Recently we were involved in a transaction between two groups who had been operating informally for years. In this case, one party (tenant) chose not to buy their space from the owner. After the owner had given the tenant the First Right of Refusal, the property was put on the market with Crandall Commercial Group for sale. The tenant agreed to vacate within a certain number of days if it sold.
Our team was able to procure a Buyer within weeks of listing the property.
The tenant was notified verbally (in person) and via email. Upon further review of the tenant's lease, the Seller's attorney referred to the Notice clause in the original lease where it called for Notices to be delivered Certified Mail or by Hand Delivery. It was following the letter of the law and we all proceeded accordingly. This incident delayed the progress of the deal for a couple of days.
This last Friday I was at a Commercial Real Estate/Investors meeting. I shared the framework of my story without any details of the individual’s names/professions/locations.
Two other brokers had similar experiences.
One broker, in particular, shared that in his situation, between a Buyer and Seller, the Buyer gave notice as he had always done, verbally and by email to the Seller. The Seller never responded or acknowledged receipt. When the Buyer noticed he hadn’t received a response, he went back to his contract and under the Notice Section, he read that all Notices were required to be in writing and either sent Certified Mail or Hand Delivered. He did so but it arrived technically after the due diligence period had expired. In this case, a legal battle was instigated. In the end, this broker’s client (Buyer) lost $50,000.00 in the process.
Key Point - Whenever in doubt, refer back to the original documentation. It sounds simple, but when people are used to acting on a handshake or informally, not following the original documentation can prove to be very expensive.
My father was an attorney and in his law office, there was a sign I will never forget. It read, “When two friends enter into an agreement, let it be well penned so that they remain friends until the end!” It was great advice then and is still great advice to this day! As a corollary, once it is well penned, it is really important to follow the prescription as to how the parties are to conduct business.
One of our goals at Crandall Commercial Group is to help review, with our clients, documents obtained from an owner, investor, or Landlord's counsel, to help ensure the final leases/contracts accurately represent not only their intentions, but covers what both sides were promised, so as to minimize chances for future conflict and/or legal actions.
Have a great Wednesday!
Jay Crandall, CCIM, DDS, MBA
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