that the deposit is held in
escrow, which will be provided to a seller if a buyer walks away.
Prior to closing, sellers should try to have as much money as pos-
sible on their side of the table — a signifi cant enough amount to
place a buyer in a tough spot.
Free and Clear Titles
Property must be able to be transferred with a clear title. A seller,
however, may be aware of certain issues with the title and may
require the buyer to assume them. In this instance, sellers must
be very clear about these issues in the contract.
In a recent litigation, the buyer tried to back out of a $38 mil-
lion closing allegedly due to an open litter violation against a
commercial tenant. The litter consisted of a piece of plywood
lying against the property's side wall, which merely needed to
RapidEye/GettyImages
Develop the right strategic moves to keep clients
on track to close transactions.
by Javier A. Lopez and Stephanie M. Gomez
LEGAL
B R I E FS