Commercial Real Estate

When advising clients on NYC development projects, one of the most common mistakes we see is failing to allow for foreseen delays and costs. Surprises in the development process, such as labor/material shortages, permitting delays, and undiscovered environmental contamination, can quickly escalate costs and deplete a small contingency. With a larger reserve in place, developers aren’t forced to scramble to secure more funding.  A sizable financial cushion also helps ensure that surprises don’t derail the project completely. Our commercial real estate lawyers help clients secure sufficient financing to account for potential issues in the development process. When surprises arise, we also spring into action to find cost-effective solutions.

Like-kind exchanges involve exchanging real property used for business or held as an investment solely for other business or investment property that is the same type or “like-kind.”  Under Internal Revenue Code Section 1031, if you make a like-kind exchange, you are generally not required to recognize a gain or loss. However, because of the technical tax regulations involved, it is always advisable to consult with an experienced business real estate attorney to determine if your transaction qualifies. 

New York law, Real Property Actions and Proceedings Law (RPAPL) Section 881, authorizes a judicial license where a neighboring property owner or lessee has refused permission to access its property for necessary improvements or repairs.  While developers can often directly negotiate written license agreements with neighbors, RPAPL § 881 authorizes courts to grant licenses through a special proceeding in cases where neighbors refuse access. Under the statute, licenses shall be granted by the court in an appropriate case upon such terms as justice requires. License orders typically provide rulings on key issues, such as license term, license fee, indemnification, insurance, and repair of damages.

Title insurance protects against any undiscovered title defects. If a title dispute subsequently arises during or after a sale, the title insurance company is generally responsible for covering any associated legal expenses. Title insurance is particularly important concerning commercial real estate transactions. Various endorsements are available to protect purchasers and lenders from more than just title defects. For instance, endorsements can cover additional issues, such as zoning concerns and environmental issues. 

When reviewing a purchase and sale agreement or commercial lease agreement, it is imperative to also thoroughly review any riders or addendums that may be attached. Riders often address issues unique to the transaction that are not covered in standard P&S forms. Additionally, the parties may add riders rather than make significant amendments to a form P&S. For instance, mortgage contingency riders will specify who can cancel the contract if the buyer is unable to obtain financing and under what circumstances. The rider may also address when extensions of time for obtaining a mortgage may be granted and the process for granting extensions. Where contamination is suspected or confirmed at the property, an environmental contamination rider is included to address the rights and obligations of the parties about remediation. An access rider, which sets forth whether, and under what circumstances, the buyer or lessee will have access to the property before the conclusion of the transaction, is also common. Given the impact commercial real estate riders can have on your rights and obligations, it is essential to consult with a team of experienced commercial real estate lawyers who can negotiate an agreement that protects your best interests.