Organizing Transaction Closings

Vol. 2, No. 12

Brad Dashoff is a special counsel in the real estate group of Sheppard Mullin Richter & Hampton LLP (Washington, DC, office). His practice includes a variety of real estate matters, such as acquisitions and dispositions of commercial properties, commercial lending, mixed use development, sale-leaseback transactions, and the creation of private equity funds to invest in real estate. John Antonacci is vice president and deputy general counsel of Atlantic Realty Companies, Inc., which is a full-service commercial real estate company that owns and manages a portfolio of approximately five million square feet of office and retail space throughout Virginia and Maryland. He is involved in a wide variety of real estate and corporate matters, including the following primary areas: purchase and sale transactions, commercial leasing (with a specialty in retail leasing), and commercial lending. Before joining Atlantic Realty Companies, Inc., he was a senior associate in the real estate group of Pillsbury Winthrop Shaw Pittman, LLP (McLean, Virginia office).

 

  • Learn how to prepare for a successful closing.

 

From The Commercial Real Estate Lawyer's Job: A Survival Guide, Chapter 19.

 

Organizing Transaction Closings

Closing occurs when each party to a transaction delivers to the other its consideration, such as money or property. People also use the term “closing” to refer to the events immediately preceding this moment, such as finalizing transaction documents and reviewing settlement statements.

The key to preparing for a successful closing is to be organized. If you have a closing checklist, you should use it to keep track of all documents and other deliverables needed for the closing. If you do not have a closing checklist, at a minimum, you should create your own list of documents and deliverables needed for the closing. You should also review your transaction documents to determine whether they include any conditions to closing. If there are any conditions to closing, you should add them to your checklist and consult with the client or a senior lawyer to find out when the conditions will be satisfied. You want to avoid being surprised about the timing for the satisfaction of closing conditions and finding yourself in a position that prevents closing the transaction in a timely manner.

As early as possible in a transaction, you should find out who is going to be signing the documents for your client and when they will be available. You do not want a closing to be delayed because the individual with the authority to sign documents is on vacation or otherwise unavailable. If possible, you should find out the schedules for multiple people authorized to sign documents in case any one of them is not available. Scheduling becomes especially important during the summer when many people take vacations, and at the end of the year both because people take vacations and because many clients feel pressure to close deals by the end of the year for income tax and accounting purposes. If there is no one available to sign documents, the deal cannot close.

If you are organized, you should be able to have much of the work finished before the day of closing, and the less time a client has to spend dealing with a transaction on the day of closing, the more he or she will appreciate your efforts. In a perfect closing, the client will have to do nothing but confirm he or she is ready to close. There are often business issues that arise on the day of closing that may hold up the closing and clients understand this, but clients do not appreciate when a closing is delayed due to a procedural error, such as forgetting to have documents signed or forgetting to provide wiring instructions so that the buyer or lender can wire funds.

 

Tips and Suggestions

1. It is never too early to prepare for the closing. As you are creating and updating your closing checklist, you should always be thinking about what you will need to have for the closing and how long it might take to get it. You should allow extra time to obtain anything that a third party will be providing, such as an estoppel certificate from a tenant or a certificate of good standing from a secretary of state’s office. Do not wait until a day or two before closing to follow up on third-party deliverables because it may be too late.

2. Cooperation between you, opposing counsel, the parties, and the title company handling the closing is key. You should coordinate with all parties to make sure everyone knows who is responsible for which tasks. If your client wants to use a new entity to purchase real property, confirm with your client whether they or you will be creating the new entity.

3. Collect signature pages to all transaction documents in advance. Once you can identify all of the documents needed for closing, you should go ahead and prepare the signature pages and send them to the client. You want to be as prepared as possible but you do not want to send out signature pages for execution too early because you may wind up having to send out, and asking your client to take time to sign, additional documents. The client should sign the documents and return them to you so that you can confirm that all documents, and the correct number of originally executed copies of each document, have been signed.

4. Though it is helpful to have a document number or file name in the footer of your documents so that others will be able to locate the document or identify which version is being reviewed, the exception to this practice is on signature pages. Since the parties may negotiate documents up to the closing, it is easier if you distribute signature pages that do not have document or version identifiers on them, which could be different from those of the final draft of the document. If the executed signature pages have a different file name or number or a different version number in the footer than does the body of the document, people looking at the document in the future may wonder if the signatories intended to agree to the attached document.