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Real Estate Transactions
Rutgers University, Newark School of Law

Real Estate Transaction Outline
Real Estate Transaction, in practice, is usually governed by a commitment letter that the parties have tailored to the particular transaction.
In commercial real estate – Since, commercial sellers and purchasers are equally sophisticated, the contract is supreme, however, if there is no contract then general rules of contracts and property apply.
PP Issue:   “the freedom of contract principle has been eroded somewhat by the regulatory impact of the public law on the real estate transaction and emerging judicial trend toward striking down bargains that are either unconscionable or offensive to PP”
Stages of a Commercial Real Estate Cycle.
Approach an institutional lender for a post-construction loan commitment (Secure Permanent Loan Commitment).
If the permanent loan (Post-construction loan) is approved ­­à the developer obtains a short term interest only construction loan form an interim lender on the strength of the PL ‘s commitment. (Secure Construction loan) **Once the construction is completed the PL “takes out” the CL.
Once the project is completed and the prop begins to make rental income à the loan is funded. The Lender (“L”) receives a promissory note for loan indebtedness and a mortgage as security of the borrower’s performance of the loan obligation. ***The purpose of the note, mortgage and other docs is to implement the terms and conditions of the commitment letter.
After the project is completed and it produces positive cash flow through occupancy leases à the developer may decided to “translate some of the equity into cash or capital by: (1) refinancing, or (2) second mortgage.
If there is a defaultà foreclosure and related remedies are available to the PL and workouts and bankruptcy.
Marketable Title – Expressed in virtually every contract of sale is a promise by the seller to deliver title (marketable title) that is free of all legal encumbrances except those that are agreeable to the reasonable purchaser.
Title Search – the purchaser’s attorney will examine the status of the seller’s title based on a title search conducted between the date of the K and the closing date.
Overview of Contracts for Sale and the Conveyancing Process
Drafting of a Contract of Sale: (p17)
Typically, initial K of sale is drafted by seller, broker, banker, or title company involved in transaction and then submitted to either or both parties for acceptance. 
Theory & Mechanics of Land Acquisition & Transfer: (p17-18)
1.        Relationships: Seller = grantor of deed. Purchaser = grantee to whom deed is granted upon purchase.
2.        Contract of Sale: Contract of sale is promise by seller to deliver title (“marketable title”) that is free of all legal encumbrances except those that are agreeable to the reasonable purchaser. See Long’s comment.
3.        Interim period btw execution of K and closing date: For ordinary contract of sale, interim period is about 2 months. For installment land contract, e.g., Crutchley, infra, seller agrees to finance purchase price and retains legal title as security until all installment payments are made; hence, in duration the contract period will resemble term of mortgage loan. (See Ch. 3D)

ant of seisin
                                                              ii.      Covenant against encumbrances
                                                            iii.      Covenant of warranty
11.     Limitation: These title protections are worthless when seller becomes insolvent.
12.     Advisable to obtain additional title protection:
a.       Title Insurance: A prudent purchaser will obtain additional title protection in the form of title insurance, which is backed by the considerable net worth of the company that issues the policy. 
b.       Reliance on Attorney’s opinion: Purchasers may also rely on an attorney’s opinion as to the status of the title, backed only by the attorney’s professional liability insurance and personal assets.
Applicable rule of law in commercial RET: (p18)
–                      Freedom of contract reigns supreme
–                      General rules of law apply only in absence of an agreement to contrary:
§          Since transactional rights and responsibilities are invariably set forth in writing, and parties may negotiate these rights and responsibilities, parties may also negotiate to override general rules of law, including, property and contracts law rules. [Shorten it.] Ex.: During executory phase of a contract of sale: