Podcast
Questions and Answers
What is a common term used to refer to the buyer in a commercial real estate transaction?
What is a common term used to refer to the buyer in a commercial real estate transaction?
- Vendor
- Broker
- Purchaser (correct)
- Landlord
What distinguishes the financing of commercial real estate from residential real estate?
What distinguishes the financing of commercial real estate from residential real estate?
- Commercial transactions typically have more documentation and requirements. (correct)
- Both require equal documentation.
- Commercial financing requires no documentation.
- Residential transactions are usually larger in size.
Which of the following is a condition that can allow buyers to withdraw from a commercial real estate agreement?
Which of the following is a condition that can allow buyers to withdraw from a commercial real estate agreement?
- Lawyer's approval of the agreement terms. (correct)
- Approval from a financial institution.
- Seller's agreement must be signed.
- Completion of a property inspection.
What type of lender is most commonly associated with commercial real estate financing?
What type of lender is most commonly associated with commercial real estate financing?
What does the term 'pre-condition' refer to in the context of a real estate agreement?
What does the term 'pre-condition' refer to in the context of a real estate agreement?
Which document is primarily referenced for reviewing terms in a commercial real estate transaction?
Which document is primarily referenced for reviewing terms in a commercial real estate transaction?
Which of the following statements about the registration process in commercial real estate is true?
Which of the following statements about the registration process in commercial real estate is true?
Who can also provide financing aside from commercial lenders?
Who can also provide financing aside from commercial lenders?
What should be confirmed when conducting a search for a corporate borrower involved in retail, wholesale, manufacturing, or farming activity?
What should be confirmed when conducting a search for a corporate borrower involved in retail, wholesale, manufacturing, or farming activity?
Which tax contributions need to be ensured for source deductions?
Which tax contributions need to be ensured for source deductions?
What type of letter is sent to Alberta Environment when conducting an environmental search?
What type of letter is sent to Alberta Environment when conducting an environmental search?
When is a search for bankruptcy typically conducted?
When is a search for bankruptcy typically conducted?
What is the purpose of searching the Canadian Intellectual Property Office (CIPO)?
What is the purpose of searching the Canadian Intellectual Property Office (CIPO)?
What type of claims does the Employment Standards search focus on?
What type of claims does the Employment Standards search focus on?
What must be confirmed with the Bank of Canada in relation to section 427?
What must be confirmed with the Bank of Canada in relation to section 427?
When searching for unpaid assessments related to federal taxes, which entity should be contacted?
When searching for unpaid assessments related to federal taxes, which entity should be contacted?
What does a security interest generally secure?
What does a security interest generally secure?
Which of the following is NOT typically a method for a creditor to declare a debtor in default?
Which of the following is NOT typically a method for a creditor to declare a debtor in default?
What can prevent a creditor from declaring a minor default?
What can prevent a creditor from declaring a minor default?
What is a common feature of loan agreements made by creditors?
What is a common feature of loan agreements made by creditors?
What happens if a debtor gives a security interest to multiple creditors?
What happens if a debtor gives a security interest to multiple creditors?
Which provision might allow a creditor to declare a default under certain conditions?
Which provision might allow a creditor to declare a default under certain conditions?
What legal limitation exists regarding a creditor declaring a default?
What legal limitation exists regarding a creditor declaring a default?
Which document typically outlines the terms of a security interest?
Which document typically outlines the terms of a security interest?
What is the primary purpose of contacting Canada Revenue Agency Tax Services on the date closing documents are sent to the purchaser's solicitor?
What is the primary purpose of contacting Canada Revenue Agency Tax Services on the date closing documents are sent to the purchaser's solicitor?
What must the purchaser verify before ownership or possession is acquired to use the section 221(2) exemption?
What must the purchaser verify before ownership or possession is acquired to use the section 221(2) exemption?
What form must the purchaser file with Canada Revenue Agency to recover GST if it has been paid?
What form must the purchaser file with Canada Revenue Agency to recover GST if it has been paid?
Which of the following information is NOT required when completing the GST 60 form?
Which of the following information is NOT required when completing the GST 60 form?
Why is it advisable to run a mock closing in complicated business transactions?
Why is it advisable to run a mock closing in complicated business transactions?
What type of documents common in business transactions may evolve over time?
What type of documents common in business transactions may evolve over time?
Which of the following is an essential document in transactions involving personal property?
Which of the following is an essential document in transactions involving personal property?
What should occur if GST is payable on the transaction?
What should occur if GST is payable on the transaction?
What type of document does not create a security interest in property?
What type of document does not create a security interest in property?
Which statement correctly describes the function of a promissory note?
Which statement correctly describes the function of a promissory note?
What protects the borrower when a promissory note is negotiated to a third party?
What protects the borrower when a promissory note is negotiated to a third party?
What characteristic is NOT required for a promissory note to qualify as a negotiable instrument?
What characteristic is NOT required for a promissory note to qualify as a negotiable instrument?
In the event of a default, what right does a true security interest provide to the creditor?
In the event of a default, what right does a true security interest provide to the creditor?
What role does the promisor play in a promissory note?
What role does the promisor play in a promissory note?
Why are documents like promissory notes often referred to as 'collateral security'?
Why are documents like promissory notes often referred to as 'collateral security'?
What happens if a third party qualifies as a 'holder in due course' concerning a promissory note?
What happens if a third party qualifies as a 'holder in due course' concerning a promissory note?
Study Notes
Commercial Real Estate Purchase
- Purchasing commercial real estate is similar to residential real estate with similar legal terminology, documents, and registration processes.
- Commercial transactions often involve more significant financial amounts, resulting in more stringent documentation and requirements for financing.
- Common sources for commercial real estate financing include chartered banks, vendor loans, family and friends.
- The specific circumstances of a transaction will determine the type of searches and documents required.
Reviewing the Agreement
- A crucial term in a purchase agreement for commercial real estate often is a "subject to lawyer's approval" clause, which is a condition that must be met for the agreement to be effective.
- This condition gives the buyers the right to withdraw from the agreement if their lawyer doesn't approve of the terms.
Conducting Due Diligence in Commercial Property Transactions
- Bank of Canada: Conduct a search to identify any claims registered against the corporate borrower under section 427 of the Bank Act. This search usually applies to companies involved in retail, wholesale, manufacturing, or farming.
- Industry Canada: Check for bankruptcy status of the corporate borrower through a phone call or online search on the Industry Canada website.
- Employment Standards: Request information from the Employment Standards agency related to any claims or actions by employees, if applicable.
- Canada Revenue Agency: Verify source deductions are being made for Canada Pension Plan and Employment Insurance contributions.
- Federal Court of Canada: Search for any certificates filed under section 223 of the Income Tax Act, relating to unpaid federal taxes such as income tax, EI premiums, GST remittances, and other federal taxes.
- Environmental Search: Conduct an environmental search if concerns exist regarding the property. This typically involves contacting the relevant environmental agency.
- Patents, Copyright and Industrial Design: If intellectual property is involved in the transaction, search the Canadian Intellectual Property Office (CIPO) for any registrations.
Responsibilities for the Purchaser
- The purchaser's legal counsel should confirm that the purchaser is registered with the appropriate government agency before acquiring ownership or possession of the property.
- If the purchaser is eligible to recover GST on the transaction, advise them to file the appropriate form with Canada Revenue Agency.
- If the purchaser is liable for GST on the transaction, inform them to pay the GST directly to Canada Revenue Agency
Essential Documents In Commercial Transactions
- When acting on behalf of either the buyer or the seller, businesses need to prepare and review a substantial number of documents.
- Common documents include bills of sale for personal property, assignments of contracts, and closing statements.
- It is advisable to conduct a mock closing before the actual closing date to review the documents and ensure that everyone is prepared for the signing meeting.
Security Interests
- A security interest gives the creditor the right to seize and sell the debtor’s property in the event of default on a loan.
Types of Financing Documents
- Promissory Note: A promissory note typically serves as collateral security and doesn’t create a security interest in the property. It is considered a negotiable instrument, and a lender can transfer this note to a third party, which is a risk for the borrower.
Key Information about Promissory Notes
- In order to qualify as a negotiable instrument, a promissory note must meet specific requirements:
- It must be in writing.
- The promise to pay must be unconditional.
- The amount payable must be a fixed sum or calculated through a stated formula.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Related Documents
Description
This quiz covers the essential aspects of purchasing commercial real estate, including legal terminology, financing options, and review processes. It also explores due diligence requirements and specific clauses in purchase agreements that can affect the transaction. Test your knowledge on the nuances of commercial property transactions.
