There are many things that need to be considered when purchasing real estate. It’s not an easy process. There are many laws and regulations that have to be taken into account. After you buy the property as the owner you are legally responsible for the property. That’s why proper due diligence must be done before you conclude the deal. If you are planning to purchase real estate in Utah, speak to an experienced Midvale Utah real estate lawyer. The lawyer can guide you with the purchase process. Utah real estate law is complex.
Before your buy a property it is important to get a title review done. Hire the services of an experienced Midvale Utah real estate lawyer. The lawyer will conduct a proper real property title review and can inform you if the title is clear. Buying a property without the services of an experienced Midvale Utah real estate lawyer isn’t advisable.
Unlike stocks, bonds, automobiles or other tangible assets where ownership and quality of title can be determined simply by reference to a single document such as a bill of sale or certificate, real property ownership interests require a thorough analysis of the public recorded ownership chain over many years. Real property is also subject to multiple divisions of the ownership interest (e.g.: fee simple, co-tenancy, joint ownership, right of survivor, etc.) and various classes and kinds of encumbrances (e.g.: mineral reservations, lender liens, workman liens, easements and other rights of ingress and egress, etc.). Conducting a proper real property title review can be daunting even for a seasoned professional. Making sure that the title is clear is an important part of the purchase. Title review is not something that you can do on your own. You have to review many documents and you should be aware of the applicable laws and regulations. This job is best left to an expert. Seek the assistance of an experienced Midvale Utah real estate lawyer. The lawyer will assist you through the entire process.
Gathering Documents and Initiating the Process.
Because the process of securing title insurance is lengthy and time-consuming, identify title insurance company to be used and contact them as soon as possible in the diligence process.
Obtain a current extended coverage title report and copies of all documents shown in the report, and inquire of seller about any other instruments not shown by the records.
Obtain a copy of the deed by which the seller acquired its interest in the property, as well as the acquisition agreement. Are there any deed conditions, covenants or restrictions that might affect the future use of the property? Ordinarily, extended coverage title protection will be required by the buyer. Accordingly, an extended coverage preliminary title report should be ordered for the initial title review. Also review the form of policy that the designated title company plans to use to determine that it conforms with extended coverage protection. Explain and discuss the scope of coverage with the buyer: be sure the buyer understands and appreciates the limitations of particular title insurance and appreciates the limitations of particular title insurance coverage, especially as related to the buyer’s objectives for the property.
Confirm that all mortgages, deeds of trust, and other liens encumbering the property have been satisfied and released (unless they will be assumed by the buyer). Review all loan and mortgage documents to determine the conditions of assumption, and obtain estoppel certificates from each lender or mortgagee.
Obtain from the seller copies of all existing surveys, plats, and surveyor’s reports and certifications. Order new surveys or updates if necessary. Obtain new or updated ALTA “as-built” survey showing location of improvements, etc. Ensure that survey is certified by licensed engineer or surveyor who prepared it.
Perform Physical Inspection of Property. Diligence investigators can learn a great deal from simply visiting a property. This step is commonly overlooked and many problems can arise in a situation where no one from the diligence team has actually visited the property.
Special Considerations for Leasehold Estates. Obtain and review copies of leases and rent rolls. Determine nature and amount of security deposits. How are they to be transferred? Review any special statutes or local laws applicable to security deposits. Determine whether any statutory rights of first refusal exist in favor of any tenants.
Estoppel Certificates should be prepared and sent to tenants as soon as possible. The certificates should confirm the terms of the lease and the nonexistence of any defaults or bankruptcy proceedings against the tenants. If estoppel certificates are not available, should the seller make any warranties or agree to indemnities with respect to such leases?
Reciprocal Easement Agreements need to be carefully reviewed concerning possible effect on present and future plans for the property, notices required to be given to parties under the reciprocal, etc.
Special Assessments for Taxes. Taxing authorities can levy special assessments on properties and they are easily overlooked in the diligence process. Contact all relevant taxing authorities to determine if any special assessments apply to the property, and if so, what payments are due, what they relate to and other relevant information.
Mechanics Liens. Check with the seller to determine if there is any work recently completed or in progress. If so, agreement should be reached with the seller concerning how to handle possible liens arising out of the work. Can title insurance solve the problem?
Physical Condition of the Property.
As noted above, a site visit to each piece of real property involved in the transaction is generally prudent and advisable. Following are some guidelines to follow in connection with the site visit.
Age/Condition. Age and condition of improvements and fitness for intended use: structural, mechanical and electrical components (“tire kicking”). Determine whether any building code or other violations exist with respect to the Property.
Engineering Studies. Many parcels will have had or will require in the context of the current transaction, one or more engineering studies. Among other things, the engineering studies may address: (i) soil condition, (ii) grading/filling/drainage, and (iii) utility access on the site.
Other Analyses. As a part of the engineering reports or in separate reports or analyses, one or more of the following should be addressed: (i) wetlands or environmentally sensitive areas, (ii) archaeological sites, and (iii) presence of cemeteries or other protected sites.
Miscellaneous Potential Problems. While conducting the site visit, be alert for indications of flooding, presence of nearby wetlands, adjoining nuisance properties, and the like.
Every parcel of real property is subject to a variety of laws, rules and regulations, often involving federal, state and local authorities. It is important to understand in the course of the due diligence investigation the totality of this regulatory network. Often, the best way to secure this understanding is to retain knowledgeable local counsel to assess zoning, condemnation and other relevant areas of regulation. In addition, other experts may be required to assess environmental regulations and use regulations such as Americans with Disabilities Act compliance.
Financial and Accounting Matters.
Books and Accounts. Work with the financial and accounting members of the diligence team to review the books and records relating to the property. This will often raise issues affecting other areas of the investigation, such as payment of taxes, status of lease payments or receipts, expenditures for environmental remediation, etc.
Other Contracts and Agreements Affecting the Property. Obtain copies of and review all material contracts related to the property. These should include agreements pertaining to the operation of the property, including management and maintenance contracts. Determine whether each contract may be assigned or terminated. The seller should carefully review the seller’s obligations to the project’s employees and the continuing liabilities that can be incurred (e.g.: collective bargaining agreements, unemployment compensation, etc.).
Utilities. Determine the availability and sufficiency of all required utilities and obtain copies of any governmental or private agreements regarding utilities.
Prorations and Closing Costs. From a review of the financial records and books, determine what costs and expenses should be prorated between buyer and seller. Such items may include:
- Rents. How are delinquent rents to be handled? What about overages?
- Other income from the property
- Real property taxes
- Based on last assessment statement
- Based on information from assessor if no current assessment statement available.
- Are any tax protests pending?
- Is tax statement divisible to cover only property conveyed? If not, who obtains the tax division?
- Insurance premiums on assigned policies
- Interest on existing mortgage indebtedness
- Sewer charges
- Utility charges. Also consider whether there are any utility impounds or escrows that need to be transferred or credited.
- Property owner or homeowner association charges
- Any instalment payments on personal property included in the sale
- Lease commissions
Closing Costs: Determine how closing costs should be allocated between or among the parties. These costs often include:
- Title insurance
- Escrow fees
- Appraisal fees
- Survey fees
- Tax service
- Notary fees
- Legal fees
- Pest control work
- Reconveyance fees
- Transfer taxes or revenue stamps
- Prepayment fees on outstanding loans
- Broker’s or finder’s commissions
Possession and Risk of Loss.
Date of Possession. Ordinarily, possession is delivered at closing. If the buyer is to obtain possession earlier or the seller is to stay in possession after the closing date, consider the need for a lease or other occupancy agreement.
Required Actions. Is seller required to terminate any leases or other occupancy rights prior to closing? If so, cover in purchase contract.
Right to Enter. Provide for buyer’s right to enter property prior to closing, for tests, inspections, etc. Consider buyer’s need to carry public liability/property damage insurance.
Risk of Loss. Confirm that buyer is covered by insurance upon closing of the transaction or upon taking possession if that occurs prior to the closing [Important!].
Preparing for the Closing.
Obtain UCC Search Results with respect to any personal property interests included in the transaction. Also obtain copies of all bills of sale and evidence that personal property will be assigned to the buyer free of all liens and security interests.
Fund Transfer. Arrange for the transfer of funds.
Title Insurance. Confirm that title insurance arrangements have been made; obtain details for recording documents, notary requirements, etc.
Closing Documents. Early in the process, prepare a checklist of closing documents. Closing documents often include the following:
- Purchase Agreement
- Bill of Sale. Consider whether separate bills of sale should be obtained for any of the personal property
- UCC Search. If any existing liens are to be terminated, obtain evidence of termination
- Current rent roll of for the property
- Originals of leases and other tenant
- Assignment of leases (and arrangements for transfer or credit of security deposits)
- Tenant estoppel certificates
- Notices of transfer, to be sent to tenants upon closing
- Originals or copies of service contracts and any warranties or guaranties with respect to the property
- Assignment of service contracts, warranties and guaranties
- Originals or copies of building permits, certificates of occupancy, and similar items for the buildings and tenant-occupied space
- Complete set of the as-built plans and specification for the improvements
- Documents relating to any existing or new financing on the property (e.g., mortgagee statements, loan documents, etc.). If existing financing is to be paid off, arrange for release of liens
- Opinions of counsel, if any
- Title insurance policies and special endorsements, if any.
- Survey of the property
- Insurance policies
- Inventory of personal property
- Keys and other items used in connection with the operation of the property
- Escrow instructions
- Closing statement to be prepared by the escrow company
Hire the services of an expert
Hire the services of an experienced Midvale Utah real estate lawyer. The lawyer can assist you with the entire process. The lawyer will conduct a due diligence on the property to ensure that you get the property without any attached liability or lien. Don’t take chances. It’s your hard earned money that you are going to be investing in the property. It’s important for you to be protected as the buyer. Remember once the sale transaction is closed, you will be the legal owner of the property and you will be liable for any taxes or liens on the property.
Midvale Utah Real Estate Attorney Free Consultation
When you need legal help with a real estate matter in Midvale Utah, please call Ascent Law for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506