August 17-September 6, 2016 —
COLORADO REAL ESTATE JOURNAL
— Page 35
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LAND SURVEYORS
CREC-Approved Contracts
T
his is the 17th in a series
of 18 articles that come
from years of experi-
ence using the Colorado Real
Estate Commission-approved
contracts for purchase and sale
of real estate for commercial
real estate transactions. Pre-
vious articles addressed the
buyer’s name, the seller, the
property, water rights, order-
ing the title commitment, own-
er’s extended coverage, mak-
ing title objections, off-record
matters, special taxing dis-
tricts, ordering and reviewing
the new improvement location
certificate or new survey, own-
ers’ associations, rights of first
refusal, contract approval, the
§13 trap and the deed.
The contract allows the seller
and the buyer to set the record
title objection deadline, the
off-record title objection dead-
line, the association documents
objection deadline and the new
ILC or new survey objection
deadline. All of these deadlines
have been discussed in previ-
ous articles. The contract also
provides for deadlines relat-
ing to 1) loan and credit in
§4.5, §4.6, §4.7 and §5; 2) the
appraisal in §6; 3) the prop-
erty inspection, insurability
and due diligence documents
in §10 and 4) tenant estoppel
statements in §11. All of these
deadlines can lead to a process
whereby the relevant matter
is objected to and the matter
is waived or resolved, or by
which the buyer terminates the
contract and receives the return
of its earnest money.
Tip:
The buyer should choose
the various objection and resolu-
tion dates in the contract very
carefully to allow the buyer time
to obtain all the information the
buyer needs to make objections in
a coordinated and not piecemeal
fashion.
Often, brokers draft the
contract and choose dates that,
in their estimation, provide a
reasonable time for each item.
Tip:
The deadlines in the contract
should be chosen, however, so they
allow for a coordinated due dili-
gence process.
I call this “sync-
ing” the deadlines. Keep the
following principles in mind:
The record title objection dead-
line, the off-record title objec-
tion deadline, the association
documents objection deadline
and the new ILC or new survey
objection deadline should be
the same. Since the new survey
is likely to be the item that
takes the longest to produce (a
new ILC is not likely to cause
the same problem), the new
ILC or new survey deadline
(the deadline for the buyer’s
receiving the new survey) usu-
ally drives these other objec-
tion deadlines.
Tip:
The new ILC
or new survey objection deadline
should be chosen to give sufficient
time to obtain and review the new
survey, the title documents, the
association documents and the off-
record matters together, as well as
to conduct due diligence on any
applicable special taxing districts
as contemplated in §8.5, any right
of first refusal or contract approval
requirement as contemplated in
§8.5, any severed mineral rights as
contemplated in §8.7.1, any water
rights as contemplated in §8.3 and
any tenant estoppel statements as
contemplated
in §11.
The impe-
tus to sync-
ing the objec-
tion dead-
lines is sim-
ply that it is
not possible
to do an ade-
quate review
of the title
do c ume n t s
without the
benefit
of
the new survey. Nor can the
new survey be reviewed mean-
ingfully without the benefit
of the title documents. Simi-
larly, off-record matters often
cannot be properly evaluated
without the new survey, as the
new survey often will show
the evidence of, and perhaps
reveal new, off-record matters,
such as third-party implied or
prescriptive easement rights,
boundary discrepancies and
encroachments. Similarly, the
association documents should
be reviewed with the benefit of
a title commitment in hand, as
the title commitment usually
will show or reveal some of the
association documents and it is
important to confirm that what
the buyer has received from the
seller or the association, at the
least, includes all of the record-
ed association documents. The
same might be said of the ten-
ant estoppel statements.
The contract automatically
terminates without a resolu-
tion acceptable to the seller
as to objections made by the
buyer with respect to the title
documents, the association
documents, the new ILC or the
new survey and the off-record
matters.
Tip:
The respective
resolution deadlines should pro-
vide enough time for the seller to
meaningfully consider the buyer’s
objections and for the buyer and
seller to negotiate a resolution.
Brokers often leave too little
time for a resolution.
It is not as important that the
inspection objection deadline
and the due diligence docu-
ments objection deadline be the
same as the record title objec-
tion deadline, the off-record
title objection deadline, the
association documents objec-
tion deadline and the new ILC
or new survey objection dead-
line. Although there may be a
connection or overlap between
the title and survey review and
the property inspection and
due diligence (in which case
syncing up the objection and
resolution dates may make
sense), in general, the types
of due diligence conducted
under the inspection and due
diligence provisions of the con-
tract differ from those under
the title and survey provisions.
Nonetheless, in choosing the
record title objection deadline,
the off-record title objection
deadline, the association docu-
ments objection deadline and
the new ILC or new survey
objection deadline, the buyer
and the seller should take into
account each of the other dead-
lines in the contract.
A seller should not object if
the buyer asks for a title objec-
tion deadline (and the other
objection deadlines that are
synced up with it) that is ear-
lier than the inspection objec-
tion deadline, the due diligence
documents objection deadline
and perhaps some of the other
deadlines. The inspection and
due diligence provisions give
the buyer a very broad termi-
nation right. The ability to ter-
minate the contract on account
of title and survey matters
hardly expands the buyer’s
right to terminate the contract
beyond the termination rights
under the inspection and due
diligence provisions of the con-
tract. The more difficult “ask”
is for a record title objection
deadline, off-record title objec-
tion deadline, association doc-
uments objection deadline or
new ILC or new survey objec-
tion deadline that is later than
the inspection objection dead-
line or the due diligence docu-
ments objection deadline and
all the other deadlines. To the
extent the seller wants to know
sooner rather than later that it
has a firm contract, the seller
extends the buyer’s right to ter-
minate the contract when the
record title objection deadline,
the off-record title objection
deadline, the association docu-
ments objection deadline or the
new ILC or new survey objec-
tion deadline is later than the
inspection objection deadline,
the due diligence documents
objection deadline and all the
other deadlines. For the buyer,
however, these later deadlines
are important whenever it
takes longer to obtain the new
survey than it does to conduct
the physical inspection of the
property and close up the due
diligence, financing, appraisal,
insurability and other contin-
gencies in the contract.
In the next article, we will
look at how the various dead-
lines play out for a buyer who
wants to terminate the con-
tract when some, but not all,
of the objection deadlines have
passed.
s
Beat U. Steiner
Partner, Holland &
Hart LLP, Boulder
The buyer
should choose
the various
objection and
resolution dates
in the contract
very carefully to
allow the buyer
time to obtain all
the information
the buyer
needs to make
objections in a
coordinated and
not piecemeal
fashion.
