Post-Closing Obligations in Commercial Real Estate TransactionsReal Estate Influence
May 22, 2012 — 1,669 views
You've found the best commercial real estate property for your clients, negotiated to get them a fair price and have finally closed the deal. Congratulations! However, these days, making sure the deal is done takes more than simply signing on the dotted line and handing over the key to company manager. As a real estate agent or broker, you will need to make sure any post-closing obligations are met by both the seller and buyer, and be able to handle disputes that may arise after closing.
The official newsletter of the American Bar Association provides some examples of when you'll need to make sure post-closing arrangements have been made and handled properly. For instance, if a seller wishes to stay in possession of the property after closing, there could be problems. The ABA suggests including a possession due on sale clause in the contract. This should clearly spell out the dates of occupancy, as well as the consequences of not moving out in time.
Furthermore, the clause should also outline how the buyer could be considered liable for anything that occurs during the seller's occupancy, such as staff or employee injuries, property damages or a fire. It must be clearly defined whose insurance would cover any loss and that the seller could not be sued for any of these issues during the seller's extended stay.
Remember that post-closing obligations will not necessarily be met if they are not defined in simple language in the purchase and sale agreement. For instance, if a seller says they will remove trash in the facility, this need to be established so the company or individual will stay true to their obligation. Creating a clear and comprehensive closing contract can help avoid disputes of this nature.
According to Inform Legal, some of the most common post-closing obligations include: repair obligations, reconciliation of taxes, mortgage releases, construction inspections, delivery of a Final Policy of Title Insurance and release of liens. It may be a good idea to create a checklist of obligations so that you're aware of who is responsible for what and when everything is completed.
To handle any further disputes, implement negotiation techniques so both parties can compromise on particular matters. If disputes become too much to handle in a private manner, mediation, arbitration and litigation may be used to close a commercial real estate deal.