Creative Contract Provisions to Consider in Real Estate Purchase
Provided by HG.org
When purchasing real estate, there are often provisions attached that require the buyer or seller to perform certain actions. When these items are more creative, they could lead to beneficial conditions or negative impacts to either party when the arrangement has finalized.
When buying or selling real estate, it is important to research everything and hire experts to assist with the property. This would involve a survey, assessment of the location and a thorough vetting so that the buyer is aware of all conditions that already exist within the site. If there are any negative issues such as insect infestation, mold or contaminants, it is important that the seller either resolve these or lessen the asking price to cover these costs. Additional creative provisions within the contract may include assignment. The special or alternate provisions generally are for more complex purchases such as when there are investors or business entities involved.
Real estate purchases generally require earnest money to hold the structure until the deal has been finalized and other financial assets have been acquired to purchase the building. When this is through someone investing or a company, the seller may be dealing with an entity instead of a person. This could require more creative contract provisions for the seller or the buyer to ensure the deal goes through. For the buyer, this may lead to a trust or limited liability company paying the funds. This permits the individual to assign the entity as the financial responsible party in paying the monies owed.
Assignment and Transfer of Ownership
Many real estate contracts do not have the numerous provisions that could prevent conflict or problems in the future. One of these could include an assignment condition. When the business owner needs to remand the property to someone else during his or her lease, he or she could assign it to another individual for the remainder of the leased period. This is usually an issue when the leaseholder cannot pay or must attend to something other than the real estate lease. Then, someone that has been chosen may take over the lease and make payments to the landlord. However, the original leaseholder is generally responsible for most obligations with the property.
Getting a landlord to accept an assignment or similar provision is sometimes difficult due to the transfer of the lease payment and person. However, many landlords are willing to edit a lease or include this provision from the beginning. Some lawyers may need to communicate the need for this condition in the lease to the landlord and have him or her sign an acceptance letter. The terms and clauses must be specific to the situation and the persons involved, and if an assignee has been found, he or she may need to be written into these documents to ensure validity and enforceability.
Other Provisions to Consider
While assignment is important for many that lease a property, when buying the real estate, there are various provisions that could assist the buyer. Conveyance may protect the buyer from numerous issues such as liens, restrictions, easements and encroachments that could already effect the property that is being purchased. If the parking lot is adjacent to other commercial businesses, there are customers coming and going at all times of the day. Easements are placed on these pieces of land to ensure better traffic for all businesses in the area. With a conveyance provision, the buyer is protected from any of these within the contract.
Defect provisions provide a safe environment that is free from contaminants, risks to health and hazardous substances. If these have been leaked or used on the real estate land, the seller may be responsible for cleanup and decontamination before the buyer moves in or builds. Proration provisions could affect the real estate property taxes and rental fees through the current tax year without additions or complications. Everything would be current for the buyer. No judgments on the land or building provide for no possible threatening issues against the equity, land or structure to include bankruptcy or issues with the title.
Legal Assistance with Creative Contract Provisions
When buying land, a building or leasing a space, the business owner should hire a lawyer to ensure these creative provisions are within the contract for purchase or rent. The legal representative may draft or edit a current contractual agreement so it is beneficial for the purchaser when he or she has found a location best suited for business interactions.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.