Sellers Using AAI (All Appropriate Inquiry) to Manage Risk

Last Updated on Thursday, 14 July 2011 04:03 Written by Chris Griswold Wednesday, 1 September 2010 09:24

If you’re somehow involved in the commercial real estate business, you’ve become familiar with the concept of “All Appropriate Inquiry,” otherwise referred to as “AAI.”  The Environmental Protection Agency has promulgated AAI to, more or less, increase the steps which a reasonable buyer should take in the process of determining/evaluating whether the property they’re buying is, to the extent possible, free of excessive hazardous material.  Today, I want to expand the way people have traditionally viewed AAI.  Read more below….

Sellers Using AAI To Manage Risk

You already know that conducting a Phase I is, as a rule, required of any buyer in order to, among other things, determine a current “baseline” at the time of purchase.  Moreover, you know that the engineering firm conducting the Phase I will usually advise the buyer whether a Phase II is, in their opinion, necessary.  Accordingly, people have come to view AAI as really a safeguard for buyers.  However, sellers should consider the benefits of having a Phase II conducted at their own cost and expense – regardless of the engineering firm’s recommendation.  Why?

First, most purchase contracts make the seller indemnify the buyer for the presence and clean-up of hazardous materials.  As the seller, when you weigh the risks associated with indemnifying the buyer against the time delay, inconvenience and expense of conducting a Phase II, sometimes, it might just be worth it to go that extra step in establishing a “harder” current baseline.  Maybe not in every deal, but, for certain deals (e.g., where the property is adjacent to I-3 or a strip of railroad tracks), you may sleep better knowing that you conducted a Phase II so as to better prevent that baseline from “moving around” in the future.

Second, just because the current buyer’s specific uses/needs don’t trigger any alarms after the completion of their Phase I study doesn’t mean that some future, subsequent purchaser’s specific uses/needs won’t call your current “baseline” into question when hazardous materials eventually appear on the property (and odds are they will) and every other owner in the chain of title throws up their hands and says “…we didn’t do it.”  That’s when your Phase II looks really good against a bunch of other Phase I’s….  Something to think about.

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“I commend Chris Griswold for his efforts in a recent transaction for keeping distant legal departments of large companies informed.  Chris has always been a real asset in bringing people together and he has the ability to center the focus on the transaction.  It’s good to have qualified, energetic, and capable legal support ready to move the process along.  My thanks to Chris for his efforts in this most recent transaction.”

Irmon Gray / Broker / NAI Sullivan Group / Oklahoma City, Oklahoma

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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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“Chris Griswold has always been proactive and professional.  He takes the time to work with us and tailors his approach to our situational needs.  My favorite thing about Chris is that he will let me know if there is an easier, less-expensive approach.  We look forward to working with him well into the future.”

Carl S. Milam / President / Western Concepts Restaurant Group / Oklahoma City, Oklahoma

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Using PUDs (Planned Unit Developments)

Last Updated on Thursday, 14 July 2011 04:03 Written by Chris Griswold Tuesday, 1 June 2010 09:23

Planned Unit Developments (“PUD’s”).  If you’ve ever wanted to buy a piece of property (or use property you already own) for the purpose of conducting certain, specific uses upon that property which are not permitted under the existing zoning base district, you need to know about PUD’s.  Why? As time progresses, it will be more and more difficult to have a piece of property conventionally re-zoned (i.e., changed as to zoning base district).  Instead, city officials will be much more amenable to having the property specially re-zoned to a PUD which has certain, specific uses “rolled into” the PUD.  However, there are a few, basic things you should know about PUD’s before using them.  Read more below.

Using PUD’s

PUD’s v. Conventional Re-Zoning. It’s important to note that getting a PUD approved (and having those certain, specific uses rolled into it) is, in fact, a “re-zoning” in every sense of the word – just like a conventional re-zoning of the zoning base district of the property.  In fact, once approved, the PUD will be its very own, permanent, ordinance-based, special zoning district.  So, don’t mistakenly believe that by doing a PUD you are doing something less (and easier) than “re-zoning” your property.  When your PUD is finally approved, what you’ll have is a piece of property which has those specific, desired and unique land uses rolled into it.  However, as with all good things in life, there are potential pitfalls.  So, before you go putt-putting along getting your PUD, be sure to at least consider the following….

Potential Pitfalls of Using PUD’s. Under certain circumstances, getting a PUD might actually limit your land use and negatively affect other things.  Example:  You own property which is zoned both I-2 and I-3 (the majority being I-2).  Your desired, specific use of the property is permitted under the I-3 but not the I-2.  The only way to utilize the I-2 portion with this use (remember, the majority is I-2), is to get a PUD.  When you get the PUD, the I-2/I-3 distinction will go away and the whole property will be restricted to the specifically enumerated uses of the PUD.  In other words, the previously permitted uses allowed under I-3 (which are undoubtedly much higher and broader than those specifically enumerated under the PUD) will be lost.  This may: i) negatively affect future marketability and overall fair market value of the land, ii) limit/restrict what you can do with and upon your property in the future (should your needs change), and iii) if you’re not careful when applying for the PUD, actually prevent you from doing what you currently need to do upon the land if you failed to include all of your desired uses into the PUD (thus requiring you to immediately revise the PUD).  Crazy, huh?

“Starting my own business presented many obstacles and uncertainties.  I was fortunate and blessed to have my real estate broker recommend Chris Griswold as a resource for my lease reviews and negotiations.  Chris addressed all my questions and concerns with unyielding patience and guidance and helped me secure a strong and favorable lease.  Chris you are an exceptional resource and even better friend….  Thanks for all your help with this first location.  I look forward to working with you on the next one.”

Chris Lucas / Owner / KoKo Fitclub / Edmond, Oklahoma

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