Commercial

Commercial Title Partners is a full service provider of Commercial Title and Escrow Services. We offer the very finest in title examination, issuance of title insurance, settlements and associated services including like kind 1031 exchanges, thru respected 1031 companies. Our expertise in real property law, affecting commercial title issues across both Missouri and Illinois, sets us apart from our competitors and is consistently recognized by our clients.

With our team of top industry professionals, including our legal department led by David C. Davis, an attorney with experience at both large nationally recognized law firms and as former Assistant General Counsel for one of the nations largest financial service companies, no commercial title transaction is beyond our scope. We have served clients in every type of transaction, from multi-parcel, multi-million dollar complex real estate transactions, land acquisitions, condominium developments and conversions to single office buildings. When clients reach the property closing, we provide a choice of top-level commercial title closers and locations, with convenient professionally appointed closing offices throughout the metropolitan area.

We pride ourselves on our capabilities to facilitate our clients’ transactions, whether requiring out-of-the-box solutions or determined persistence. Our dedication and attitude has built our reputation, leading developers, bankers and attorneys to call upon us and our in-house legal team for our extensive title insurance expertise.

Glossary

Click here to view or download a glossary of commercial page.

FAQs

What are the basic differences between residential property transactions and commercial property transactions?
Residential real estate transactions revolve around the wants and needs of homeowners and their families. It typically involves property purchased for individual use to provide housing for families.
Commercial real estate is typically business focused and involves property that is sold, leased or used to achieve a business objective. It is often used as an investment to achieve a projected rate of return on funds invested.

Is the due diligence different in a commercial deal?
Significantly. Commercial transactions may involve a myriad of complexities. There are survey requirements, related title endorsements, environmental site assessments, property condition assessments, seismic risk assessments, and potential zoning issues that must be understood and addressed.

Does RESPA affect commercial closings?
The Real Estate Settlement Procedures Act (RESPA) is the main federal law that governs residential home sales. This law requires sellers to make several guarantees and warranties to buyers about the condition of the property and the absence of a variety of environmental defects. RESPA also governs the form of closing documents that can be used. The purpose of the law is to protect homebuyers from being deceived and buying a house that is dangerous or uninhabitable. RESPA does not apply to commercial real estate transactions.

The lack of RESPA affects commercial real estate closings in two major ways. One, it means that buyers and sellers must perform detailed due diligence on the property and the other parties to the transaction, which can delay the closing of the deal. Two, the lack of RESPA frees the parties to be more creative in structuring the deal and in the types of closing documents they choose to use. During a commercial transaction the buyer is constantly trying to preserve the right to withdraw from the deal as long as possible and the seller is trying to limit the right of the buyer to withdraw. Buyers are looking to add contingencies and sellers are looking to close all contingencies long before escrow and the closing process. The buyer is also trying to keep the seller on the hook for any problems that become apparent after the sale for as long as possible while the buyer wants to terminate its liability as close to the closing date. It is imperative to have an experienced title closer for commercial transactions.

What is the difference in how are funds escrowed in commercial vs. residential real estate transactions?
Most private home sales have an informal escrow process. Because commercial sales often involve larger sums of money and are more complex, escrow in this setting is formal and tightly controlled. Capital for a commercial transaction will often come from many different sources. Additionally, because there is less regulation of commercial real estate deals the parties must do more due diligence to protect their investments. The paperwork involved is highly customized and more extensive than the form documents used when buying a home. The parties will often have negotiated an escrow agreement that the escrow agent must verify has been satisfied before releasing any funds.

Should a title agent be utilized as the escrow agent for a commercial transaction?
While there is no legal requirement for who the buyer and seller must chose to serve as the escrow agent, most of the time the title agent will act as escrow agent. Title agents are usually already familiar with the details of the transaction and have no financial interest in the success or failure of the deal as their fee is for services rendered regardless of the outcome of the deal. Title agents also have the expertise to create the customized closing documents vital to most commercial real estate transactions.

Why are legal entities used in commercial transactions?
Investors know that commercial real estate can involve substantial risks. Legal entities are used to protect individual investors from liability both as sellers and buyers. Even existing legal entities buying additional property will sometimes create a new legal entity or subsidiary, to isolate the risk of acquiring or selling a piece of property. In many states there are tax advantages to owning commercial real estate in a legal entity.

What is a signing authority verification in a commercial transaction?
A corporation or other legal entity may be the actual party to a transaction, but a human being will still need to sign and execute documents of the behalf of the entity. This creates an extra layer of paperwork in the commercial real estate closing process.
Both sides will want proof that the person signing on the dotted line has the authority to do so. This is called signing authority. Proof of signing authority can be in the form of a corporate charter that expressly gives the individual such authority, letters of authorization from the president, CEO, or board of directors of the entity, or a resolution from the board of directors or equity partners. Until documents demonstrating signing authority have been received, a party will not allow the money in escrow to be disbursed. The seller wants to make sure the buyer has the legal authority to commit to the transaction and the buyer wants to make sure the seller is legally authorized to dispose of the asset.

How important is environmental due diligence in a commercial transaction?
Very. Because liability for environmental problems can be so severe, the parties will usually require a separate report and document to deal with the current understanding of environmental issues such as a known wetland or known ground or water pollution. The buyer will want some statement from the seller
stating the property is otherwise free from issues and the seller will want to try and avoid making such a statement. A document detailing the final agreement of the parties as to both the nature of any environmental issues and future liability for later discovered issues will be part of most commercial real estate
closings. (May be in the form of an Indemnification Document) 9.

What is important about zoning in commercial due diligence?
Buyers will want reassurances that the property is correctly zoned for its current use and for the buyer’s intended use. As part of the closing documents the parties will want a report that proves a zoning search has been conducted and that there are no known zoning issues. Depending on the jurisdiction, this report may include letters from the local municipalities, endorsements to the title of the property, or a detailed
report. Both lenders and owners title policies have may exclusions for zoning matters and clients may routinely request zoning coverage. Surveys play a key role in correct zoning coverage.

How are leases dealt with in commercial transactions?
Unlike in a residential transaction, a commercial real estate closing will include an assignment and assumption of leases. This document explains that the benefits of any lease transfers from the seller to the buyer. It also transfers future liability for breaches of the lease from seller to buyer and details responsibility for lease breaches prior to the sale. This document also notifies tenants of the change in
ownership.

What are some of the title issues in a commercial transaction?
Early in the process of negotiating the transaction a title company will be hired to issue a preliminary report of the state of the title to the property. Commercial real estate titles are often much more complicated than residential titles. There are any number of liens and encumbrances such as easements that must be accounted for. Often the seller may no longer hold some of the below ground rights such as mineral or water rights. Once the preliminary report has been issued the buyer must carefully review it and file any objections or concerns to the report under a deadline. If the buyer has any objections the seller often has a limited time to respond to the objections of the buyer can walk away from the transaction. Once the issues with the title have been settled the title company will issue the final report. Both the buyer and the seller will then review this report for errors or concerns and any issues will have to be resolved before the transaction can move forward.

Before a deal can be completed the buyer and seller must both agree to accept a title report and execute a series of closing documents. The closing documents may include assignments and assumption of leases, deeds, environmental reports and assignments of liability, zoning disclosures and warranties, and anything else the parties decide is necessary to close the deal.

Like in residential transactions, part of the closing documents will be some form of deed, typically a quitclaim deed, but sometimes a special warranty deed is used. This document once recorded officially transfers ownership of the property from buyer to seller. A title affidavit will also accompany the executed deed. Federal laws may also require that a non-foreign entity affidavit be executed with the deed. The title and the terms of the deed will have been reviewed and discussed long before the formal closing documents are executed.

What are some of the important due diligence items in a commercial transaction?
Because there are fewer state and federal protections for buyers and sellers in a commercial transaction, the due diligence process is much more extensive. Buyers will want to make sure the following areas are in order:

  • The contract of sale has been properly executed
  • A current title insurance commitment is ordered and reviewed
  • Review and accept true copies of all leases
  • Review of new environmental phase 1 assessment
  • Review any Property Condition Reports that may be applicable
  • Understand and accept Termination notice conditions and due diligence deadline
  • Review of the seller’s books and records
  • Order zoning report to review and accept zoning compliance issues
  • Search for any outstanding tax cases or liens
  • Results of a new ALTA Survey
What is an escrow agreement in a commercial transaction?
Before money can be transferred to an escrow agent, the parties must come to some agreement as to what the escrow agent’s duties are and what will allow the escrowed funds to be released to the seller of the property.
Unlike residential sales, the escrow agreement in commercial real estate closings is unique for each deal. However, there are several common escrow agreement provisions such as:

  • Clause appointing the title agent to act as escrow agent
  • Clause ordering escrow agent not to commingle funds sent by the buyer with any other monies.
  • Statement of when written instructions from buyer and seller need to be received before funds can be released.

Typically escrow agents won’t have any responsibility for verification of any part of the deal other than only releasing funds when instructed from both the buyer and the seller. Instructions to release the funds are almost always required to be in writing

What information do sellers typically obtain in a commercial deal?
Sellers will typically obtain confirmation of the following:

  • The contract for sale has been properly executed
  • Buyer has delivered down payment to escrow agent
  • The escrow agent has deposited the money in a segregated interest bearing account
  • There is a filed response to any objections to the title and survey report
  • Execution of assignment and assumption of leases by buyer

Every transaction is different and certain deals may require even more steps in the due diligence process than those above.

What is a Purchase and Sale Agreement?
The purpose of the PSA is to protect the parties rights, obligations and liabilities in order to close the transaction. Every term is up for negotiation. Most Commercial Real Estate agreements include commonly used provisions. Understanding each of these provisions is essential for both the buyer and seller. Among them:

  • Purchase Price
  • Closing Date
  • The full names of all the purchasers
  • A legal description – description of property to be conveyed, real or otherwise
  • Earnest money and default
  • Contingencies
  • Information about the closing or escrow agent
  • Closing date and date of possession
  • Responsible for Title
  • Responsible for Survey
  • Clear Title