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commercial real estate transactions- nuts and bolts questions

So, the partners here are having me branch out into commerci doctorvalley02/07/18
You're doing sales/purchases? If so, your job will consist o 3lol02/07/18
"You're doing sales/purchases? If so, your job will consist jeffm02/07/18
What are you buying? office or apartment building? nycatt02/07/18
Before anyone says it, buying a large apartment building is nycatt02/07/18
Two deals I'll be stafffed on shortly: 1) rep lender on som doctorvalley02/07/18
I can't answer all your questions because my environment isn jeffm02/07/18
I do real estate litigation and not closings (just did 3 or nycatt02/08/18
I do a fair amount of this. Some may be state specific. Here wtretire02/10/18
doctorvalley (Feb 7, 2018 - 12:06 pm)

So, the partners here are having me branch out into commercial real estate. I've been in transactions for my career so I understand due diligence checklists and closings in the corporate world. For RE though what is the exact role of an associate? I keep hearing about ordering title, contacting escrow closer, circulating checklist, and various other buzz words. So if someone could walk me through what the day to day role is for a junior/mid real estate attorney is on a deal (we rep lenders and borrowers; and buyers and sellers) it would help immensely. Thanks so much.

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3lol (Feb 7, 2018 - 1:28 pm)

You're doing sales/purchases? If so, your job will consist of negotiating the contracts of sale, for one. Once you've done a few RE contracts you know what to look for. Same with leases.

Assuming there's a sale/purchase/refinance, a title report will be ordered, which shows the chain of ownership, easements which affect the property, surveys, taxes paid and owing, etc. You'll be responsible for dealing with any issues related to the title report, most often relating to taxes, boundary lines, or an apparent break in the chain of title. You'll have to attend the closing, where some issues will invariably arise which have to be dealt with using closing adjustments and little escrow agreements which you draft then and there.

When repping a bank/lender, you'll also be looking at title reports, getting the bank all the stuff they need to make the loan, and physically producing and checking over the loan documents once the bank gives them to you. You'll also be responsible for disbursing the funds at closing and for making sure payoffs of past mortgages happen.

Once you've done real estate for a little while, it's really not that complicating and you will have a good handle on the small handful of tasks you have to perform. I used to do residential RE, and now do a bit of residential and commercial incident to my main practice area. I did RE for less than a year and can comfortably handle a matter from contract to closing. Same with being a bank attorney.

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jeffm (Feb 7, 2018 - 2:29 pm)

"You're doing sales/purchases? If so, your job will consist of negotiating the contracts of sale, for one. Once you've done a few RE contracts you know what to look for. Same with leases."

Good point. In the negotiation aspect, there can be a lot of variety if the buyer of the real estate is also purchasing a business or purchasing the assets of a business. Then, you will start seeing some detail-oriented stuff which deviates from a "real estate" practice, such as the taking of inventories and making of adjustments for obsolete quantities on hand, etc. There are a whole lot of quality forms to be found for free and for pay. You just find/assemble them as you need them. After a while, you have your own cache of closed case files from where you can pull sections, clauses, etc.

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nycatt (Feb 7, 2018 - 1:36 pm)

What are you buying? office or apartment building?

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nycatt (Feb 7, 2018 - 1:38 pm)

Before anyone says it, buying a large apartment building is a commercial transaction for purposes of this conversation. Buying the homne you live in or a vacation home is not.

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doctorvalley (Feb 7, 2018 - 5:05 pm)

Two deals I'll be stafffed on shortly:
1) rep lender on something called a "bridge" loan. Looking for day-to-day snapshot of what I'll do. For example, do I order title? Do I order property insurance?
2) rep buyer of building on a joint venture. same questions as above.

Also, I've been told to follow the "checklist" but which attorney is in charge of keeping this?

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jeffm (Feb 7, 2018 - 5:47 pm)

I can't answer all your questions because my environment isn't "corporately-structured" as yours sounds it will be. I think you are best off to keep up with most deadlines and see to it they are met if you represent either the buyer or seller. Don't count on agents and title companies and other attorneys. Keep your list and make sure everyone, including you, is making it all happen as it should. Lender's attorneys might tend to care a lot less about all this; however, lenders are in the business of making money, and so they like you most when deals go through.

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nycatt (Feb 8, 2018 - 1:56 pm)

I do real estate litigation and not closings (just did 3 or 4 closings my whole career), so I know limited amounts about these (although I have seen everything that can go wrong on them and litigated it). Bridge loans are something I know even less about (I mean i know what they are - but from a due diligence perspective). Seems like a pain because you may want to repeat the original due diligence if your firm didnt already do it -- and you might have to look at the cash flows from the vendor to make sure they can pay the bridge loan. Although maybe an accountant could that part? but you may need to look at the original leases to make sure the cash flows wil keep on coming on the existing leases. This is more importannt for commercial than resi

Order title immediately. you will need to see the title report and assess whether there are any issues there. Your title agent will be VERY helpful in this regard - your agent can point out all the issues. You want a good title company that will answer your questions - get a recomendation.

If the building is residential, you want to consider the possibility of rent regulated tenancies. This applies a lot in NYC and san francisco and more liberal cities. I know NYC very well but no other areas. The due diligence for this kind of thing is extensive, and I wont go into it unless you are actually doing a resi apartment complex.

If the building is commercial, you need to go through all the commercial leases and evaluate them as well. somebody should anyway. I know leases backwards and forwards after fightning over them for ten years, but you may find some challenges if you have to do it for the first. time. Google "making a lease abstract." if you don't do it, make sure someone on the buyer's team is. you would be surprised how clueless some born-rich individuals are (some of course are very smart, but don't assume). Institutions will know their shit.

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wtretire (Feb 10, 2018 - 9:04 pm)

I do a fair amount of this. Some may be state specific. Here are a coupke of brief points. If you are specific ad to who you are representing and what type of deal I can elaborate.

1. Negotiate the contract of sale if you represent buyer or seller (note, in the states I practice, seller circulates the first draft). I can make a list of the main points to look out for if you would like...

2. Purchaser will order title in most states. A commercial contract will typically provide purchaser with a set amount of time to raise title objections with seller.

3. The lender Typically circulates the "checklist." These typically refer to closing requirements. For example, clean title, survey, entity docs if either buyer or seller is an entity, opinion letter from buyer's counsel, closing docs, environmental, insurance, etc.The list will typically detail which party is responsible for addressing each outstanding item. As the closing date approaches the list of outstanding items will get shorter until everything has been addressed.

4. If you are representing lender or buyer there may potentially be negotiation as to the language in the loan docs (bank specific. You can typically negotiate larger loans...).

5. Pro tip. If you represent the buyer get a good title company, they can save you a ton of the work clearing title issues.

6. Make sure you keep track of all deadlines (title objection, inspection, due diligence, mortgage Contingency and closing date).

This is a great area of law when the real estate market is doing well. When the market tanks, good luck.

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