1. Contract Drafting 2011-03-08 University of Houston Law Center Spring 2011 D. C. Toedt III

2. Guest speaker Louis E. Silver Schlanger, Silver, Barg & Paine, LLP

3. Objective of this class session High-level overview of typical transaction Survey of documents to be drafted Selected legal- and business points NOT:  Equip students to do real-estate deals “solo”  Provide contract forms

4. Review: Signatures NORTH BY EAST ENTERTAINMENT, LTD., by Northeast Platinum, LLC, its general partner, by: /s/ John Auletta John Auletta, sole member of Northeast Platinum, LLC

5. Hypothetical transaction: sell a shopping center

6. The “influencers” The obvious ones: Seller, Buyer Other important players:  Lender(s)  Anchor tenant(s)  Other tenants  Local government(s)  Quasi-governmental entities

7. Letters of intent

8. Potentially dangerous Stmt. of present intention on basic points  Price; timeline; earnest money; brokers; etc.  Conditions precedent – due diligence, etc.  Lock-up?  Expenses of negotiation Expressly ID binding vs. non-binding terms Confidentiality? Press release? One for each phase of deal?

9. Agreement of Purchase and Sale

10. The goal: Closing Swap deed for $, prom. note, etc. Old-style closings vs. modern logistics  Signatures – how delivered?  Consideration - ditto  Escrow Closing instruction letter – brings everything together

11. Some key agreement components 1. Timeline 2. Covenants and/or closing conditions 3. Reps & warranties 4. Disclosure schedule – exceptions to R&W  Nomenclature: “Schedule 4.7(a)”

12. Exhibit forms  Warranty deed – Tex. Prop. Code  Promissory note?  Deed of trust?  Estoppel certificate (signed by tenant)?  Attornment / subordination / nondisturbance agreement (between lender & tenant)?  Bring-down certificate? Some key agreement components

13. Timeline: Critical dates in agreement Closing date  Might be tied to conditions being fulfilled, e.g., receipt of govt. licenses / approvals  Drop-dead date Title & survey review period – how long? Inspection period – how long? When does earnest money become ‘at risk’?

14. Conditions to obligation-to-close Pre-closing & closing covenants satisfied  Operational covenants  Bring money / bring deed Seller’s reps and warranties correct (materiality qualifier?)  Good title, etc. – due diligence  “Bring-down” certificate? Estoppel certificates, etc., from current tenants

15. Money transfer: Mechanics Wire transfer? Promissory note?

16. Covenants Deliver deed, money, etc. Buyer consent required for pre-closing:  Amend. or modif. of existing leases  New lease  New title encumbrance Indemnities  Environmental – how far back does it go?  Others?

17. Covenants Maintain insurance coverage Risk of loss  Seller maintains risk of loss till the closing  What happens if the place burns down before closing?

18. Due diligence

19. Title search/policy & related D/D Purpose – why? Searcher – who? Timing – when? Admin. mechanics – how, who pays? Issues to look for – what? Add’l info: Texas Dept. of Insurance pageTexas Dept. of Insurance page

20. Drafting issues: Title Rep & warranties  Seller has good title Closing conditions  No problems with title search Covenants  Deliver signed gen. warr. deed at closing  Indemnities?

21. Survey of the property 5Ws – who, when, why, where, what Whom to hire? Lender desires Issues to review include:  Flood plain  Soil studies  Platting

22. Drafting issues: Survey Rep & warranties Closing conditions  No (unscheduled) encroachments Covenants  Indemnities?

23. Existing leases Rent roll Anchor tenant, smaller tenants Lease agreements  Conflicting use- and exclusivity provisions  Co-tenancy issues  Termination rights

24. Drafting issues: Leases Rep & warranties  No tenants in default (except as scheduled)  No disputes, pending terminations, etc. Estoppel certificates Covenants Closing conditions

25. Commercial Leases: Top 10 Things 10: Permitted, prohibited uses 9: Notice and opportunity to cure 8: Consents and approvals not to be unreasonably withheld, conditioned or delayed. 7: Beware of relocation rights 6: Obligations should be conditions and covenants

26. Commercial Leases: Top 10 Things 5: Remedies – exclusive? Cumulative? Self-help? 4: Future needs 3: Options! (Renewal, expansion, termin.) 2: Beginning, end of obligations 1: Consistency!

27. Environmental due-diligence CERCLA, amended by Brownfields Law  EPA fact sheets – useful summaries Current owner or operator liability for clean-up costs Exposure potential for lenders Strict liability, but … Gowanus Canal, Brooklyn

28. “All appropriate inquiries” due-diligence defense EPA fact sheet Hire an ‘environmental professional’  Licensed, experienced ASTM standards (American Society for Testing Materials) Shelf life for investigations

29. Drafting issues: Environmental Rep & warranties Closing conditions Contingency plans  Indemnities

30. Other questions?

31. Last question (With apologies to Wait Wait Don’t Tell Me)