Practice Pointer Clause Samples
A "Practice Pointer" clause serves as a guidance note within a contract or legal document, offering practical advice or highlighting important considerations for the reader. Typically, it provides context, suggests best practices, or warns about common pitfalls related to the surrounding provisions. This clause helps ensure that parties understand the implications of certain terms and can make informed decisions, ultimately promoting clarity and reducing the risk of misunderstandings.
Practice Pointer. Mortgages for certain asset classes include detailed assumption of debt provisions. These should be reviewed carefully before signing the purchase agreement to determine the process and costs for obtaining lender’s approval for the assumption. In most cases, if debt is being assumed, the assumption process commences after the initial inspection/due diligence period.
Practice Pointer. The buyer may at times be concerned that the seller has the proper authority to transfer the property. This is usually determined prior to closing and is an important benefit of title guaranty since the title certificate will usually insure the buyer for such matters (whereas not generally covered by the opinion of title).
Practice Pointer. The ASTM standard for Phase I’s excludes asbestos, lead paint, wetlands, and radon.
Practice Pointer. Frontage roads along highways in older industrial parks are often problematic. The roads are usually treated as easements but there are often no maintenance or scope of use provisions. It can be difficult to satisfy the title standards for these properties and risky for buyers that plan to modify or change the use of the property or road.
Practice Pointer. Some owners take promissory notes from tenants for unpaid amounts. The buyer needs these assigned at closing plus receipt of the original debt instrument.
Practice Pointer. Occasionally the buyer will request a portion of the compensation be characterized as a fee for a covenant not to compete (i.e., ▇▇▇▇▇▇ agrees not to operate a similar project in the same market). The seller should be aware that such a request likely converts a portion of the capital gain into ordinary income.
Practice Pointer. There is added risk for buyer in purchasing the membership interest since they will be assuming any liabilities of the entity. This risk is not great for single-tenant buildings where the property is subject to a true NNN lease since owner in that situation is generally not managing the property and only collecting rents. The risk increases significantly if the selling entity is operating and managing the property. Bed bug litigation is an example of potential risk being assumed.
Practice Pointer. If a generous inspection period is provided by seller, seller should insist in return that the sale of the property be As-Is, and thus limit the representations and warranties provided in the contract.
Practice Pointer. Unlike some states, Iowa does not have an entity transfer tax on the sale of membership interest in an entity. Thus, one benefit of a membership transaction is the seller does not pay the transfer tax, plus there is no recording of the transaction disclosing the purchase price or existence of the sale.
Practice Pointer. The seller will want to be careful – especially on speculative deals – that the buyer not be permitted to finalize any government approvals before closing or at least before some of the ▇▇▇▇▇▇▇ money becomes non-refundable. If the buyer terminates after property has been re-zoned or platted, the seller may need to un-wind these entitlements before locating a new buyer or developing the property for an alternative use. This unwinding will cost time and money.