Fee Ownership of Wireless Sites
Wireless purchase contracts, like contracts to purchase land for other uses, contain language relevant to the transfer of fee ownership of wireless sites from a seller/grantor to a buyer/grantee within a given state. The ownership of real property is known as fee ownership, as discussed in Module 11 Lease-ability, in contrast to Native American Indian lands. Purchasing fee ownership in real estate is one way to secure the entitlement space rights necessary for the construction and long-term operation of wireless facilities, but it doesn’t remove the importance of due diligence as discussed throughout this text. Property ownership is the most substantial right to real property conveyed from one party to another; nevertheless, a buyer can receive only the quality of ownership rights from a seller to the extent the seller possesses quality ownership rights.
Lease vs. Purchase Analysis
A common tool wireless facility developers use to evaluate whether to purchase a property is a lease vs. purchase analysis. A lease vs. purchase analysis is an evaluation facility developers make using specific criteria to determine if they prefer to lease or buy space for a wireless facility space. The purchasing of the property offers an opportunity to benefit from property appreciation but might require a larger initial investment than leasing.
Each state’s real estate regulatory agency1 develops and updates approved language for use in purchase contracts. These standard forms simplify the task for real estate brokers, allowing them to just fill in blank spaces that change the parameters of one transaction to another. Standard forms help to keep real estate brokers from practicing law by writing contract language. It is illegal for a non-attorney not engaged as a party to a transaction to draft the final language for a real estate contract.
The process of evaluating a title commitment for a lease is the same as for a property purchase. The title commitment may reveal facts about a property that was unknown when the purchase contract was fully executed.
Title questions to resolve for a purchase contract include the following: read more…
A property survey for a property transfer is usually performed by the seller. Therefore, a state-approved purchase contract form may specify that the seller must provide a survey to the buyer by a certain deadline, specified when the purchase contract is fully executed. Does the seller have a property survey? By what deadline will the seller provide the buyer with the survey? What is the buyer’s deadline to accept or object to the survey? Is the survey acceptable to the title company? How much time is the seller allowed to correct an objectionable survey to please the buyer?
Property Disclosures, Physical Inspection, and Additional Documentation
If existing leases are active on a property being sold, will those leasehold interests continue? Wireless facility investors may favor keeping any ongoing rental income. Certainly, that’s the case if an investor buys an existing communications tower with income-generating leases. Conversely, a wireless site developer planning to build its facility in an agricultural field may not want an existing farm lease to continue if it will interfere with the proposed tower construction and operation.
Exceptions that surface in the title commitment are subject to read more…
Liquidated Damages and Specific Performance
If a purchase contract is terminated by the buyer under to the terms of the contract, all amounts paid by the buyer on the purchase price can be refundable to the buyer with the parties having no further obligation or liabilities to each other. If the buyer fails to consummate the contract for any reason except for the seller’s default or the termination of the contract pursuant to the terms of the agreement, the seller shall have the right to retain the cash deposit as liquidated damages for the breach of contract. If the seller fails to consummate the contract for any reason except for the buyer’s default, the buyer may use legal means to force the seller to sell the property (this is known as specific performance).
An assignment provision is critical for investors who want to tie up a property and then immediately convey it to another party prior to closing (known as a property flip). Sellers may want to know who the real buyer of the property will be. Maybe it’s not the individual posing as an investor but another more substantial company. If the buyer does not disclose that information and the seller needs to do a quick sale and doesn’t have another buyer lined up, the seller may not be in a position to restrict the right of assignment of a purchase contract. This could be the case with distressed properties on the market.
At closing, taxes, insurance, and other monetary items are prorated between the parties for the current year according to how much of the year each party will own the property and what responsibilities each has for payments of taxes, insurance, and utilities. How, when, and where will the closing take place? read more…