Purchase of Commercial Property
Commercial real estate purchases are often expensive. As a prospective buyer, you will start by looking at commercial properties and gathering information about them. However, once you identify a commercial property for purchase, the transaction can become complex. Queens real estate lawyer Shane D. Scott can counsel you on the legal consequences of certain actions and represent you during a purchase of commercial property.The Commercial Real Estate Purchase Contract
Usually, you will initiate a purchase of commercial property by making an offer to purchase to the seller. The seller can accept, counteroffer, negotiate, or refuse your offer. Your attorney will receive and review the purchase contract, if it is prepared by the seller’s attorney rather than your attorney, and negotiate changes as needed. The commercial real estate purchase contract will include title conveyance terms, a mortgage contingency clause, zoning regulations, and other important provisions.
To move forward with a purchase, you will need to make a down payment. The amount depends on the loan; for a traditional bank loan, the down payment is often 10% of the contract price, and you will need to pay it to the seller’s attorney, who will place it in an escrow account.Steps to Take Prior to Closing
Once you receive the fully executed contract from the seller’s attorney, there are a number of steps that you will need to take. Among other things, an inspection will need to take place; special inspections may need to be conducted regarding engineering or termites. You may need to retain an environmental investigation firm to perform a Phase I ESA. This is a process of determining whether there are certain risks associated with the commercial property and figuring out how to remedy them. A report is generated, detailing environmental conditions and making a preliminary determination about whether cleanup is needed. The Phase II process involves physical testing to identify hazards like contaminated soil or groundwater or abandoned fuel storage tanks.Financing
Generally, financing for commercial real estate is obtained from a bank or another institutional lender. The financing is secured by real estate and related assets. Assets that might be used to collateralize a commercial loan include equipment, fixtures, bank or trade accounts, inventory, receivables, supplies, and general intangibles. You will need to apply for financing in a timely fashion; it is important that there be a mortgage contingency clause so that if you cannot get a mortgage, you can cancel the contract. If you get a commercial real estate loan, you should obtain a loan commitment letter from the lender and forward it to the title company and the seller’s attorney.Title Search
You will need to order a title search from a title company. When you plan to use a piece of property for commercial purposes, it is crucial that there not be any title defects. Ideally, your purchase contract should state that the seller will deliver marketable title, rather than just insurable title. Marketable title is title that is free and clear of defects, such that a prudent buyer would accept it in the reasonable course of business. All defects should be identified and cleared before the closing. You also will need to order ancillary searches for items like municipal violations that need to be cleared by the seller and confirm that these are resolved.Survey
Additionally, you will want to get a survey of the commercial property performed by a surveyor. Surveys confirm information about the property, and they reveal any discrepancies between how the land is being used and the recorded legal description. The ALTA survey is the most comprehensive type of survey; it reveals property boundaries, improvements, and recorded title items like access and easements. The lender may require you to get a specific type of survey in order to provide financing.Closing
Documents must be prepared for the closing, such as a new lease for your bank if requested. You may need to give fully executed tenant estoppel certificates to your bank’s attorney. A tenant estoppel certificate constitutes confirmation and assurance from a tenant that critical facts and documents presented are accurate at a specific moment in time. The lender and title company may require other documentation before you proceed to the closing.
At the closing, you will need to bring appropriate identification and provide an insurance binder or policy. You will need to sign mortgage documents. Adjustments to taxes and fees may need to be performed. Documents will need to be signed, and the balance of the real estate price will need to be paid to the seller. You will receive not only keys and possession but also closing documents such as the deed, the original survey, title insurance, and lease documents.Retain a Property Transaction Lawyer in Queens
Numerous considerations can come up during a purchase of commercial property and securing the financing for it. If you are interested in buying a commercial property in Queens, you can seek advice from Shane D. Scott. Call us at (800) 230-0744 or complete our online form.