COMMERCIAL CLOSINGS

A commercial closing in North Carolina refers to the final step in the process of buying or selling a commercial property, such as an office building, retail space, industrial facility, or other business-use property. During the commercial closing, the ownership of the property is formally transferred from the seller to the buyer, and all the legal, financial, and contractual obligations related to the transaction are completed.

The commercial closing process involves several key steps to ensure that both parties fulfill their obligations and that the transaction complies with all relevant laws and regulations. Here’s a general outline of what happens during a commercial closing in North Carolina:

Key Steps in a Commercial Closing in NC:

1. Finalizing the Purchase Agreement:
   • The closing process begins after the parties have agreed to all terms in the purchase agreement (also known as a sales contract). This agreement outlines the terms and conditions of the sale, including the purchase price, contingencies (such as financing or inspections), and the closing date.
2. Title Search and Title Insurance:
   • Before closing, the buyer or their attorney typically orders a title search to ensure the seller has clear ownership of the property and that there are no outstanding liens, encumbrances, or legal issues that could affect the sale.
   • Title insurance is also typically purchased to protect the buyer against potential future claims or issues regarding ownership.
3. Due Diligence Period:
   • Prior to closing, the buyer may have a due diligence period to inspect the property, review financial documents (such as leases or maintenance records), and address any concerns. This could include environmental assessments, property inspections, and lease audits for commercial properties.
   • If the buyer identifies any issues during due diligence, they may negotiate repairs, ask for credits, or even back out of the deal (depending on the terms of the contract).
4. Securing Financing:
   • If the buyer requires financing, they will need to secure a commercial loan from a bank or other lender. The buyer will finalize the loan agreement and ensure that the financing is in place before closing.
   • The buyer’s lender may require an appraisal of the property and other documentation, such as the buyer’s financial statements, business plans, and tax returns, to ensure the loan can be approved.
5. Closing Disclosure and Settlement Statement:
   • Before closing, both the buyer and seller will receive a closing disclosure (for the buyer) or a settlement statement (for both parties), which outlines the final financial details of the transaction, including the agreed-upon price, any adjustments, closing costs, and the distribution of funds.
6. Reviewing Documents:
   • Both parties, along with their attorneys or representatives, will review all necessary documents to ensure accuracy and compliance with the agreed terms. These documents may include:
     • The deed of sale (which transfers ownership of the property)
     • Closing statements
     • Mortgage or loan documents
     • Title transfer documents
     • Any additional agreements, such as lease assignments or service contracts
7. Transfer of Funds:
   • On the closing day, the buyer typically deposits the funds required for the purchase (including the down payment and any other fees) into an escrow account. The escrow agent will disburse these funds to the seller, pay off any existing liens or mortgages on the property, and handle other financial transactions related to the sale.
8. Execution of Documents:
   • Both the buyer and seller (or their representatives) will sign the necessary documents, including the deed of transfer, financing agreements, and settlement statement.
   • The deed, which officially transfers ownership, is signed by the seller and then recorded with the county register of deeds in North Carolina. This process is crucial to ensure the buyer’s ownership is legally recognized.
9. Closing Costs:
   • Closing costs are typically divided between the buyer and seller according to the terms of the purchase agreement. These can include:
     • Buyer’s closing costs: Loan fees, title insurance, attorney fees, inspections, and property taxes.
     • Seller’s closing costs: Real estate commissions, unpaid property taxes, and any necessary repairs or credits to the buyer.
   • It’s important for both parties to review the closing statement carefully to understand their financial obligations.
10. Post-Closing Tasks:
    • After closing, the buyer becomes the official owner of the property and takes possession. The closing agent will file the deed with the county to officially record the buyer’s ownership.
    • The buyer may also take possession of the keys, access codes, or other items related to the property.

Important Documents in a Commercial Closing:

• Purchase Agreement: The initial contract between buyer and seller outlining the terms of the sale.
• Deed of Sale: The legal document that transfers ownership of the property from the seller to the buyer.
• Title Report/Title Insurance: Ensures there are no outstanding legal issues with the title.
• Closing Statement/Disclosure: Summarizes the financial details of the transaction.
• Loan Documents: If the buyer is financing the purchase, these include the loan agreement and mortgage documents.
• Bill of Sale: If the transaction involves the sale of personal property along with real estate (e.g., equipment or furnishings), this document would transfer ownership.

Closing Costs for Commercial Real Estate Transactions in NC:

• Attorney Fees: Both parties may have their own attorneys to review the transaction.
• Recording Fees: To record the deed and other documents with the county.
• Title Insurance: Both the buyer and seller may need to purchase title insurance.
• Broker’s Commission: If real estate brokers are involved, they will receive a commission based on the sale price.
• Transfer Taxes: North Carolina imposes a real estate transfer tax based on the sale price.
• Inspection and Appraisal Fees: If required, the buyer may need to cover the costs of inspections and appraisals.

Role of Professionals in a Commercial Closing:

• Real Estate Attorney: Commercial real estate transactions in North Carolina typically involve attorneys who help ensure that the legal aspects of the transaction are properly addressed, including reviewing contracts and handling document preparation.
• Escrow Agent/Closing Agent: The escrow or closing agent manages the financial and legal aspects of the transaction, ensuring that funds are properly transferred and that the deed is recorded.
• Real Estate Broker: A commercial broker may represent either the buyer or seller and assist with negotiating the terms of the sale.

Conclusion:

A commercial closing in North Carolina involves multiple steps and parties working together to ensure the transaction is completed smoothly and legally. It is essential for both buyers and sellers to understand their responsibilities, carefully review the documents involved, and work with experienced professionals, including attorneys and real estate agents, to avoid complications and ensure that the deal is successfully finalized.