A Right of First Refusal in Conjunction with a Simultaneous Closing
Last Updated on Thursday, 14 July 2011 04:03 Written by Chris Griswold Thursday, 1 July 2010 09:24
The weather has been crazy with record snows and ice, record hails and record floods. Locusts could be next…. More importantly, I hope everyone’s 4th of July was well spent. Regardless of your political preferences/affiliations (and even with the current economy which appears to be improving), we’re all lucky to be alive and live in a country where property can be privately owned, where there are no debtors’ prisons and where everyone has a voice. Surely, the most challenged among us is more fortunate and privileged than most of those who live outside our borders…. God Bless America. Today, we’ll briefly cover the value of using a right of first refusal clause in a simultaneous closing situation. Read more below.
A Right of First Refusal in Conjunction with a Simultaneous Closing
If you’ve never been party to a closing whereby the seller simultaneously takes title to a piece of property just to immediately convey it away, then it’s only a matter of time. While these types of transactions are fairly common, they’re not always simple. Why? Well, sometimes sellers have difficulties acquiring title to the property they’re attempting to sell which, depending on the factors involved and the price tags at stake, can put the buyer in the hurt locker. How so?
Scenario: Imagine you’re the buyer in a transaction where you’re attempting to acquire title to 3 different parcels of property from 3 different sellers for the purpose of creating 1 large, retail development. To boot, one of the sellers doesn’t currently hold title to their parcel – we’ll call him “Joe.” Joe’s parcel is the most important piece of the development puzzle. Without Joe’s parcel, things won’t work and, furthermore, the commitments you’ve received from retailers on the other 2 parcels depend, and strictly condition their commitments, upon the inclusion of Joe’s parcel. So, basically, you’re up a creek (and in trouble with everyone) if Joe can’t acquire and convey good title. You get the picture.
That’s when a right of first refusal comes in handy. Without incurring a lot of excessive legal fees, you (as buyer) can get a right of first refusal to purchase “Joe’s” parcel directly from the entity otherwise selling to Joe. Among other safeguards, this particular clause should be written directly into the contract Joe has with this selling entity. You’re sure to get push-back from Joe on this (since Joe doesn’t want you cutting him out of the picture) but, at the end of the day, the documentation can be written up to protect both you and Joe.
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