Download Legal Elements of the Development Process Acquiring Real Property

Legal Elements of the Development
Process Acquiring Real Property
October 13, 2016
Presented by: Kenneth Gordon, Esq.
Any forms or documents included in these materials should not be considered as models for any particular matter, nor
should they be relied on as being applicable to any specific legal matter.
DUE DILIGENCE
Scope of Due Diligence
• Financial, land use—zoning and planning,
physical, environmental, operational, and legal
due diligence.
Due Diligence Provisions in a
Contract of Sale
• Should there be one — free option?
– Bidding process — no due diligence
– Cost Issues — investment without risk of not
getting the deal
– Seller concern of tainting property if Purchaser
backs out
• Time Period
Due Diligence Provisions in a
Contract of Sale (cont’d)
• Scope of Termination Right
– e.g., Follow up on environmental, structural or
zoning issues.
– For any reason.
• Access Rights and Physical testing
– Interference with Tenants
– Non-disclosure of results and confidentiality
– Damage and repair
Due Diligence Provisions in a
Contract of Sale (cont’d)
• Contact with Other Parties and Governmental
Agencies—informal polling
• Indemnification
TITLE INSURANCE AND SURVEY
Concept of Record Title
• County Recorder's office — copies of recorded
documents; use of ACRIS system in NYC for
searching all recorded documents affecting
the Property (back to 60's only).
• Using title search to identify documents
affecting title.
• Race/Notice — concept of bona fide
purchaser for value and deemed notice of
matters of record
Title Commitment and Title Policy
• What a title policy insures and doesn't insure
– Does insure: defects in title, liens and
encumbrances other than those excepted in the
policy.
– Doesn't insure: against the insured's own acts,
lack of consideration, presence of hazardous
substances, zoning and land use.
• Significance of the Effective Date of a Policy
What is a Survey?
• Importance of legal description
• Identification of location of easements,
covenants and restrictions and other rights—
look at recorded SNDAs and memos of leases
Title Insurance Provisions in a
Contract of Sale
• Concept of Permitted Exceptions
• Obligation of Seller to Cure Exceptions to Title
– Monetary Cure — liens, mortgages, etc..
– Voluntary liens
– Concept of inability to convey and not a default —
something missed in title search
• Departmental Violations (DOB, health, fire,
C of O) and positions of a Seller and Purchaser
Selecting the Title Insurance Company
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financial creditworthiness;
rates;
cooperation on exceptions;
tickets
REPRESENTATIONS AND
WARRANTIES
Representations and Warranties
• Types of Representations and Warranties
– See PSA –NJ Form and NYC Form
– Reps you typically don't see — physical condition
of improvements, existence of hazardous
materials, compliance with laws, zoning or C of O.
• Effect of a Pre-Closing Breach
• Concept of obligations Surviving the Closing or
Merging in a Deed
• Effect of a Post-Closing Breach
CONDITIONS TO CLOSING
Conditions to Closing
• Difference between a Condition and a
Covenant
• Consequences of a Failure of Condition
• Failure of Condition vs. a Default
DEVELOPMENT APPROVALS
Development Approvals
• Inclusion of Approvals in Sale — see sample. If
going to get these provisions, Buyer is going to
pay for them.
• Sale subject to obtaining Approvals —
Definition of Approvals—see Exhibit to NJ
Form.
• Financing contingencies; types available for
purchase of land, pre-development expenses
and construction expenses.
COVENANTS
Covenants
• Types of Covenants during Executory Period
• Payment of Transaction Expenses
CLOSING
Closing
• Mechanics of a Closing — Concept of escrow,
who goes first, etc...
• Closing Deliveries
• Concept of Time being of the Essence
• Adjustments
CASUALTY AND CONDEMNATION
Casualty and Condemnation
• Relevance to a Development Site
• Ways to define Material Casualty - $$, time,
leases.
• Application of Insurance Proceeds
• Ways to define Material Condemnation
DEFAULT AND REMEDIES
Default and Remedies
• Purchaser Default and Seller Remedies
• Seller Default and Purchaser Remedies