From KW Commercial SA's www.kwcommercialsa.com "ask the expert" page. Under Doug Becker's Real Estate Law Page. http://kwcommercialsa.com/blog/?category_name=douglas-w-beckers-real-estate-law-blog-page under the topic of WHAT SHOULD A SELLER CONSIDER WHEN THE BUYER WANTS TO HAVE THE RIGHT TO ASSIGN THE CONTRACT? http://kwcommercialsa.com/blog/?p=541
WHAT SHOULD A SELLER CONSIDER WHEN THE BUYER WANTS TO HAVE THE RIGHT TO ASSIGN THE CONTRACT?
[Douglas W. Becker at 2011-3-21 in: Doug Becker's Real Estate Law Page]
DOUGLAS W. BECKER
COMMERCIAL ESCROW MANAGER AND UNDERWRITING COUNSEL
CHICAGO TITLE INSURANCE CO.
270 N. LOOP 1604, E.
SAN ANTONIO, TX. 78232
March 21, 2011
Issue: Quite often during the negotiation of a commercial real estate contract the buyer will request the right to assign the contract to a new entity. Should the seller resist?
Discussion: In representing the buyer, it is important to retain the right to assign the contract, especially under circumstances where the entity which will ultimately acquire the property has not yet been formed. It is preferable to make clear that the buyer will have the right to assign the contract by an express provision approving assignment or by describing the buyer as "John Doe, and/or Assigns". Where there is a significant amount of earnest money, and the purchase price is to be paid in cash at closing, the seller should not have any real objection to allowing an assignment by the buyer, absent some special circumstance, such as restrictive use covenants affecting the property or concerns over mix of uses in a retail development.
On the other hand, if the contract requires certain activities by the buyer prior to closing, which activities involve significant financial outlays, such as zoning or platting, the seller will want to have some assurance that the buying entity and the entity to whom the contract is to be assigned have the financial wherewithal to complete the buyer's obligations.
Moreover, under circumstances where the purchase price is to be financed by the seller, the seller has a legitimate interest in determining the creditworthiness of the entity to which the contract is to be assigned. A compromise solution is to provide that the contract can be assigned by the buyer to an entity with which the buyer is affiliated in a significant way, i.e., such as an entity in which the buyer is a majority owner or which the buyer controls by being the general partner. In addition, as a condition to allowing an assignment of the contract, the seller might require that the original buyer guarantee performance by the entity to which the buyer desires to assign the contract.
Douglas W. Becker
Commercial Escrow Manager and Underwriting Counsel
Chicago Title Insurance Co.
270 N. Loop 1604 E., Suite 115
San Antonio, Tx. 78232
Tags: Chicago Title in San Antonio, Commercial Real Estate San Antonio, Doug Becker, Law in San Antono, Residential Real Estate Law, right to assign, San Antonio, San Antonio Commercial Real Estate, San Antonio Law, Texas