Paralegal Primer on Commercial Real Estate Closings
This presentation covers key aspects of commercial real estate closings from preliminary matters and due diligence to tenant documents and review processes. It discusses obtaining necessary agreements, conducting due diligence reviews, handling conveyance documents, and more.
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Commercial Real Estate Closings A Paralegal Primer PRESENTERS: SHANNON L. HOGAN of GOODWIN LLP BRENDA L. BICKHAM of SAUL EWING ARNSTEIN & LEHR LLP GISELLE CIANO of PIERCE ATWOOD LLP
PRELIMINARY MATTERS PRE-CLOSING BUYER REPRESENTATION DUE DILIGENCE lead time items I. a. Obtain executed Purchase and Sale Agreement (PSA) and any amendments Exhibit A sample PSA attached b. Prepare Checklist and calendar Critical Dates Exhibit B Checklist with Critical Dates c. Order Due Diligence items: 1. Title and Survey 2. Zoning Report (a/k/a PZR ) 3. Phase I Environmental Site Assessment 4. Property Condition Report (a/k/a PCR ) 5. UCC, Tax Lien Judgment and Bankruptcy Searches Order jurisdiction specific items (i.e. MA = MLC s) Entity Formation 1. create organization chart 2. create SPE entity and file with appropriate SOS office (usually a Limited Liability Company LLC ) 3. order good standing certificates (within 30 days of closing) 4. Operating Agreement(s) either draft or obtain executed copy of final agreement Note: Items 3 and 4 are often handled directly by the client. d. e. Begin after expiration of DD period. Exhibit C Organizational Chart
TENANT DOCUMENTS II TENANT DOCUMENTS: Seller sends out SNDA s and Estoppels, which should be sent out as soon as possible, as they take time to negotiate and are often late being returned by tenants. Buyer to review before being sent to tenants. a. Obtain tenant leases (and all amendments) Exhibit D SNDA and Estoppel tracking chart b. Review leases and prepare lease abstracts c. Rent Roll (obtain from Seller) d. Estoppels Form often attached to PSA or provided by Lender Form provided by Lender e. Subordination, Non-Disturbance and Attornment Agreements (SNDA s) f. Letters of Credit to be transferred to new owner (if any) Seller to deliver executed transfer forms into escrow at closing.
DUE DILIGENCE REVIEW III. DUE DILIGENCE REVIEW: a. Review of Title commitment and Exception Documents Exhibit E sample title commitment -negotiate pro-forma policy and endorsements b. Review of Survey Exhibit F sample survey Exhibit G - Survey requirements incl. Table A items c. Review Zoning report Exhibit H sample PZR d. Review UCC, Tax Lien, Judgment and Bankruptcy searches Prepare Title Objection Letter e. Exhibit I sample objection letter Additional items for client to review: service contracts, warranties, tenant work and financials f.
CONVEYANCE DOCUMENTS SELLER IV. a. CONVEYANCE DOCUMENTS: Review PSA for documents to be delivered at closing and draft same. These might include: Forms of conveyance documents sometimes included as exhibits to the PSA Seller to draft/deliver: Exhibit J Sample Quitclaim Deed 1. Deed (form of deed should be consistent with the seller s vesting deed (i.e. Quitclaim (MA); Warranty; Special Warranty (TX)) Exhibit K Sample Bill of Sale 2. Bill of Sale Exhibit L Sample Assignment and Assumption of Leases 3. Assignment of Leases and Other Intangible Property (contracts, warranties, etc.)(signed by both Buyer and Seller) 4. Tenant Notice Letter Title Affidavit and Transfer Tax forms provided by Title Company 5. Certified Rent Roll (certifying that it s true and accurate as of a certain date within 30 days of closing) 6. Owner s Affidavit/Title Affidavit (including GAP indemnity) 7. Transfer Tax forms, if applicable 8. Seller s authority and consent to sale, including good standing certificate 9. Seller s Bring Down Certificate (see EX N for Buyer form)
CONVEYANCE DOCUMENTS BUYER b. Buyer to Draft/deliver: 1. Assignment of Purchase and Sale Agreement Exhibit M Assignment of Purchase and Sale Agreement 2. Buyer s Brindown Certificate Exhibit N Buyer s Bringdown Certificate 3. Buyer s authority (See Section V) 4. Property Management Agreement
AUTHORITY DOCUMENTS V. BUYER S AUTHORITY DOCUMENTS: a. Manager s Certificate (with exhibits): Exhibit O Certificates: Samples of the following attached: 1. Certificate of Formation 2. Good Standing Certificates EX O-1 Member Certificate 3. Operating Agreement EX O-2 Managing Member Certificate 4. Consent authorizing transaction 5. Organizational Chart (See EX C) EX O-3 Consent EX O-4 Manager s Certificate w/Incumbency b. Opinions (Authority and enforceability)
LOAN DOCUMENTS AND LENDER REQUIREMENTS VI. LOAN DOCUMENTS and LENDER REQUIREMENTS: a. Closing Agenda (see for full list of loan documents and lender closing requirements) Exhibit P sample closing agenda from lender -Promissory Note -Loan Agreement -Mortgage and Security Agreement (Deed of Trust) -Assignment of Leases and Rents -Guaranty -Environmental Indemnity -UCC Financing Statements
CLOSING VII. a. CLOSING Preparation of signature packets for client signature. b. Escrow Packages: 1. To Lender s Counsel (original loan documents) Exhibit Q sample letter to lender s counsel 2. To Title Company (with buyer/seller deliverables and recordable documents) Exhibit R sample escrow letter to title c. Closing Protection Letter (if required) d. Settlement Statement Exhibit S sample settlement statement and disbursement sheet e. Payoff letter seller to request
POST-CLOSING VIII. POST-CLOSING a. Receipt of Escrow Documents and Title Policy from escrow agent/title company b. Confirmation that tenant notices have been sent to Tenants c. Coordinate transfer of Letters of Credit (if any) d. Coordinate with client to insure that warranties are being signed. d. Closing Binder
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