By Shawn Goletz
Attention All Dealers Currently Marketing Or Anticipating A Future Sale Of Dealership Assets: If your deal will include the sale or lease of the real estate upon which the dealership is located, undertaking some basic pre-deal “housekeeping” can be very useful to avoid due diligence headaches or closing nightmares. Depending upon how long a seller has operated the dealership business, years or possibly decades may have elapsed since acquisition of the real estate and review of related closing documents. Use the following checklist of real estate tips to help smooth the path towards a successful transaction:
- Find your closing documents! Most importantly, locate the survey, title policy, and any environmental reports. An astute buyer will certainly request these as part of due diligence, so prepare in advance to avoid unnecessarily delaying any document inspection process.
- Review the survey. Pay special attention to any buildings, structures, or other improvements that have been built near property boundaries since the date of the old survey. Encroachments that cross boundary lines or violate minimum setbacks can cause major problems. If you suspect problems, consultation with a surveyor and/or attorney is advisable (do not wait on the buyer to cite obvious matters that may cause closing delays).
- Make a list of any environmental issues that have arisen during ownership of the property, and also include anything disclosed by previous owners even if an adverse condition was remediated. Review old environmental report(s), if applicable. Full disclosure of known conditions is highly advisable and usually required by the deal’s definitive agreements; further, depending upon the state where the property is located, the law may impose liability for failure to disclose known conditions. Consult an environmental lawyer to address any questions or concerns.
- Make a list of all major repairs or renovations to improvements on the property, and gather all pertinent records. Significant improvements can affect the appraisal of the property to the seller’s benefit or help to substantiate the buyer’s lender appraisal that is necessary for mortgage financing. This is especially important if the terms of the deal provide that an appraisal will determine the purchase price. If a seller is not prepared to provide appropriate information and documentation, the appraiser may make incorrect depreciation assumptions resulting from inaccurate estimates regarding the effective age of the improvements.
The attorneys at Bass Sox Mercer have significant experience advising dealers on all aspects of a dealership sale. If you are currently marketing your dealership or considering doing so in the near future, our firm is available to guide you all the way from contract to closing. If you do not yet have legal counsel, please contact us with any questions regarding your potential transaction.