Keys to Determine the Right Type of Commercial Real Property Purchase and Sale Agreement

Keys to Determine the Right Type of Commercial Real Property Purchase and Sale Agreement

In an educational blog published by Tamara B. Pow, Esq.,a Business and Real Estate Attorney and a suggested real estate partner, it stated that, “the purchase and sale agreement (the “PSA”) is the central document for the sale of commercial real property and one of the most important.”

The details of the agreement are usually negotiated after the buyer and seller sign a Letter Of Intent (LOI), though the parties may skip the LOI and move straight to the PSA. Before devoting time and energy into negotiating the PSA, which is often a lengthy and time-consuming process involving numerous rounds of amendments before an agreement acceptable to both parties is achieved, a LOI should be utilized to ensure the parties agree on the basic conditions of the sale.

The party who provides the initial agreement has the advantage of being familiar with the document’s terms and structure, whereas the other party must read and evaluate the entire agreement in order to grasp it and any necessary adjustments.

Initial items to note are:

  • Sale Price

  • Deposit Timing And Amount

  • Accurate Identification of The Parties and The Subject Property

  • Time Permitted for Due Diligence (Including Title Review And Objections)

  • Length of the Escrow Period, the Representations and Warranties provided by each Buyer And Seller

  • Buyer And Seller documents that must be delivered to the Escrow Holder before the Close of Escrow

  • Any Special Clauses that either Buyer or Seller want incorporated into the PSA

The party examining the PSA should ensure that the LOI’s pre-negotiated terms are integrated into the agreement, and the PSA should be changed if it differs from the LOI. Because the sale price, deposit, subject property identification, length of due diligence, and escrow periods are often discussed in the LOI, a simple comparison against the LOI will confirm if these items are appropriately mentioned in the PSA.

 

During The Due Diligence Period

 
  • A preliminary title report should be obtained as soon as feasible since it enables access to documents listed in the title record that affect the property.

  • These documents are often mentioned as exceptions to the title insurance policy, and it is the responsibility of buyer’s counsel to determine which exceptions should be deleted, as well as to clarify the buyer’s responsibilities with respect to the exceptions that will remain, these are often agreements that run with the land.

  • The PSA should allow a buyer to request that the seller remove or change things highlighted in the title report, give the seller time to reply, and lastly provide the buyer the option to terminate the PSA without losing their deposit if the seller’s response is not satisfactory.

  • Other due diligence items will vary based on the buyer’s objectives for the property, and may involve things like getting a survey, testing the soil, inspecting existing improvements for dangerous hazards, and contacting the city about development plans and prospective zoning changes.

  • Experienced buyers who intend to redevelop the property will frequently negotiate a lengthy due diligence period to ensure that they will be able to secure the necessary permits and clearances. Otherwise they usually open to a shorter due diligence period.

Before The Due Diligence Period Ends
  • The buyer should be allowed to cancel the PSA without penalty and receive their deposit refunded in full (but will often be required to pay for escrow and title costs incurred). The money is non-refundable after the diligence time has expired and the buyer has not terminated the PSA.
“California PSAs typically include a liquidated damages clause which state that if a buyer breaches the PSA then the deposit shall be relinquished to the seller as liquidated damages,” Pow explained.
  • If a buyer breaches the agreement, it is usually after the diligence period because the buyer can no longer terminate it without penalty until the seller violates the terms.
  • From the buyer’s perspective, representations and warranties (reps and warranties) cover issues such as the seller’s authority to enter into the agreement and sell the property, whether the property is the subject of any lawsuits or threats of lawsuits, and whether the property violates any environmental or statutory laws.
  • They will also indicate that the seller has not filed bankruptcy and is not a foreign individual or barred person as defined by applicable statutes, that the property is not condemned, and that all third-party claims in the property have been revealed.
  • If the property is inhabited by a third-party tenant, the buyer should ask for a tenant estoppel as a closing condition and find out if the lease includes a Right Of First Refusal (ROFR) that allows the tenant to buy the property before anybody else.
  • If the lease includes a ROFR, the buyer will want assurance that the tenant is dismissing the ROFR before investing time and money in diligence, and the PSA should clarify that the diligence term does not commence until the ROFR is waived.
“Commercial real property in California is often sold on an As-Is basis, meaning a buyer accepts the property in its current condition without any warranties from the seller regarding the condition or use of the property. A buyer should confirm the As-Is clause makes an exception for the Seller reps and warranties specifically stated in the PSA to hold Seller accountable for these specific items,” Pow elaborated.
Escrow Closing
  • Closing instructions should be prepared by buyer’s counsel, outlining the documents that a seller must place in escrow before the remainder of the purchase money can be transferred to the seller.
  • Some buyers want the option to prolong the escrow close, and sellers are more amenable to this offer if the extension right compels the buyer to pay an additional escrow deposit.
  • Acquire an extension option during the LOI or PSA negotiations, as a seller is not obligated to agree to a closing extension if it is not included in the contract.
  • If the seller refuses to change the PSA to allow for a closing extension, the buyer may be pressured to close on time or be held in default of the contract, putting the buyer’s deposit at jeopardy.
  • Closing costs, which are normally divided according to county custom, although the parties will agree to distribute them differently, are a closing note on the close of escrow.
  • In either case, a buyer should double-check that the PSA appropriately indicates who is responsible for whose expenses, and that the settlement agreement matches the PSA.
To read more about a buyer’s perspective on Commercial Real Property Purchase and Sale Agreement, visit strategylaw.com. For commercial real estate consultations in Colorado, call/text
Cynthia Daughtrey, Esq.
cynthia@westwardbroker.com
303-548-9659

There’s a lot to do in Twin Lakes, Colorado!

There’s a lot to do in Twin Lakes, Colorado!

This small and peaceful town in the Rocky Mountains is home to just over a hundred families. Located just south of Steamboat Springs and northwest of Denver, the Twin Lakes town is a precious gem in the Colorado mountains.
 
In the summertime, you can go fly fishing on one of Twin Lakes’ five lakes or take a scenic highway up to Independence Pass to get a look at some of Colorado’s most breathtaking scenery.
 
Its major attraction is its Whitewater Rafting. The lake has 2 small islands made up primarily of sandstone that are home to many species of birds, trees, shrubs, and other plants. It has a lot of natural beauty to offer with its crystal clear lakes, horseback riding trails, boat tours to Historic Interlaken Resort, and majestic mountain peaks.
 
At Twin Lakes, there are campgrounds available, as well as dispersed camping in various nearby places. On the southeast side of the Twin Lakes dam, no camping or fires are allowed. Besides its breathtaking scenery and vast landscapes, there’s a lot to do when you visit Twin Lake, Colorado!
 
Despite its size, this town has many things to offer like the local Twin Lakes General Store, Saloon, the library, and the community center. The Twin Lake Community Center offers a variety of activities such as arts and crafts classes for kids and Zumba sessions for adults.
 
The Twin Lakes area is great for outdoor recreation, with multiple ways to enjoy the outdoors from hiking and fishing to snow sports. Find out how to stay safe in the backcountry during the winter. Also, learn how to maintain Leadville and Twin Lakes looking their best.
 
There are several breweries in the area and restaurants in downtown Twin Lakes serving up fresh and local ingredients.
 
It also offers a variety of attractions from museums to historical sites and ghost tours. There’s even an observatory for those interested in astronomy, you can go also visit the Shooting Star Gallery.
 
In addition to all these activities, Twin Lakes is also known for its delicious food options like fresh fruit ice cream which you can find at the ice cream shop on Main Street, or other delicious food places like ‘The Log Cabin‘.
 
After a day of adventures, Twin Lakes has a lot of inns, B&B, lodge, and cabins that you can book ahead of time. From May through October, the Twin Lakes Inn is available nightly to the public, as well as on weekends and for private events during the winter season. You may visit Leadville Twin Lakes to know what’s new in town!
 
See you at the lakes!
Why You Should Start a Business in Colorado

Why You Should Start a Business in Colorado

Starting a business in Colorado is an excellent choice for entrepreneurs, as it has the country’s second-best economic climate and is globally recognized as a top place to do business. The state has a rich natural-resource base, with the third-highest concentration of raw minerals in the country. Its public and private sectors cooperate in fostering innovation and entrepreneurship, which has helped Colorado become a world leader in technology innovation.

Colorado’s economy is diverse and includes technology, energy, defense and medical. In fact, nationally-ranked Colorado companies are leaders in their fields, from 3D printing to aerospace. The state’s unemployment rate is below the national average. Colorado’s unemployment rate has dropped from 6.2 percent in January 2021, when the epidemic was at its peak, to 3.7 percent in March 2022.
 
There are many resources and opportunities that can help entrepreneurs launch their businesses in the state. The University of Colorado has a program called the “Colorado Innovation Network” which provides free office space for startups and entrepreneurs. An entrepreneur can also find an office space in one of the many commercial real estate buildings in Colorado.
Denver’s location near the Rocky Mountains provides excellent opportunities for outdoor recreation. With more than 300 days of sunshine per year and an average temperature of 70 degrees Fahrenheit, Colorado is a great place to live!
Commercial real estate in Colorado is an excellent investment, and with the right tenant, it can provide you with a steady stream of income for years to come.
 
While the Denver metro area is the state’s largest and most important real estate market, there are other areas in Colorado that offer similar opportunities. In order to be successful in the commercial real estate market, you will need to know some of the key metrics and requirements for commercial tenants.
 

Lindsey Shorthouse Stapay

Real Estate Broker

Phone: 303.641.3341

Email: Lindsey@westwardbroker.com

3 Things to Know Before Buying a Vacation Home

3 Things to Know Before Buying a Vacation Home

So you’ve decided to buy a vacation house, but where do you start looking for one that meets all of your demands? There are many factors to consider while looking for the ideal home away from home, from new appliances and community amenities to location and solitude. For more information on what to consider while buying a holiday house, we prepared a checklist for you!
1. Determine the Type of Property YOU Want
 
It can be difficult to sort through all of the available luxury mountain homes, mountain cottages, high-rise condos, and lake villas. As a result, when searching for vacation houses, it’s crucial to focus on your lifestyle and what you enjoy. Avoid luxurious condos in the city if you prefer a cabin in the woods.
 
Here is a quick checklist of things you need to consider:
Do you have kids?
Do you have pets?
How many rooms do you need for your family?
How often will you visit?
What is your preferred season during your vacation?
Do you have the means to travel to your vacation home?
What kind of activities do you want to do when on vacation?
Will you need a parking space?
What are your preferences in terms of style, and amenities?
Will this be a retirement home?
Are you looking for a Legacy property for your family?
 
2. Figure Out Your Budget
Vacation houses are expensive! Many purchasers are unaware that second-home mortgage rates are higher and that the requirements for financing a second house differ from those for a primary dwelling.
 
What you should know about second mortgages
 
A second residence might be a wise investment. It can not only provide you with a holiday spot and help you avoid costly rentals, but it can also create cash flow.
 
Your vacation house could theoretically pay for itself if you rent it out and utilize the money to pay the mortgage.
 
But before you jump in, make sure you know the laws and requirements for a second mortgage. They’re not the same as the mortgage on your primary residence.
 
Also, if you are thinking of renting the second-home out when you are not there, be sure to check the local laws to see if your property is eligible for that.
 
 
3. Evaluate the Location
Not just in terms of real estate market value, but also in terms of selecting which facilities are most essential to you, finding a decent location for your vacation home should be a top priority.
  • Do you want to be able to walk to the lake from your home?
  • Would you like to be near golf courses or ski resorts?
  • Do you want to go out for some nightlife, dining, shopping, or entertainment?
Consider which places would provide you with the ideal holiday experience, and then search for properties in those areas.
 
Besides the fun activities you can do, you also need to consider the facilities available near your vacation home.
  • Are there any grocery stores?
  • Are medical facilities available?
  • Is the community friendly?
  • Is the area safe and secured from any form of threats?

The Pros and Cons of a Vacation Home

Here are some of the most typical advantages and disadvantages of purchasing a vacation property that might have a significant impact on your life.
Pros of purchasing a vacation home:
  • It’s an investment, and like your principal residence, it’ll probably appreciate in value (especially if you settle near popular areas like a beach or mountains).
  • This property will allow you to save money on a place to stay and stay for longer than you would in a holiday rental, enhancing your own vacation experience. It will also provide you with a location to invite loved ones for some R&R!
  • Make money by renting out this property during the months you aren’t there or even to other vacationers.
  • If you plan to buy a vacation home in Colorado, get help from a local commercial real estate expert to give you the best properties to choose from.

Cons of purchasing a vacation home:

  • Vacation homes are not cheap! You’ll have to pay a new mortgage, as well as property taxes, insurance, and utilities. These fees may imply less money saved for other goals, such as a college fund or retirement.
  • When you’re not there, you must consider the maintenance and security requirements. Even with today’s technology, you can watch your property from afar, but what will you do in the event of an emergency if your vacation house is far distant from your regular residence?
  • Will you become bored with the scenery? This is why it’s critical to avoid making an emotional judgment when buying a vacation home. Do you think you’ll be wishing for a change of scenery in a few years? Will you refrain from taking vacations somewhere else?
Still hesitant? Book a consultation today with a commercial real estate expert to determine the steps you need to take to decide!
Cynthia Daughtrey, Esq.
cynthia@westwardbroker.com
303-548-9659
What to Do If Your For-Lease Space Is Still Empty

What to Do If Your For-Lease Space Is Still Empty

Despite the fact that the commercial market is on the mend, some landlords are still having difficulty finding suitable renters for their properties. What should you do if you’ve computed an exact rent and advertised it to clients but can’t fill your vacant commercial space?

 

Consider these creative strategies for novice property investors and seasoned landlords alike before calling a real estate broker to help you sell your property.

Provide lease terms that are flexible

When a company is looking for office space, it can be very difficult to find the perfect location. This is because there are so many factors that need to be considered. The size of the office, the location, and the lease terms. If a company finds a perfect space but does not like the lease terms then they might not move in.

Term lengths of one or two years are becoming more typical. You can also provide benefits like reduced or free rent for the first few months. Lessees are more inclined to sign a longer lease once they’ve settled into the premises and their business has taken off. This will allow them to negotiate better deals and get what they want in an office space without having to settle for less.

Allow for space customization

The more you have the potential to customize your space, the better.

The first step in customization is determining what your clients need. Do they need office space with a conference room? Do they need an open floor plan? Do they require storage space or a reception area? Once you know what they need, then you can start thinking about how best to create those features in their lease.

Make sure the scope of the renovations and the financing are agreed upon before work begins. Some tenants may gladly accept a long-term lease if the landlord pays for some or all of the renovation expenditures, which can be a great bargaining chip.

Convert your office into a co-working space

The demand for co-working spaces is growing in the US. That is because more and more people are looking for flexible work spaces. The trend is also picking up in other countries as well. This has led to a shift in commercial real estate where landlords are converting their vacant office space into co-working spaces.

The conversion of vacant office space into co-working spaces can be a lucrative business opportunity for landlords as they make money from both the rental and leasing rates.

Pop-Up Book Stores

Book Pop-Up Shops are a new way of promoting and selling books in different places. These shops can be used for a variety of purposes, such as book signings, author readings, lectures, workshops, and more. All that is needed to create one is the space to put the books on display.

For those who own commercial real estate looking for an alternative form of income or those who want to promote their property in order to get it leased out quickly, this could be a great opportunity.

Make Your Space a Private Event Venue

The idea of renting out commercial space for private events is not a new one. It’s been around for decades. However, in recent years the trend has exploded.

Private event spaces are great for hosting meetings, workshops, conferences and other corporate events that need a space that is more intimate than a ballroom or conference hall.

Private event spaces also provide an opportunity to increase revenue streams by renting out their space to private groups and organizations as well as businesses looking to host off-site meetings or training sessions with their employees.

When Is It Time to Sell?

So you have decided to sell your property. Before anything else, it is a good idea to sit down and clarify your motivations and draw up a basic time frame for the selling process.

Cynthia Daughtrey, Esq.
cynthia@westwardbroker.com
303-548-9659