By: Michael Sjuggerud, Esq., B.C.S
Board Certified Real Estate Lawyer
In real estate transactions, the exchange of property and title is one of the most important, but overlooked, parts of the deal. Many real estate closings are delayed because an issue arises during the buyer’s due diligence. However, the seller can avoid many of these delays by anticipating documents and information that may be required by the buyer, or closing agent. To that end, the seller should gather the following existing documents before listing the property for sale:
Title insurance policy
Environmental site assessments or reports
Contact information and payoff information for mortgage lenders
List of personal property (equipment, furniture, etc.) that may be sold with the real property
Documents pertaining to any pending litigation involving the property or the seller
Organizational documents for any business entity or trust with an ownership interest in the property
To expedite the buyer’s turnaround time to obtain a new survey of the property, oftentimes a seller’s existing survey can be updated by the original surveyor faster than if a new surveyor is engaged. Likewise, a current owner’s policy of title insurance can reduce the time period for a for a title examiner to identify title issues in need of attention. A review of any leases on the property will confirm whether there are any rights of first refusal, options to purchase the property, or lease extensions in favor of the tenant, as well as confirming the amount of the security deposit and rent to prorate on the closing statement. If the property is subject to a mortgage, then the seller should locate contact information for the lender (particularly in the case of a private mortgage), and confirm whether there are any prepayment penalties, yield maintenance obligations, or similar issues. A written list of personal property (equipment, furniture, etc.) can help the seller, the buyer, and the closing agent know exactly what property will be transferred at closing. Documents related to pending litigation against the property or the seller should be gathered and reviewed by professionals before the property is listed. Documents evidencing the seller’s organizational structure (whether a business entity or trust) will need to be reviewed by the closing agent, and the contents of such documents occasionally surprise the seller (such as the identity and number of persons who may be required to consent to a sale and/or sign closing documents).
The diligent seller would also retain the services of a real estate lawyer who conducts commercial real estate closings. A lawyer can order a new title search before the property is listed for sale, as well as perform a review of the documents referenced above. Since a title search will eventually need to be ordered, doing this sooner, rather than later, will reveal whether there are any liens or other matters recorded against the property which the seller may be unaware. These issues could include contractor liens, code enforcement liens, liens in favor of any associations or districts with authority over the property, wild deeds, easements, etc.
Identification and resolution of any such matters before listing the property for sale, when selling commercial property, will expedite the closing process and result in fewer closing delays.
Michael A. Sjuggerud is a partner in the Orlando office of Shutts & Bowen LLP, where he is a member of the Real Estate Practice Group. He is Board Certified in Real Estate Law by The Florida Bar.
Michael advises financial institutions, businesses, local governments, and others on transactions involving the sale, purchase, financing, leasing, development, and use of real property.
If you need the assistance of an experienced attorney specializing in real estate, contact Michael today.