Commercial Real Estate Investment/Contract for Deed

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Expert: - 2/9/2010


Question
Hello Jim,
I have a few questions as to what my rights are for holding a Contract for Deed.  

  We sold a business to a gentleman through a contract for deed.  However, the Land loan is through a bank.  This guy has been late on almost every payment that he has made to us.  As of February 2010 he is 3 months past due on his payments to us.  We have been in contact with the banker and they are very easy with him.  However, we do not have as much $ as the bank and 3 payments for us means we are seeing our investment go down the drain.  We have heard there is another business opening up to compete with him in the area this spring 2010.

  I guess my question is.... what kind of rights do we have if we have contacted the buyer and he says there is no money left.  Should we foreclose? and if so how fast can we do it in hopes to not loose the clientele we built for 6 years?  

  Any wisdom we can glean from you would be much appreciated.  We've worked hared at this business from the ground up and it just got way too busy for my wife and I to handle it.  We are willing to take it back and look for people to hire so we don't loose all that we have worked for.  

Thanks so much for your time,
Nate

Answer
Nate:

I would need a copy of your agreement detailing the terms of your sale in order to advise you further.  

Whatever action you take, I suggest you motivate the buyer to exit the property immediately; perhaps agreeing to waive whatever is owed you at this point - but only if the buyer does no damage to the property, does not remove anything of value, and leaves forthwith.    

Clearly you have put a fox in your hen house and it is best to get this tenant out of the property without any further shenanigans.  There is still much havoc the buyer can cause and the sooner the occupant vacates the sooner any additional liability will end.  

You may wish to check into this individual's business and personal history which may reveal information that suggests how you should proceed.

I suggest you have someone else screen potential occupants/buyers in the future and require some form of meaningful financial security to assure performance by the other party.  

Please be prudent and proceed with caution.  This is not a good time to be Mr. Nice Guy.  

Good luck,

-Jim

Commercial Real Estate Investment

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Jim Avancena, CPM

Expertise

Best qualified to answer questions that involve commercial leases, that is, basic issues as well as the often unexpected effects of the complexities and inter-relationships of the provisions a lease may contain, explain how seemingly innocuous text in your lease can have a major impact on a Tenant or Landlord and their business operations, and the common practices utilized in the industry. I can untangle most matters that may come up from the time a tenant begins searching for a office or store space and the lease acquisition process, concerns related to remodeling/improving the leased premises, moving-in, subletting or assigning the leased space, and a long list of problems that may come up during the lease term and even after a tenant moves out. I have practical experience with most property management issues and resolving landlord and tenant disputes - especially those involving what may appear to be overcharges assessed for additional lease charges like CAM costs, operating expense reimbursement, real estate taxes, utilities, construction improvements etc. Note that I am not an attorney and cannot provide legal advice.

Experience

Thirty years active experience in the commercial real estate industry as a licensed real estate broker in the Washington DC Metro area (DC, Northern Virginia & Maryland). I have been admitted (approved) by the Maryland and DC courts to testify as an expert witness on the subjects of Commercial Leasing and Property Management in the area of standard industry practices. I have had a business for the last 14 years advising virtually every form of business entity from large national corporations to the smallest ma & pa new businesses regarding a wide range of commercial real estate matters in addition to property management and commercial leasing.

Organizations
Currently my three children keep me so busy that it is difficult to participate in organizations with continuing and specific time requirements.

Publications
I publish a local commercial real estate newsletter titled: "Tenants First". My firm was the subject of a high profile Washington Post business section cover page (2.25 full pages) feature story on January 13, 1993; titled "Overcharging Overhead".

Education/Credentials
BA in Political Science from Memphis University, and five years of study in the real estate development summer program at MIT. I was certified as a commercial property manager (CPM-IREM), and currently hold a brokers license in Maryland and the District of Columbia.

Awards and Honors
The same plaques and honors that most others in my industry have earned. I have none that I consider especially meaningful.

Past/Present Clients
Past clients include: The World Bank, George Washington University, National Association of Criminal Defense Attorneys, US Department of Commerce, The American Benefits Council, K-Mart Development, many law firms, a national union, other major organizations, and many, many small business firms and retail operators that I am most honored to serve. I estimate more than 1,500 firms/organizations.

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