Key Steps To Successfully Closing A Commercial Real Estate Transaction

Closing a commercial real estate deal is more than just a single day of signing papers. It’s a process that begins almost immediately after the desired property is selected. At each step of the way, there could be unexpected surprises that might potentially derail the closing and keep the parties from finalizing the deal. Having experienced legal counsel can give you the peace of mind of knowing that the transaction you’ve worked so hard for will be finalized. Whether you are the buyer or seller of commercial property, SederLaw is ready to work with you to help ensure the deal goes as you expected.

Steps in Closing a Commercial Real Estate Transaction

These are some of the most important steps to take in successfully closing your commercial real estate agreement:

Title search and title insurance. If you’re buying property, you likely already know the importance of conducting a title search to ensure that what you’re buying has a clean title. But it’s not as simple as a title search for residential property. There could be different corporate entities that held the property with misleading or confusing names. There might be a break in title that makes it unclean. Or the property might be subject to liens or other encumbrances which could make you reconsider the deal.

A knowledgeable attorney can facilitate a title search to make sure the person or entity selling you the property can do so. This includes investigating the chain of title to ensure no one else can assert rights against the property. Your attorney can also uncover any claims (from creditors, taxing authorities, or others) which could make the property less valuable.

Conducting a title search is almost always necessary to obtain title insurance. Insurance is designed to cover any liens, claims, or defects with the property that were not uncovered during the title search. This insurance is strongly recommended because even the best search can fail to identify problems.

Escrow. Compared to residential property, commercial real estate escrow tends to be more complicated. For example, the money to buy the property may come from different sources. Due diligence must normally be completed, too, so the parties know their interests in the transaction are being protected. The parties will usually negotiate an escrow agreement with detailed terms. An escrow agent will later verify the agreement has been followed before funds are released.

Due diligence. This is a broad category of steps that every commercial property purchaser and seller should take to ensure they receive the full value of their transaction. As mentioned above, it is usually an integral part of escrow. Working with an attorney, you will complete these steps (among others):

  • Identifying any restrictive covenants and zoning rules that may limit the commercial use of the property
  • Conducting a property survey (for example, to identify the boundaries) and reviewing the report
  • Where the property is financed, verifying the buyer’s ability to make ongoing payments to the lender
  • Inspecting any existing buildings or structures to determine whether repairs are needed
  • Properly executing the purchase contract, which typically includes verifying a corporate entity’s signing authority

Closing documents. There are a series of documents the parties will sign and exchange to finalize the commercial transaction. Some examples are:

  • Assignments and assumption of leases
  • Assignments of liability
  • Deeds
  • Environmental reports
  • Zoning disclosures
  • Warranties

Your attorney can review these documents to make sure they are accurate, properly signed, and address everything necessary to close the deal.

Bear in mind, the above is a condensed version of a process that could be more complicated depending on the nature of the property, the parties involved, and the details of the transaction. The most important step you can take is retaining a skilled commercial real estate attorney who can guide you. Give SederLaw a call today to learn more.