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Part II of our Real Estate Series
By: Mariana Fradman, MBA
Happy Tuesday, TPSers! Back by popular demand is Part II of our Real Estate Series, by none other than the lovely and talented President of the New York City Paralegal Association, Mariana Fradman. You asked for it…so here it is. (And it’s really good!)
Congratulations! The due diligence period ended…all parties signed off and the deal is scheduled to close! You are ready to enter the next phase of a life of your deal: Pre-Closing.
Do you know the main keyword of a pre-closing? You got it: ORGANIZATION. If you know who the players are, reflected any changes in the organization chart on your checklist, noted all new entities (and received and reviewed new documents related to them) during the due diligence process, got all third parties approvals and consents, and all financing and funding issues are cleared, you are READY to close… not really.
There is a long tale of the forgotten issues and how to deal with 11th hour problems (domain names, authorizations to do business, EINs, license compliance, claims that didn’t make the litigation list, tax liability, insurance issues, title issues, changes in financial conditions and regulatory issues, uncleared surveys and many more.) Sounds like a nightmare. Yes…may be…don’t panic! Many of them could post-pone the deal and some of them could be moved to your post-closing checklist. Your job is to keep your list…you got it – constantly updated.
You made it thru due diligence process and survived the pre-closing craziness. Tomorrow is THE BIG DAY. When should you start to prepare for it? My advice: start it a way before the closing is scheduled! Why? Because ORGANIZATION is KEY! Plan ahead. Mange the document production (How many sets of documents do we need? How many counterparts should be sent to each party for execution? How do we send documents for execution (via email as pdf file or via FedEx delivery)? When is the FedEx deadline? Oh, no! My client is traveling and won’t have an access after 3:00 pm for the rest of the week! There is a tornado warning and all airports are closed, how can I get seller’s signatures to the title company by tomorrow morning?) There are many other questions that will need your immediate response and, many times, you will need to pause and re-group in order to overcome hurdles.
Why is the closing room often called a “War Room”? I don’t know about other players, but for me, as a paralegal, it is a war. I am in war with the time. You probably hear many times that “wires should be cut before 3 pm”. What does it mean for you? It means that all parties have to have all necessary documents prior to that time, all invoices submitted for payment and that a settlement statement (the document that spells out who proceeds will be distributed at the closing) is finalized and executed by all parties involved in the deal. It means that you provided ALL parties with ALL necessary documentations and that airplane that was grounded due to the upcoming tornado landed on-time.
There are two types of closing that you will see in your real estate life: in-house and in-escrow. Both of them involve the same documents, but while, in-house, you will see all (or most) of the players at the closing table, the closing in-escrow is…in escrow. All original documents will be delivered to the escrow agent (usually, a title company) ahead of the time. The title company will verify the delivery of all necessary execution counterparts, assemble documents and inform both sides that they are in the possession of all documents necessary for the conclusion of the transaction. Upon receipt of the notice to proceed from each party, the title company will set up wires and distribute money. CONGRATULATIONS! The deal is closed. Should be celebrate? Absolutely! Are we done? Absolutely not!
The last stage of a real estate commercial deal is called a post-closing. Many times, the post-closing is a beginning of a whole new game. One part of a post-closing process is to make sure that all deliveries are made on-time and all documents delivered to correct parties. After the closing, the title company, which holds all original documents, will date all documents and distribute them to parties according to the escrow deliveries letter. At the same time, they will prepare deed, mortgage, UCCs and other deal-related documents for recording and submit them to an appropriate office. While your friend, the title company, takes care of documents, it is your job to follow up and make sure that you receive one set of original non-recordable transfer documents and copies of documents sent for recording. You need to send out notification letters (to tenants, landlords or suppliers), as well as cancel an agreement with a registered agent (WHO?…for those of you who are not in the corporate or business law world, a registered agent, also known as a resident agent or statutory agent, is a company or individual designated to receive service of process when a business entity is party in a legal action. The registered agent’s address may also be where the state will send the paperwork for the yearly renewal of the business entity’s charter.) You also need to prepare a closing index and binders that reflect all (or most documents involved in the transaction) and distribute them to parties.
Your job as a paralegal is to send files to records department and follow up on post-closing deliveries (remember those 11th hour documents?). You will also be an appointed person to receive documents recorded in the county and state offices as well as to keep a tickler system if any of the documents should be assigned or terminated in a timely matter.
Some more on your deal – unless the property was sold and you represented the seller; the acquisition will bring you a honor to deal with this property again and again through financing, refinancing, partial release of the mortgage, full release of the mortgage, partial sale or full disposition of the property. So, as you can see, the life of a commercial real estate deal is long and full of surprises.
Now, the last, but certainly not least — and don’t say I didn’t warn you! You may find yourself working on a few deals simultaneously and all of them are in the different stages. You will manage number of different checklists and review boxes of documents while preparing closing binders and arranging for escrow deliveries for the closing scheduled in two days. Your time management skills, attention to details and diligence will help you. Don’t be afraid to ask questions. Don’t be afraid to ask for help. The fast passing deals will make your life exiting and experience will make you the best paralegal. Don’t be afraid to take new assignments and ask questions.
Even though most of us in the TPS inner circle don’t work in the area of real estate, we gotta say, we thoroughly enjoyed reading this piece – so thank you, Mariana! Are there any aspiring real estate paralegals out there who have a question for Mariana? (What an opportunity…you get to pick the brain of a smart, real estate paralegal and President!) Perhaps you have a tip or tidbit that you’d like to add as an experienced paralegal? If so, share it!
We have a full blogging schedule ahead…so buckle up, readers. We’re bearing down like a full-speed, paralegal, freight train headed straight for the knowledge village! Lots of good stuff is on the way.
Carpe Diem, paralegals. We’ll see you soon!