The commercial real estate closing process in New York is complex and involves significant attention to detail. From negotiating terms and reviewing contracts to ensuring compliance with local and state regulations, a variety of tasks must be simultaneously managed to successfully close a deal. This is why having an experienced real estate attorney on your side through every stage of the process is pivotal.
The Commercial Closing Process in New York
Before discussing the specifics of your attorney’s role in this transaction, it is necessary to provide an overview of the commercial real estate closing process in New York. While commercial transactions vary, the process follows several typical stages:
- Letter of Intent (LOI)
A letter of intent provides an outline of the essential terms of the transaction that would eventually make up the binding Purchase and Sale Agreement between the seller and buyer. The LOI itself is usually not binding, but it helps both parties set expectations and create a framework early in the transaction.
- Purchase and Sale Agreement (PSA)
Once both parties agree to the terms of the LOI, both buyer and seller attorneys draft and negotiate the PSA. A PSA is a binding document that specifies the purchase price, contingencies, closing date, and other critical details.
- Due Diligence Period
Once an agreement is signed by both parties, the due diligence period begins. During this time, the buyer thoroughly inspects the property, conducts a title search to ensure marketable title, evaluates financial records, in addition to leases with tenants, reviews compliance with zoning laws, and reviews compliance with environmental laws.
- Financial Approval
If the buyer is seeking financing for the purchase, a lender will conduct its own review to assess the value of the property offered as collateral, and to determine the buyer’s financial ability to repay the loan.
- Preparing Closing Documents
Leading up to the closing day, all necessary legal documents, including the deed and loan documents, will be drafted and reviewed.
- Closing
The final step in the commercial closing process involves the transfer of title, or ownership, to the property. A deed is signed and recorded with the proper County, the buyer receives the keys to the property, and the seller receives the sale proceeds.
The Attorney’s Role in the Process
In New York, having an attorney is indispensable, and allows the transaction to proceed smoothly, legally, and efficiently.
- Drafting and Reviewing Contract Terms
One of a real estate attorney’s first responsibilities in a commercial transaction will be to draft and review the terms of the LOI and PSA. These documents establish the terms of the deal; an attorney will ensure these terms are protecting your interests and avoiding unforeseen legal risks.
- Due Diligence Assistance
Commercial properties can come with a range of legal complexities, involving several moving parts. An attorney’s expertise can ensure that any potential issues, including code violations, pending litigation, environmental concerns, or tax liabilities, are identified and addressed before closing.
- Preparation of Closing Documents
Before the closing date, an attorney will prepare all necessary closing documents, including a deed and any other required documents, to ensure they are legally sound and in compliance with New York law. An attorney will also ensure that all necessary documents are signed and the transaction can be completed as planned.
- Post-Closing
After the keys exchange hands, an attorney may be involved in recording the deed with the proper County and making sure that any post-closing issues are resolved.
Why Attorneys Are Essential in New York
Commercial real estate transactions in New York are anything but straightforward. There are many variables that can affect the outcome of a commercial deal. An experienced commercial real estate attorney can assist you in addressing costly mistakes, offering guidance on local laws, negotiating on your behalf, and coordinating the process until the closing date. In New York, having an attorney present at the closing isn’t just recommended, it’s a legal requirement. This mandate exists to safeguard clients’ interests. By acting as a trusted advisor and advocate, a New York closing attorney provides peace of mind for their clients and ensures a successful closing.