Business Lawyers in Columbus, Ohio
By - October 23, 2024 - Uncategorized
The purchase and sale agreement is an important part of a commercial real estate transaction. These transactions can be complex, and the purchase agreement provides clarity by stating the terms of the deal. Within this document are the seller’s representations, which provide the buyer with a variety of information about the seller and the property. Let’s take a closer look at seller representations, what they include, and why they’re helpful.
A commercial real estate purchase agreement is a contract between a property’s seller and buyer that sets forth the terms and conditions of the sale. It includes information like a description of the property, the purchase price, any contingencies or requirements that must be met before closing, representations and warranties made by the seller, and more. The agreement helps ensure that both parties understand what’s expected of each other and that the buyer can make an informed decision. Additionally, the agreement outlines how disputes will be handled if any arise.
Representations are claims that the seller makes about the property, including the condition of the property and their right to sell the property and transfer ownership to the buyer. These claims help the buyer understand what they’re purchasing and the deal they’re entering.
Representations help build trust between the seller and the buyer by providing transparency in the real estate transaction. When the seller discloses information about the property, the buyer can make better informed decisions. This helps the buyer minimize risk, since they understand the property’s condition before buying. Representations also help ensure compliance with applicable laws and regulations, as well as help protect the buyer if the seller doesn’t disclose important information about the property.
Sellers benefit from representations, too. By being upfront about the property’s condition, they can reduce the risk of disputes down the road. Well-written representations can also help the seller avoid legal claims for misrepresentation and limit their liability after the sale.
Making false claims or inaccurately representing the property can have serious legal consequences for the seller. Misrepresentation can lead to disputes with the buyer, claims for damages, and sometimes the sale may be canceled. In cases of misrepresentation by the seller, a buyer has options:
If you’re selling real estate, it’s crucial to provide accurate representation of the property to help avoid legal issues.
In the seller representation section of an agreement, the seller can include a variety of information about the property and the transaction. This information typically includes:
Let’s take a closer look at each component.
In order to sell a property, you must have the legal right to do so. As the seller, you should state that you own the property and have the right to sell it. You should confirm that you have the full title to the property and that there are no undisclosed owners. You should also state that you are legally authorized to transfer ownership of the property to the buyer. Additionally, you must make the buyer aware of any mortgages or liens that could impact the sale of the property.
Commercial real estate is often required to comply with environmental laws and regulations. Before closing on a property, the buyer will want to be sure that it meets all relevant criteria, especially since addressing issues like hazardous materials or contamination later can be expensive. As the seller, you should disclose any current or previous environmental issues, such as if there are hazardous materials on the property or if the property has been contaminated. You should also confirm that the property is compliant with all applicable environmental regulations and that any environmental permits you have are current and valid.
Zoning and land use laws dictate how the owner can use the land, including what buildings can be constructed. As the seller, it’s your responsibility to inform potential buyers whether or not the property is compliant with all relevant zoning laws and land use laws. You should also make buyers aware of any pending zoning changes, as these could impact how the buyer intends to use the property. This section of the agreement often includes:
Sellers must also make buyers aware of any governmental actions, pending litigation, or threatened litigation involving the property. This may include:
Before closing on a property, buyers need to know its condition. This helps them understand the risks they’re taking on as well as repairs they may need to invest in down the road. As the seller, you must accurately represent the physical condition of the property. You can also make a list of improvements you have made to the structure or its systems. When discussing the property’s condition, be sure to include:
If your property generates income from tenants, it’s important to let the buyer know about existing lease agreement contracts. You should also disclose the terms of the leases. Additionally, you should inform the buyers of whether or not tenants are current on their payments and if there are any defaults. When discussing lease agreements, tenant status and other property management topics, it’s also important to note if there are disputes with any tenants, including lease violations or pending litigation.
Sale agreements typically include a section that represents the property’s title and liens. As the seller, you must confirm that you hold the title to the property as well as disclose any additional claims to or interests in the property. Liens, mortgages, and other factors that could impact the buyer’s ownership should also be mentioned. Additionally, if litigation that could affect ownership of the property has been threatened or is pending, be sure to include that in this section of the agreement.
If your commercial property is meant to generate income, accurately representing the property’s financial state is extremely important. The financial section of the agreement typically lists the property’s income and operating expenses, as well as tax payments and insurance payments. Providing financial statements can be an effective way to show buyers up-to-date financial information on the property. You should also confirm that all property taxes have been paid. If there are any tax disputes or reassessments, be sure to disclose those as well.
Whether you want to sell or purchase commercial real estate, there are steps you can take to protect yourself and encourage a smooth transaction. If you’re a seller, make sure you provide an honest and comprehensive look at the property you’re selling. Disclosing important information about the property can help you avoid legal disputes in the future. It can also be helpful to negotiate limits on your liability and the time frame in which a buyer can make a claim. Additionally, consider purchasing insurance to cover potential liabilities.
If you’re looking to buy real estate, you should conduct due diligence to make sure that what the seller has stated about the property is true. You can do this by conducting title searches, looking at environmental assessments, reading lease reviews, and reviewing property inspection reports. You can also shield yourself from the impacts of seller misrepresentation by negotiating protections.
Whether you’re selling or buying property, working with a lawyer is a great way to protect your interests, minimize risks, and help the process go smoothly. Contact Stevens Law today for help drafting or reviewing purchase agreements and for knowledgeable legal guidance.
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