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Get ready for Part 2 of the breakdown of #CRE Purchase and Sale Agreements (PSAs).
Today we'll do a deep dive into the burning issue all of #retwit has been waiting to understand: casualty and condemnation.
Today we'll do a deep dive into the burning issue all of #retwit has been waiting to understand: casualty and condemnation.
If you missed Part 1 - you can find it here to get an overview of #CRE PSAs.
https://twitter.com/LA_CRE_Attorney/status/1650885554148372481
Casualty and condemnation provisions address two critical yet unlikely situations that could arise before closing: (i) property damage, and (ii) eminent domain proceedings. Let's take a closer look at these concepts.
Casualty Clause 🌩️
Addresses situations where the property is damaged before the closing, outlining the rights and responsibilities of both parties. Depending on the extent of the damage, the buyer or seller may choose to terminate the transaction or proceed with adjustments.
Addresses situations where the property is damaged before the closing, outlining the rights and responsibilities of both parties. Depending on the extent of the damage, the buyer or seller may choose to terminate the transaction or proceed with adjustments.
Proceeding with a Damaged Property 🛠️
If both parties decide to move forward with the sale despite damages, the agreement may require the seller to make repairs or assign insurance proceeds to the buyer for post-closing repairs, ensuring the buyer is compensated.
If both parties decide to move forward with the sale despite damages, the agreement may require the seller to make repairs or assign insurance proceeds to the buyer for post-closing repairs, ensuring the buyer is compensated.
Condemnation Clause 🚧
This clause comes into play if all or part of the property is taken by eminent domain proceedings before closing. It defines the buyer's rights in such situations, protecting their interests in cases of eminent domain.
This clause comes into play if all or part of the property is taken by eminent domain proceedings before closing. It defines the buyer's rights in such situations, protecting their interests in cases of eminent domain.
Eminent Domain Options 💼
The buyer may have the right to terminate the agreement or close the transaction, subject to an adjustment to the purchase price or the assignment of the condemnation award to the buyer.
The buyer may have the right to terminate the agreement or close the transaction, subject to an adjustment to the purchase price or the assignment of the condemnation award to the buyer.
Important Considerations:
How the termination rights are negotiated depends on the circumstances. Damage to a building may not be important if you plan to redevelop the site, whereas the taking of even a small area can be material if it affects parking or access.
How the termination rights are negotiated depends on the circumstances. Damage to a building may not be important if you plan to redevelop the site, whereas the taking of even a small area can be material if it affects parking or access.
The key is understanding your goals and ensuring these provisions are tailored appropriately for your particular circumstances. While these events are unlikely during escrow, in the rare instances they do come into play, having the right protections in place is critical.
To summarize, casualty and condemnation provisions deal with the unlikely scenario of damage or condemnation occurring during escrow. They should be reviewed to ensure appropriate allocation or risk and termination rights depending on the specific goals of the buyer.
As always a reminder that the info above is for general information purposes only and is not legal advice.
If you enjoyed this thread, follow me @LA_CRE_Attorney for more tips and insights on #CRE acquisitions and financing and RT below to share with your audience.
If you enjoyed this thread, follow me @LA_CRE_Attorney for more tips and insights on #CRE acquisitions and financing and RT below to share with your audience.
https://twitter.com/LA_CRE_Attorney/status/1651254115714977793
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