Commercial Real Estate Transactions in Oklahoma – An Oklahoma Attorney’s Guide
Commercial real estate (CRE) in Oklahoma can be an excellent investment. We have provided the following information as an overview of various aspects of commercial property purchases and sales in Oklahoma. For more specific advice or to obtain help with your commercial transaction, contact Avenue Legal Group here.
While some stages of a residential real estate transaction will be similar to these steps below, residential deals are much more regulated than commercial sales under Oklahoma law. Click here if you’re looking for our residential real estate transaction guide.
Property identification: Many commercial real estate investors are looking to identify suitable properties for a 1031 exchange or like kind exchange. Before you can pursue a property investment, you’ll have to identify opportunities with listing details that fit your requirements and are not already under contract with another buyer. If pursuing an IRS 1031 exchange or tax deferred exchange, you only have 45 days from the date of the closing of your relinquished property to identify a replacement.
Qualified Intermediaries (QI): We frequently work with qualified intermediaries (QIs). We help investors with all types of commercial investments, whether it’s their first acquisition or their hundredth. If you need a recommendation for a QI or simply want us to work with your QI to get a deal moving, contact our firm here.
Letter(s) of intent (LOI): Commercial transactions frequently begin with a letter of intent (LOI). These are often declarations of the executive summary or high-level details which the parties intend to incorporate into their eventual final written purchase and sale agreement (PSA) or contract. Unless there are specific, express promises made and obligations undertaken in an LOI and the essential elements of a contract are present, a letter of intent is typically not a legally binding document.
Standard form contracts: Some commercial real estate transactions in Oklahoma are performed using the Oklahoma Real Estate Commission (OREC) standard form contracts, either for commercial improved lots or commercial zoned land. However, the majority of commercial deals skip the form contracts and instead rely on carefully drafted and negotiated custom contracts.
Custom contracts: Commercial transactions are viewed as sophisticated engagements by Oklahoma courts. Accordingly, judges assume that the parties carefully negotiated each term of their purchase and sale agreement (PSA) before signing it. Our firm is experienced and capable of all stages of custom contract work, including developing PSA strategy, drafting short form or long form agreements, reviewing PSAs drafted by other parties, negotiating and redlining PSAs, and more. We also frequently work hand-in-hand with an agent or broker throughout the contracting process.
Contingencies in Oklahoma real estate contracts: It is relatively uncommon to see significant contingency terms in commercial real estate agreements, such as the financing contingencies that are very common in residential sales. However, many commercial contingencies are somewhat included by implication within inspection, due diligence, title report, and other sections of a PSA.
Holding entities and LLC formation: Real estate investors should strongly consider using a limited liability company (LLC) or other legal entity to hold legal title to their real estate investments. Contact our firm to determine whether a new entity is advisable for your transaction, what type of entity may be best, or for help creating the entity. Our firm always offers simple flat fees for legal entity creation and operating agreement drafting.
Title insurance: Any financier acting as a mortgagee or lender on your commercial property acquisition will require two types of title insurance at closing; owner’s title insurance and lender’s title insurance. Oklahoma is a lien theory state, so the purchaser will hold title to the real estate subject to a lien, mortgage, or other security interest in the property; whereas in Texas or other states, a deed of trust allows title to be vested in the lender until full payment has been made. For purchasers who are using their own hard money and do not have to grant a security interest in the property as collateral, you may elect to skip title insurance. However, due to the relatively low cost of title insurance premiums, most buyers will still obtain an owner’s title insurance policy even if not required to do so.
Sometimes, the title commitment or title report will have certain requirements which must be completed by the parties to the transaction before the title company will issue a title insurance policy. This process frequently delays closings, requiring a quiet title action or other curative title work which just takes time. Our firm is well-versed in quickly getting to the root of the title issue, devising a plan to cure the issue, and taking action to resolve the issue.
Due diligence: The due diligence process for commercial real estate acquisitions is much more substantial than residential real estate deals. If using financing, commercial real estate lenders will often require all of the common due diligence items, including a Phase I environmental site assessment (ESA), boundary survey, ALTA survey, title report, and more. For more, see our article on due diligence in real estate transactions.
Terminating a real estate purchase and sale agreement: Parties to a commercial real estate transaction may have many reasons for wanting to terminate their agreement prior to closing. In Oklahoma, the terms of your PSA will determine whether the party attempting to do so has a right to terminate, as well as what the effects of the termination should be. For more, see our article on terminating a PSA.
Earnest money disputes: When termination occurs, the most common dispute between commercial real estate transaction parties will inevitably be “who gets to keep the earnest money?”. The answer to this question should be determined by the terms of the PSA, which is why the agreement language should be carefully drafted and negotiated. For more, see our article on earnest money.
How we can help: Our firm can help you navigate any stage of your commercial real estate transaction. Many of our clients already have a good grasp of their intended deal but need local counsel to help review and negotiate the finer points of their contracts. Other clients want guidance from the beginning of their search for a commercial property, need assistance in finding a QI, or want help putting their due diligence team together.
Contact Avenue Legal Group to discuss how we can help with your commercial purchase and sale.
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