Real Estate Acquisition Process from a Legal Perspective

Presented By:
Jim Hurley
February 21, 2019
Case Study - Takoma Central
Purchased August 2018

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Listing Agreement
Parties: Seller and Broker

Purpose: Sets forth terms pursuant to which Seller has hired Broker to market
and sell a property

Key Provisions:

• Term – how long does Broker have to market and sell the property
• Duties – who prepares marketing materials;
how will Broker market the property;
who qualifies potential buyers and negotiates with the buyers
• Staffing – which individual brokers and broker team will be assigned to
property
• Fees – commission fee; breakup fee; tail fee

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Confidentiality Agreement
Parties: Seller and Buyer

Purpose: Sets forth terms pursuant to which Seller is willing to

share information about the Property with Buyer

Key Provisions:

• Use of Information – Buyer agrees not to share information

with anyone other than its employees, accountants, lawyers,
etc.
• Non-circumvention – Buyer agrees to only use information for
underwriting an acquisition of the Property
• Return of Material – Buyer agrees to return or destroy
materials upon request of Seller
• Limited Contact – Buyer agrees to not contact tenants or
lenders of the property without Seller’s consent

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Letter of Intent
Parties: Seller and Buyer
Purpose: Lists key terms pursuant to which Seller and Buyer are willing to transact for the purchase and
sale of the Property
Key Provisions:

• Purchase Price – cost to acquire the Property

• Deposits – what deposits will be required of Buyer in connection with the
transaction
• Due Diligence – how long does the Buyer have to conduct due diligence
before its deposit becomes non-refundable
• Closing – how long after the expiration of the due diligence period until the
closing occurs
• Closing Costs – who pays for transfer taxes and other costs associates with
transaction
• Additional Concepts – Additional conditions to transact (certain tenant must
extend lease; Seller must complete some type of improvement; etc.)
• Non-Binding – majority of letter of intent is not binding

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Access Agreement
Parties: Seller and Buyer

Purpose: Sets forth conditions upon which Buyer can access the Property and
conduct due diligence

Key Provisions:

• Timing – during what days and hours can Buyer access the property
• Buyer Representatives – in addition to Buyer, who can access the Property
with Buyer (zoning experts, lenders, employees, etc.)
• Activities – can Buyer talk to tenants;
what type of investigations can it complete (invasive, non-invasive)
• Liability – how much insurance must the Buyer carry to protect against loss or
damage at the Property caused by Buyer; Buyer indemnifies Seller for any
such losses or damages

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Purchase and Sale Agreement
(Slide I of II)
Parties: Seller and Buyer

Purposes: Sets forth binding conditions upon which Seller and Buyer are
willing to transact. Expands on basics of letter of intent.

Key Provisions:

• Property Description – what is being sold (fee estate; leases; easements; licenses;
warranties; etc.)
• Deposits – when, where and amount of deposits;
when do deposits become non-refundable
• Title and Survey – what is Seller willing to cure on title (Seller’s mortgage; Seller cause mechanics’ liens);
what should Buyer be willing to assume with Property
• Due Diligence – what materials related to Property will Seller provide to Buyer; When can Buyer access the Property,
conduct diligence and speak with tenants
• Conditions to Close – Any conditions that must occur for Buyer and Seller to be obligated to close
• Closing Date and Mechanics – When will closing occur; What must Buyer and Seller deliver at closing (money,
documents, etc.)

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Purchase and Sale Agreement
(Slide II of II)

Key Provisions (continued):

• Representations and Warranties – what is Seller willing to tell Buyer about

Seller and the Property
• Survival Period and Limits – how long is Seller liable for breaches of its
representations and warranties to Buyer; is there a limit/cap to Seller’s liability
• Apportionments – How are rents, taxes and other property expenses prorated
between Buyer and Seller
• As-Is – Property generally sold “As-Is” – other than the reps and warranties in
the PSA, the Seller is making no promises regarding the suitability or condition
of the Property
• Default – What happens if a Buyer or Seller doesn’t perform under the PSA
• Casualty/Condemnation – What happens if a portion of the Property is
condemned or damage occurs to the Property before the closing

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Closing Documents
Parties: Seller and Buyer

Purpose: Documents that transfer Property from Seller to Buyer on the closing date

Key Provisions:

• Deed – Transfers dirt, buildings and improvements, easements and related

rights
• Bill of Sale – Transfers personal property
• Assignments – Transfers leases and contracts
• Tenant Notice Letter – Gives tenants notice of change of ownership
• Federal and State Forms – FIRPTA (re withholding requirements for Seller);
Transfer tax forms

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Additional Documents – Extra Credit
• Leasing Agreement
• Property Management Agreement
• Property Tax Appeals Agreement
• Contract for ALTA Survey
• Title Insurance Policy
• Environmental Review Agreement
• Property Condition Report
• Loan Documents (Promissory Note, Loan Agreement, Deed of Trust,
General Assignment, Guarantees, Environmental Indemnity)
• Buyer/Borrower Organizational Documents

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 Thank you!

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