- Learn how to make a real estate purchase or sale easier.
From The Commercial Real Estate Lawyer's Job: A Survival Guide
When you are asked to work on a purchase and sale or financing transaction, one of the first steps you should take is to create a closing checklist. The closing checklist will serve as your roadmap through the transaction and is a very useful tool for staying on top of all of the various components in a transaction.
- The elements of a closing checklist will vary depending on the type and terms of the transaction and which party to the transaction is creating the checklist. The closing checklist for a loan will include different documents than the closing checklist for a purchase and sale. If you are representing the buyer in a purchase and sale transaction and the buyer is also taking out a loan to finance the purchase, your checklist will include all of the documents and information needed for both the purchase and the loan, whereas if the lender’s counsel prepares the checklist, it will most likely only include the information and documents necessary for the loan. Quite often, the lender will prepare a checklist for the loan transaction so that the borrower will know exactly what the lender is requiring. The borrower can then incorporate those items into the purchase and sale checklist to create one master checklist.
- Each party to a transaction may use its own checklist tailored to what it needs for the transaction, however, in large multiparty transactions, you might have one central checklist for the transaction and each party might then create its own checklist for the items it cares about.
- For certain transactions, such as a retail or office lease, where the lease may be the only document, a formal checklist may not be needed.
- In preparing your closing checklist, you should leave space next to each item to provide additional information about the item. If a document has been agreed upon or signed, it is helpful to indicate so because it shows the parties that progress is being made and everyone can refocus on the documents and issues not yet agreed upon. If due diligence information has been requested but not provided, you should indicate so and list who is responsible for providing the information. If there are open questions or issues between the parties, these can also be included next to the relevant document or due diligence item.
- The closing checklist should be updated from time to time over the course of the transaction. On larger transactions, the client may want to see weekly or daily updates but most often, updating the closing checklist concurrent with revised drafts of the transaction documents being distributed will suffice. Updating the closing checklist too frequently is not recommended because things might not have changed enough to warrant an updated draft and you may convey to your client the impression that you are generating unnecessary work for yourself (at their expense). When you are revising and updating your closing checklist, consider whether you should show your updates in tracking (if your word-processing program has such a feature). This is a very easy way for everyone to see the progress made, or the issues that have arisen, since the last draft.
- There is no magic formula to creating a closing checklist and they come in many different forms. The trick is to come up with a form that works for you and your clients and that is easily manageable. The more complicated a closing checklist becomes, the less likely it is that it will be useful.
A contact list is a list of the people working on a particular transaction together with their relevant contact information. It is helpful to include the contact list at the back of the closing checklist for the transaction so that all basic information about the transaction is in one place. Transactions often involve people from various professions, in addition to lawyers and their clients, such as brokers, title companies, engineers, and surveyors. Since an issue may arise at any time requiring information from one of these professionals, it is beneficial to have this contact information in one easy to access place. If you only have names of other parties and professionals involved in the transaction, but no other contact information, try searching on the Internet for their contact information. Most professionals either have their own websites or are listed in professional directories available online. If you cannot find any additional information, you should include what you know because any information you can include is better than no information. Depending on the nature of the transaction, consider including people’s home addresses and phone numbers but, if the contact list is going to be circulated to all parties, you should confirm that people want their home information disclosed. Your default position should be to exclude home information unless instructed otherwise.
If there is going to be a closing binder made after your transaction closes, you should include a copy of the contact list so if you or your client needs to contact the surveyor, lender, or title company in the future, you know who to contact.
Miscellaneous Tasks to Keep in Mind
As previously discussed, when you are working on a purchase and sale or financing transaction, one of the first steps you should take is to ask the following questions:
- Ask if there is a letter of intent or term sheet. The letter of intent or term sheet should provide you with the basic information you will need to get started on the closing checklist, though the terms of the transaction may change during the course of the negotiations. You should also be able to begin creating your contact list from information in the letter of intent or term sheet. Even if the client (or, if you work at a large law firm, the senior lawyer running the transaction) does not want a formal closing checklist or contact list, it is recommended that you at least create informal versions for your own personal use. You may be expected to be the gatekeeper of information and documents so the more organized you are, the more value you can add to the transaction.
- Ask who else is involved in the transaction besides the two parties and their lawyers. In real estate transactions, there may be a broker, a title company, and a lender. For a complex transaction, you might also need to include accountants and other professionals.
- Ask how often you should update and circulate the closing checklist. For large, multiparty transactions, it might be helpful to provide everyone with an updated closing checklist more frequently than is beneficial in a smaller transaction.
There is no special order for the closing checklist or contact list. Generally, the closing checklist should have the basic information listed first, such as the parties, key amounts (purchase price or loan amount), and key dates (end of study period, closing date) followed by the transaction documents generally in the order they occur in the transaction. The contact list will generally list the parties to the transaction and their lawyers first followed by any other outside parties listed afterward.