DOCUMENTATION OF REAL ESTATE TRANSACTIONS

Transcription

1 DOCUMENTATION OF REAL ESTATE TRANSACTIONS Table of Contents 1 Earnest Money Agreement; Letter of Intent... Paul D. Schultz 2 Purchase and Sale Agreement... Christopher T. Matthews Susan B. Cude 3 Right of First Refusal... Mark A. Manulik 4 Option to Purchase Real Property... Mark A. Manulik 5 Contract of Sale... Eugene A. Frassetto Andrew I. Davis 6 Mortgage, Assignment of Rents, Security Agreement, and Fixture Filing... Jonathon L. Goodling 7 Commercial Trust Deed, Assignment of Rents, Security Agreement, and Fixture Filing... Jonathon L. Goodling 8 Residential Trust Deed, Assignment of Rents, Security Agreement, and Fixture Filing... Jonathon L. Goodling 9 Commercial Lease... Thomas R. Page 10 Ground Lease... Eugene L. Grant 11 Residential Lease... David A. Hilgemann 12 Agricultural Lease... Paul R. J. Connolly 13 Like-Kind Exchange... Ronald A. Shellan 14 Lawyers Opinions in Oregon Real Estate Transactions... David P. Weiner, Editor 15 Lease Assignment and Sublease... Christopher M. Walters Timothy M. Parks

2 FUNDAMENTALS OF REAL ESTATE TRANSACTIONS Table of Contents 1 The Lawyer in a Real Estate Transaction (1992 ed & 2001 supp)... Stanley M. Samuels Randall B. Bateman (2001 supp)... Chresten J. Gram 2 Ethical Considerations in Real Estate Transactions (1992 ed)... Allen E. Gardner (2001 supp)... Peter R. Jarvis 3 Financial Aspects of Real Estate Investment (1992 ed)... Arlie Hutchens (2001 supp)... Laura L. Takasumi 4 Escrows and Closing (1992 ed & 2001 supp)... Don G. Carter (2001 supp)... Jonathan M. Radmacher 5 Title Insurance (1992 ed & 2001 supp)... Dean P. Gisvold David R. Aldrich 6 Securities Issues in Real Estate Transactions (1992 ed)... Gregg I. Eskenazi Robert T. Currey-Wilson (2001 supp)... James G. Harlan 7 Foreign Investment in United States Real Estate (1992 ed)... Michael R. Chellis Stephen M. Seidel (2001 supp)... Gregory W. Engrav 8 Warranties in Real Estate Sales (1992 ed & 2001 supp)... Stan N. Rotenberg (2001 supp)... Kelly Meltzer

3 Fundamentals of Real Estate Transactions (continued) 9 Bankruptcy Issues for Real Estate Practitioners (1992 ed)... Kevin D. Padrick David W. Hercher (2001 supp)... John Casey Mills 10 Environmental Liability and Real Estate Transactions (1992 ed)... Jan L. Betz (2001 supp)... Steven F. Hill Hong N. Huynh 11 Water Rights and Transactions (2001 ed)... William H. Holmes David E. Filippi Jennie L. Bricker

4 PRINCIPLES OF OREGON REAL ESTATE LAW Table of Contents 1 Estates in Land (1995 ed)... Don K. Lloyd (1999 supp)... Jeffrey S. Davis 2 Concurrent Estates (1995 ed & 1999 supp)... Jean M. DeFond 3 Easements (1995 ed & 1999 supp)... Mark A. Manulik (1995 ed)... Gary A. Maguire (1999 supp)... Gregory D. Fullem 4 Covenants, Conditions, and Restrictions (1995 ed & 1999 supp)... Eugene L. Grant 5 Statute of Frauds (1995 ed & 1999 supp)... Alan K. Brickley 6 Conveyances (1995 ed & 1999 supp)... Donald A. Gallagher, Jr. 7 Description of Land (1995 ed & 1999 supp)... Thomas R. Page 8 Recording and Priorities (1995 ed & 1999 supp)... C. Cleveland Abbe 9 Marketable Title (1995 ed & 1999 supp)... Michael G. Magnus 10 Highway Access (1995 ed)... Sandra Campbell (1999 supp)... Linda M. Bolduan Joseph W. West 11 Fixtures (1995 ed)... Janet M. Gravdal (1999 supp)... Milton C. Lankton

5 REAL ESTATE DISPUTES Table of Contents 1 Remedies of Purchaser for Breach of a Land Sale Contract (1993 ed & 1997 supp)... Charles R. Markley 2 Reformation of Contracts (1993 ed)... Peter Livingston (1997 supp)... Wendy Beth Oliver 3 Forcible Entry and Detainer (1993 ed)... Hon. Michael H. Marcus (1997 supp)... Paul B. Heatherman Kevin J. McCarty 4 Ejectment (1993 ed & 1997 supp)... Fred B. Miller 5 Suits to Quiet Title (1993 ed & 1997 supp)... Patrick L. Hadlock 6 Suits for Partition (1993 ed & 1997 supp)... Christopher M. Walters (1997 supp)... Phillip E. Joseph 7 Adverse Possession and Prescription (1993 ed)... Tracy J. White (1997 supp)... Andrea L. Bushnell 8 Eminent Domain (1993 ed & 1997 supp)... Richard C. Bemis (1997 supp)... D. Joe Willis Karen K. Law 9 Boundary Line Disputes; Encroachments (1993 ed & 1997 supp)... Theodore Herzog 10 Waste and Injuries to Land (1993 ed)... Harold D. Gillis (1997 supp)... Alexandra E. Sosnkowski

6 Real Estate Disputes (continued) 11 Judgments, Execution, and Exemptions (1993 ed & 1997 supp)... Leslie M. Roberts 12 Sellers Liability (1993 ed & 1997 supp)... Gregory R. Mowe (1993 ed)... Kelly Knivila

7 REGULATION AND TAXATION OF REAL ESTATE Table of Contents 1 Ad Valorem Taxes (1995 ed)... John H. Gadon (1999 supp)... Christopher Robinson 2 Special Assessments (1995 ed & 1999 supp)... Adrianne Brockman 3 Dedication of Private Land to Public Use (1995 ed)... Kathy A. Lincoln (1995 ed & 1999 supp)... Gerald G. Watson 4 Vacation and Abandonment (1995 ed & 1999 supp)... Marilyn Moylan Wall 5 Partitions and Subdivisions (1995 ed & 1999 supp)... Dan R. Olsen (1999 supp)... Shelley Fuller 6 Real Estate Licensees (1995 ed & 1999 supp)... Gile R. Downes 7 Development and Sale of Condominiums (1995 ed & 1999 supp)... P. Stephen Russell III J. David Bennett 8 Timesharing (1995 ed & 1999 supp)... A. Richard Vial (1995 ed)... Thomas M. Johnson 9 Representing Homeowner Associations (1995 ed & 1999 supp)... Karna R. Gustafson (1995 ed)... J. David Bennett P. Stephen Russell III 10 Development and Sale of Planned Unit Developments and Planned Communities (1995 ed & 1999 supp)... J. David Bennett (1995 ed)... Karna R. Gustafson

8 Regulation and Taxation of Real Estate (continued) 11 Regulations Affecting Real Estate Loans and Sales (1995 ed & 1999 supp)... John A. Lusky 12 Mobile Homes (1995 ed)... Michael C. Robinson (1999 supp)... Dennis M. Paterson III 13 Building Codes (1995 ed)... Bill Manlove (1999 supp)... Benjamin Walters 14 Americans with Disabilities Act Requirements for Public Accommodations (1995 ed)... Keith W. Wingfield (1999 supp)... Robert W. Pike

9 FORM 3 RIGHT OF FIRST REFUSAL MARK A. MANULIK* INTRODUCTORY COMMENT A right of first refusal may be a useful way to control disposition of a property when a landowner is currently unwilling to sell the property or grant an option to purchase. When a landowner is unwilling to sell a parcel of land that is important to the prospective purchaser, and the purchaser is concerned that a third party may acquire it, then the purchaser may buy a right of first refusal. This right assures the purchaser of an opportunity to acquire the property before it is sold to a third party. Rights of first refusal are commonly used by developers to control the disposition of property adjacent to their projects and avoid unfavorable development of that property. A right of first refusal differs from a right of first opportunity. A right of first refusal enables the potential purchaser to acquire the property at the price and on the terms at which it is offered to a third party. A right of first opportunity enables the purchaser to purchase the property at a price designated by the landowner before the landowner offers the property for sale to any third party there is no existing thirdparty contract. From the purchaser s perspective, a right of first opportunity may be unsatisfactory because there is no market control on the price asked by the landowner. The landowner could select an arbitrarily high price MARK A. MANULIK, B.A., University of Texas (1975); J.D., University of Houston (1978); member of the State Bar of Texas since 1978 and the Oregon State Bar and Washington State Bar Association since 1988; shareholder, Schwabe, Williamson & Wyatt, PC, Portland. *The author acknowledges William N. Gross, who cowrote the prior version of this form. The case citations in this form were checked for overrulings and reversals through November The ORS citations were checked through

10 Form 3 / Right of First Refusal and extinguish the right of first opportunity if the prospective purchaser is not willing to acquire the land at that price. PRACTICE TIP: From the prospective purchaser s standpoint, the right of first opportunity should provide that any subsequent offers of the property for sale at a lesser price would continue to be subject to the purchaser s right of first opportunity for a stated period of time (such as six months) following the prospective purchaser s decision not to exercise the right. From the landowner s perspective, a right of first opportunity may be more attractive than a right of first refusal because the property would not have to be marketed with the burden of a right of first refusal. Many potential third-party purchasers may be unwilling to invest the time and expense necessary to negotiate a purchase agreement if its effectiveness is conditioned on a right holder s waiver of a right of first refusal. With a right of first opportunity, the right holder has a chance to purchase the property before it is marketed and, if the purchaser declines to purchase on the stated terms, the landowner then may market it free of the burden of the right of first opportunity. PRACTICE TIP: As a practical matter, the distinction between a right of first refusal and a right of first opportunity may be more theoretical than real, in that the very existence of either type of right on the public record will tend to make the landowner s property unmarketable, thus forcing the landowner to negotiate in good faith with the holder of the right in order to either conclude a sale or obtain a recordable release of the right. In that regard, it would be prudent for the landowner to retain the right to record a release unilaterally if the right is not exercised. Also consider whether a gift of the property or a testate or intestate conveyance should trigger the right of first refusal. See, e.g., Cottrell v. Beard, 9 SW3d 568, 571 (Ark Ct App 2000) (bona fide gift did not constitute sale that would trigger right of first refusal under examination). In most circumstances, a right of first refusal should not be subject to the rule against perpetuities. See ORS The rule does not apply to nondonative transfers of nonvested property rights except under certain circumstances. As long as significant consideration is paid for the right of first refusal, the transfer is not likely to be construed to be a gift. QUERY: Would a $100 fee for a 50-year right of first refusal be construed to be a gift? 3-2

11 Right of First Refusal / Form 3 PRACTICE TIP: The lawyer should be prepared to counsel the landowner about the potentially great economic significance of granting a right of first refusal or a right of first opportunity and the need to be adequately compensated. Many landowners tend to grant such rights rather casually, without adequately considering the economic consequences of effectively removing the property from the market for the period of time necessary to work through the refusal procedure. The following form of right of first refusal is intended to represent a negotiated agreement between sophisticated parties with equal bargaining strength. However, each provision of the contract can be drafted to favor a party, and many lawyers may view this form as more favorable to one party. This form is intended to serve only as a starting point, and the form must be modified to fit the circumstances of each specific transaction that may require its use. Many variables may arise with respect to each transaction that is encountered and many of those variables have not been addressed by this form. 3-3