New York’s commercial real estate market is as dynamic as the city itself. The constantly changing landscape can create great opportunities for investors and businesses. However, they can also bring unexpected challenges. When the market takes a turn, three provisions in your offer or purchase contract can help protect your interests.
Financing contingency
This contractual provision allows you to exit a deal if you cannot secure adequate financing within a specified period. This can be beneficial when interest rates suddenly rise or when lenders tighten their lending criteria.
A financing contingency typically includes:
- A defined timeframe for obtaining loan approval
- Specific criteria for acceptable financing terms
- Conditions for contract termination and deposit return
It’s important to note that these clauses have limitations. They may not protect you if you fail to make a good-faith effort to obtain financing or if you don’t meet the agreed-upon criteria.
Due diligence period
This is a specified timeframe for buyers to thoroughly investigate a property before closing on the deal. This allows you to:
- Conduct comprehensive property inspections
- Review financial statements and lease agreements
- Assess zoning regulations and potential development restrictions
This provision is especially important in New York, where properties may require special permits. Some properties may also have historic designations and potential environmental issues that can affect their value, use and future development plans.
Flexible closing date
Unexpected issues can come up at any time during the transaction. This can include:
- Delays in obtaining financing
- Co-op board approval processes
- Complex title issues
- Unexpected problems found during inspections
A flexible closing date provision helps manage these uncertainties. It allows buyers and sellers to adjust the closing date without breaking the contract as long as the new date falls within a pre-agreed range and meets specified conditions.
Navigate the market with ease
New York’s commercial real estate law is complex and varies by location. While these provisions offer protection, it’s advisable to consult an attorney. They can tailor these provisions to your specific situation.