Legal Blog

Navigating Deal Sheets: Ensuring Smooth Transactions from The Beginning

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Great news! You have an accepted offer and will now generate a deal sheet. Over the years, I have reviewed thousands of deal sheets, and while most are great and complete, every so often, I get one that needs some “tweaking.” Here are a few comments on deal sheets, which, if addressed, will make the deal go significantly smoother and avoid many headaches.

  1. Confirm The Legal Names of Your Buyer – Check the License or Passport
    Often, a buyer may go by a nickname, John, which is really Jonathan. Nick is really Nicholas, and Sue is really Susan. Alternatively, John, Nick, or Sue may be the person’s middle name they have gone by since they were young. Don’t just go by their “usual” name; please use their “legal name.” An incorrect name has a massive ripple effect that can create several issues, including having to redo the loan and transfer documents to match the actual legal names. It reminds me of the time when, three days before closing, my client – let’s call him Alan – sent me a copy of his license for closing. Well, low and behold, Alan was his middle name! Because of this – and because I had no earlier knowledge – we had to scramble to amend the contract, title searches, and transfer documents. Fortunately, this was a cash deal, so there were no loan documents, but those would have also required a change. And don’t get me started on issues if this was a coop! So please, please, please make sure you use the client’s legal name.
  2. Speaking of Names – What About My Seller?
    This same principle in item 1 holds true for sellers, but it’s confirmed slightly differently. One of the first things I do when representing a seller on a new deal is to verify that the “record” owners are consistent with what is presented on the deal sheet. Maybe there was even a subsequent transfer that the seller forgot about. For condos/houses in NYC, the simplest way to do this is to go onto ACRIS and pull the last deed of record to confirm. For coops, where it’s a bit more private, take a look at the current stock certificate (if the client has it), or, in the worst case, reach out to the managing agent and request a copy of the certificate. Explain that you are the broker representing the owner and you just want to verify the names. You should not get pushback, and, like the buyer’s name issue, confirming the seller is equally important.
  3. The Cooperative Corporation
    Did you know that The Majestic (115 Central Park West) has a legal name of 115 Central Park West Corporation? Or that the San Remo (145 Central Park West) has a legal name of San Remo Tenants’ Corp.? I am saying this because what the name of a building is referred to as “on the street” may be different from the cooperative corporation’s actual legal name. And the legal name is what is essential – not the nickname. This is another important issue to verify because, like our seller and buyer names, an incorrect cooperative corporation name can mess up a slew of documents impacting the loan – the recognition agreements, the UCC-1 filing, and the loan documents at closing. There are several ways to verify this – look at the stock certificate, the financial statements, the offering plan, or just ask management. I also go onto the NYC Division of Corporations website to verify the accuracy of the names.
  4. Storage Units
    Your client has a great storage unit they have been using for years, making the deal that much more attractive to a buyer. But does that mean that upon a sale, it can automatically be transferred to a buyer? No, it does not. Storage units are handled in several different ways – maybe your client owns them (the best-case scenario where they can transfer them). Maybe they license it (and it can be assigned, or maybe it cannot). Or maybe there is no formal agreement at all, and it’s an informal process where it reverts to a wait list upon a sale and is not transferrable at all. There could be 100 residential units but only 50 storage units in a building. Whatever the case, do not assume that storage is automatically transferable without checking its transferability.
  5. Circulate a Recent Copy of a Maintenance or Common Charges Statement With The Due Diligence Materials
    One of the biggest “mistakes” I see on a deal sheet is an incorrect maintenance/common charge reflected, with this mistake coming more often than not on listings that went “live” at the end of the year but carried into the following year. What often happens to monthly charges on the first of the year? Well, they certainly don’t decrease; we know that they increase! In order to avoid a situation where there are misstated monthly charges, please not only reconfirm the amount but also include a copy of a recent statement with your due diligence materials. I get asked all the time for a copy of the statement from my buyers because they not only want to confirm that the amounts are accurate but they want to see what is included as part of the monthly statement.

In conclusion, meticulous attention to what may appear to be basic details is paramount in ensuring smooth real estate transactions. By avoiding these common pitfalls, deals will run more efficiently. If you have any questions, please do not hesitate to reach out.

ABOUT BRAD JACOBS

Brad Jacobs Photobrad.jacobs@offitkurman.com | 646.386.2048

Brad Jacobs is a principal in the firm’s Real Estate Law and Transactions Practice Group, focusing on real estate law. Brad oversees numerous real estate transactions encompassing residential and commercial properties, lending, and secured financing. His experience extends to 1031 exchange transactions, commercial office space leasing, and subleasing. Brad also counsels sponsors and holders of unsold shares and collaborates with the trust and estate department on estate sales. He offers regular guidance on tax and estate planning strategies related to acquisitions and sales.