PURCHASE AGREEMENT FOR AN APARTMENT BUILDING
PURCHASE AGREEMENT FOR AN APARTMENT BUILDING
This purchase agreement (the Agreement) is entered into as of [date], between [name of seller], a [entity type of seller], of [address of seller] (Seller), and [name of buyer], an LLC, of [address of buyer] (Buyer), for the transfer of the real estate and personal property located in [village / city / township], [county], Michigan, described in exhibit A [attach the legal description, tax identification number, and address as exhibit A] (the Premises). The parties enter into this Agreement subject to the terms and conditions set forth below.
1. Property to be transferred. Buyer shall purchase and receive from Seller the Premises and the personal property of the apartments, including all transferable licenses, permits, leases, inventory, machinery, furniture, equipment, fixtures, supplies, and the name “[name] Apartments” used in the operation of the apartments. The personal property transferred under this agreement is described in the attached exhibit B.
2. Consideration. Buyer shall pay Seller for the Premises and personal property as follows: Buyer shall pay a total purchase price of $[amount]. Buyer shall pay Seller a down payment of $[amount] at the closing of this Agreement. At closing Buyer shall also deliver to Seller a promissory note and a second mortgage on the Premises; Buyer’s mortgage to Seller will be subordinate to Buyer’s mortgage to finance the down payment (the Purchase Loan). The form and terms of the promissory note are shown in the attached exhibit C, and the form and terms of the mortgage are shown in the attached exhibit D. As additional security under the mortgage, Buyer shall give Seller an assignment of rents and leases in the form attached as exhibit E.
3. Title conveyed. Title to the Premises shall be conveyed at the closing by a warranty deed in the form attached as exhibit F showing no exceptions except as Buyer allows under section 9. Seller shall pay the transfer tax on the deed.
4. Personal property. The personal property shall be transferred to Buyer by a bill of sale in the form attached as exhibit G. Seller shall retain a security interest in the personal property as set forth in exhibit D until Buyer’s mortgage to Seller is paid in full. Seller shall prepare and deliver an inventory of the personal property to Buyer within 15 days of the effective date of this Agreement, and the inventory shall show the personal property to the satisfaction of Buyer. Unless Buyer sends Seller a written notice of dissatisfaction within 15 days after Buyer receives the inventory, Buyer shall be deemed to be satisfied with the inventory disclosed.
5. Closing. The closing of the sale shall take place at a location to be agreed on by the parties, on [date], or within 10 days after all conditions precedent under this Agreement are satisfied, whichever occurs first. However, if the closing cannot be held because of delay in the mortgage lender’s approval, processing, and disbursement of the Purchase Loan, an additional 30 days shall be allowed to close this transaction. Buyer shall prepare the documents for the closing and submit them to Seller for review at least 5 days before the closing. Buyer shall pay all real estate transfer taxes on the sale and prepare and file all recording and transfer affidavits.
6. Possession. Buyer shall receive possession of the Premises and the personal property as soon as the closing is completed.
7. Survey. Seller shall provide Buyer with an ALTA/NSPS survey of the Premises that is certified to Buyer and to the prospective mortgagee in a form suitable to Buyer. The survey shall show the Premises and all easements and recorded encumbrances on the Premises on the following items from Table A of the ALTA/ NSPS specifications. Seller shall pay for the survey, which shall be completed and delivered to Buyer within 30 days after the effective date of this Agreement.
8. Property taxes and assessments. Seller shall pay all real and personal property taxes that are due and payable by the date of the closing. Buyer shall pay all real and personal property taxes that are due after the date of the closing. Seller shall pay all assessments that are levied against the Premises on or before the effective date of this Agreement, whether due in installments or otherwise, at or before the closing. After closing, Buyer shall pay all assessments that are levied against the Premises after the effective date of this Agreement. The current real and personal property taxes shall be prorated as of the date of closing between Seller and Buyer based on the fiscal year of each taxing authority, and for purposes of the proration the taxes shall be deemed to be paid in advance. The date of closing shall be attributed to Buyer.
9. Title insurance. At Seller’s expense, Seller shall furnish Buyer with an owner’s policy of title insurance in the standard American Land Title Association form, without the standard exceptions, certified to the date of the closing, in the amount of the purchase price. Within 15 days after the effective date of this Agreement, Seller shall provide Buyer with a commitment for the title insurance that shows that Seller has good and marketable title to the Premises. Buyer may raise any objections to the exceptions or encumbrances shown on the commitment and survey within 15 days after Buyer receives the commitment and survey by giving written notice to Seller. If Buyer raises a title objection, Buyer will not be required to close this transaction unless Seller cures the objection or Buyer waives its objection. Seller shall not be required to cure the objection. If Seller elects to cure the objection, Seller shall take action to remove the exception or the encumbrance from the chain of title, to remove it from the commitment and the policy. The title insurance policy shall include a tax lien search certified to the date of the closing that shows no tax liens against the Premises. At Seller’s expense, Seller shall also provide Buyer with a financing statement search certified to within 30 days of the date of the closing that shows the personal property to be free of security interests. If the financing statement search discloses security interests in the personal property, Seller shall provide for them to be satisfied and released at or before the closing.
10. Condition of the property to be Transferred. The Premises and personal property shall be transferred to Buyer in the same condition they are in on the effective date of this Agreement, ordinary wear and tear excepted.
11. Tenants. At least 20 days before the closing, Seller shall provide Buyer with copies of all leases and other written documents under which the tenants occupy their respective units and a certified list showing (1) each tenant, (2) the number of the unit each tenant occupies, (3) the commencement and termination dates of each tenant’s lease, (4) which tenants have prepaid rent and the amount of prepayments, and (5) which tenants have paid a security deposit to Seller and the amount of security deposits. Seller shall pay any security deposits and prepaid rents to Buyer on the date of the closing. Seller shall assign all its interests in the leases, security deposit agreements, inventories, and any other agreements that Seller has entered into with the tenants to Buyer at the closing.
12. Proration of rent and expenses.
a. All rent shall be prorated to the date of the closing (with Buyer to be credited with the rent attributable to the day of the closing). Buyer shall receive a credit from Seller at the closing for the amount attributable from that date forward. The proration shall be based on the assumption that Seller will have collected all rent in advance. Seller shall retain its interest in any rent that is uncollected on the date of the closing. If, after the closing, Buyer receives any amounts that were due to Seller before the closing, Buyer shall immediately deliver the amounts to Seller. However, Buyer has no obligation to collect past-due amounts for Seller.
b. The expenses for the Premises shall be prorated to the date of closing with the date of closing attributed to Buyer. All invoices that have been received by Seller shall be paid before the date of closing. Invoices for all services and contracts for the Premises covering the time period before closing and the date of closing that have not been received by Seller before closing shall be prorated based on good-faith estimates using the invoices for those services and contracts for the immediately prior invoicing period and the prior year’s invoicing period for the period of time including the closing date. For invoices paid before closing that cover a period of time after closing, Seller shall receive a credit at closing for the amount paid for the period of time after closing. For invoices that will be received after closing to cover a period of time before closing, Buyer shall receive a credit at closing for the amount that will be paid after closing for the period of time before closing.
13. Buyer’s right to inspect. Buyer may inspect the Premises and the personal property to verify their condition; inspect the blueprints, construction documents, records, and other relevant documents of Seller; and arrange for any inspections, audits, and appraisals that Buyer deems necessary for a period of 60 days from the effective date of this Agreement. All inspections, audits, and appraisals that Buyer requests shall be at Buyer’s expense, but Seller shall give reasonable assistance to Buyer or Buyer’s agents in completing the inspections, audits, and appraisals. Buyer shall not unreasonably disturb the tenants or employees of the apartments in undertaking any inspections, audits, or appraisals.
14. Warranties by Seller. Seller warrants to Buyer and shall certify to Buyer at the closing as follows:
a. Seller has full authority to enter into and perform this Agreement in accordance with its conditions, without breaching or defaulting on any obligation or commitment that Seller has to any partners or third parties.
b. Except as disclosed in this Agreement, Seller is not a party to any agreement or otherwise bound under any obligation with any other party who has any interest in the Premises or the personal property or the right to purchase or lease the Premises or the personal property.
c. Except as otherwise stated in this Agreement, Seller’s interest in the Premises and the personal property will be transferred to Buyer at the closing, free and clear of all liens, encumbrances, charges, contracts, and adverse claims, contractual or other.
d. There are no suits, actions, or proceedings pending or, to the best of Seller’s knowledge, threatened by any party, including governmental authorities or agencies, against or involving the Premises or the personal property or to which Seller is or may become a party in connection with the Premises, the personal property, or the operation of the apartments.
e. Seller has no notice or knowledge of
i. any planned or commenced public improvements that might result in special assessments or otherwise directly and materially affect the Premises or the personal property;
ii. any government agency or court order requiring repairs, alterations, or corrections of any existing conditions;
iii. any request by an insurer or a mortgagee of the Premises requiring repairs, alterations, or corrections of any existing conditions; or
iv. any structural or mechanical defects in the Premises or the personal property.
f. During the interim between the signing of this Agreement and the closing, Seller will continue to operate the apartments and maintain the Premises in the same manner as Seller has operated the apartments and maintained the Premises for the past 12 months.
g. Seller will not cause or permit any willful act that would prejudice the business conducted on the Premises and will not assign or grant a security interest or other lien that will encumber the Premises or the personal property.
h. No improvements, repairs, or other construction has occurred on the Premises within the 120 days preceding the date of this Agreement. If any maintenance or repairs are undertaken on the Premises between the effective date of this Agreement and the date of the closing, Seller shall provide full unconditional waivers of lien from each contractor, subcontractor, supplier, and laborer for all construction work.
i. Within 15 days after the effective date of this Agreement, Seller shall provide Buyer with copies of all existing financial statements, including income statements and balance sheets, for the apartments for the years [specific years] and for the current year. The financial statements, including the income statements and the balance sheets, are a true, accurate and complete reflection of the business done by the apartments. Seller shall also promptly provide Buyer with any other financial information that Buyer requests regarding the operation of the apartments.
j. All of the contracts for the Premises are subject to cancellation on 30 days’ notice.
15. Warranties by Buyer. Buyer warrants to Seller and shall certify to Seller at the closing as follows:
a. Buyer is a Michigan LLC in good standing in the State of Michigan.
b. Buyer has full authority to enter into and perform this Agreement in accordance with its conditions, without breaching or defaulting on any obligation of Buyer to any partners or third parties.
c. Except as disclosed in this Agreement, Buyer is not a party to any agreement or otherwise bound under any obligation with or in favor of any other party who has any interest in the Premises or the personal property or the right to purchase or lease the Premises or the personal property.
16. Survival of the warranties. The warranties of the parties to this Agreement shall survive the closing. The act of closing shall not bar either party from bringing an action based on a warranty of the other party for 120 days after the closing, after which the warranties will have no further effect.
17. Indemnification and the right to set off.
a. Seller agrees to indemnify Buyer for all damages, including actions, suits, judgments, costs, charges, expenses, fines, penalties, attorney fees, and the consequences of any liabilities, that are asserted against or affect the Premises or the personal property because of Seller’s actions or failure to act before the closing. Buyer may set off the amount of any such damage against any amounts Buyer owes Seller.
b. Buyer agrees to indemnify Seller for all damages, including actions, suits, judgments, costs, charges, expenses, fines, penalties, attorney fees, and the consequences of any liabilities, that are asserted against or affect the Premises or the personal property because of Buyer’s actions or failure to act after the closing.
18. Changes in the condition of the Premises. In the event of loss of or damage to the Premises or the personal property because of fire or some other casualty between the effective date of this Agreement and the date of the closing, Seller shall immediately give Buyer notice of the loss or damage. Buyer shall have the right to terminate this Agreement within 10 days after receiving notice from Seller if the damage exceeds $20,000. If Buyer does not terminate this Agreement or the damage is less than $20,000, Buyer may have Seller repair the damage before the closing or assign any insurance proceeds to Buyer at the closing by giving a notice of election to Seller. If Buyer elects to take the insurance proceeds, Seller shall also pay an amount equal to Seller’s deductible for the loss to Buyer at the closing.
19. Conditions precedent for performance by Buyer. The obligation of Buyer to consummate the sale contemplated by this Agreement is subject to the fulfillment of the following conditions before the closing. Buyer may waive these conditions in writing.
a. Each of Seller’s warranties shall be true as though made again on the closing date, and no warranty shall be breached before the closing.
b. Seller shall perform and comply with all its obligations under this Agreement before the closing.
c. There shall be no material adverse change in the Premises or the personal property and no encumbrance on the title to the Premises or the personal property from the date of this Agreement to the date of the closing.
d. No action or proceeding to restrain, prohibit, or declare illegal the transaction contemplated by this Agreement shall be pending or threatened. No order restraining or prohibiting the transaction contemplated by this Agreement shall be issued by any public authority, governmental agency, or court. No attachments, garnishments, levies, or liens shall be filed or in effect regarding the transaction contemplated by this Agreement, the Premises, or the personal property.
e. All bills and expenses that Seller has incurred and received for utilities, services, supplies, or other expenses for the apartments before the closing shall be paid by the closing.
f. Buyer shall obtain a binding commitment letter for a conventional mortgage for $[amount] at an interest rate of no more than [percentage] with a payment schedule amortized over 30 years and a payoff of not less than [number] years that can be closed before or at the closing of this Agreement. Buyer shall apply for the mortgage within 10 days after the effective date of this Agreement.
g. Buyer shall accept the results of all inspections, inventories, appraisals, and audits commissioned by itself or otherwise required by this Agreement. However, if Buyer does not notify Seller within 60 days of the effective date of this Agreement of any refusal of any inspection, inventory, appraisal, or audit commissioned by Buyer, Buyer shall be deemed to accept those results.
20. Conditions precedent to performance by Seller. The obligation of Seller to consummate the sale contemplated by this Agreement shall be subject to the fulfillment of the following conditions before the closing. Seller may waive these conditions in writing.
a. Each of Buyer’s warranties shall be true as though made again on the closing date, and no warranty shall be breached before the closing.
b. Buyer shall perform and comply with all its obligations under this Agreement before the date of or at the closing.
21. Commissions. Seller shall pay a real estate commission of $[amount] to [name of broker], of [address of broker], Michigan (Broker), for its efforts in arranging for the sale of the Premises when this transaction closes. If the transaction contemplated by this Agreement does not close, no commission will be owed or paid. Each party represents to the other that there are no other real estate commissions due or owing as a result of the sale of the Premises under this Agreement.
22. Management of the apartments during the interim. From the effective date of this Agreement to the date of the closing or the date of the termination of this Agreement, Seller and Buyer shall jointly manage the apartments. Buyer shall be responsible for the day-to-day management of the apartments as Seller’s agent. Buyer shall manage the apartments in a customary manner and shall not, without prior consent from Seller, take any action or make any commitments that are not customary in managing apartments. Buyer shall not be responsible for collecting rent, for disbursements, or for keeping the financial records for the apartments; Seller shall continue to take care of these responsibilities. If this Agreement is terminated, Buyer shall withdraw as the manager of the apartments.
23. Termination. If either Buyer or Seller is not obligated to complete this Agreement because a condition precedent is not met, that party may terminate this Agreement by notifying the other party of the intention to terminate this Agreement and the reason. Buyer or Seller may waive any obligations of the other party without prejudicing the right to subsequently assert other conditions or to make a claim against the other party for the breach of a condition or warranty.
24. Seller’s Payments at the closing. For the purpose of preparing the closing statements and making payments at the closing, any amounts that Seller owes to Buyer under this Agreement and any obligations of Seller that Buyer agrees to pay may be offset against the down payment to be paid at the closing.
25. Escrow of earnest money. Immediately after both parties sign this Agreement, Buyer will deliver to [name of escrow agent] (Escrow Agent), an earnest money deposit of $[amount]. Escrow Agent shall hold the deposit in an interest-bearing account as earnest money for the transaction described in this Agreement to evidence Buyer’s good-faith intention to consummate the agreement. The deposit shall be accompanied by a letter instructing Escrow Agent to hold the deposit pursuant to this section. Escrow Agent agrees to be bound by this section by accepting the amount tendered. Escrow Agent shall immediately notify Seller of the receipt of all sums. If this Agreement is not consummated because Buyer fails to perform any of its obligations under this Agreement, Seller shall notify Escrow Agent in writing to deliver the deposit and any interest to Seller as liquidated damages for Buyer’s failure to complete this Agreement. If the transaction contemplated by this Agreement is not consummated because Seller breaches a warranty or fails to perform any of its obligations under this Agreement, Buyer shall notify Escrow Agent in writing to return the deposit and any interest to Buyer. If the transaction contemplated by this Agreement is consummated, Escrow Agent shall give the deposit to Buyer at the closing. After receiving written notice from either party that the deposit and interest should be given to a party, Escrow Agent shall notify the other party of the demand. If a written objection is not received within five days, Escrow Agent may forward the amount pursuant to the notice. If a written objection is received within five days, Escrow Agent shall hold the amount until the parties resolve their dispute and each notifies Escrow Agent in writing of the resolution, or Escrow Agent may file an interpleader action and deliver the money into court.
26. Whole agreement. This Agreement constitutes the entire agreement between the parties and supersedes and cancels any other negotiations or agreement between the parties relating to the transaction contemplated by this Agreement. None of the prior or contemporaneous negotiations, preliminary drafts, or prior versions of this Agreement shall be used by any of the parties to construe or affect the validity of this Agreement. Each party acknowledges that it has not made or relied on any representations, inducements, or conditions not specified in this Agreement.
27. Amendments. This Agreement may be amended only by a written document signed by each of the parties to this Agreement.
28. Successors and assigns. This Agreement binds and benefits the parties and their successors and assigns.
29. Assignability. Neither party may assign its interest in this Agreement except that Buyer may assign its interest to any of the managers or members of the limited liability company individually or to a successor limited liability company in which one or more of the managers or members of Buyer are managers or members of the new limited liability company. However, the managers or members must retain an interest in the successor limited liability company equal to at least 50 percent of the managers or members equity interest in Buyer. This restriction shall not apply if any of the managers or members of Buyer dies, is mentally or physically incapacitated, or divorces.
30. Governing law and venue. This Agreement shall be construed in accordance with and governed by Michigan laws. Any actions concerning this Agreement must be brought in [county], Michigan.
31. Exhibits. The following exhibits are attached to and are a part of this Agreement:
• Exhibit A—Legal description of the Premises
• Exhibit B—Personal property to be transferred
• Exhibit C—Form of promissory note
• Exhibit D—Form of mortgage
• Exhibit E—Form of assignment and rents
• Exhibit F—Form of warranty deed
• Exhibit G—Form of bill of sale
32. Notices. Any notices required by this Agreement shall be served personally or by registered mail, certified receipt requested, to the party for whom it is intended at the address listed at the beginning of this Agreement.
33. Effective date. This Agreement shall be effective and dated on the first page when the last of the parties listed below have signed this Agreement.
|Dated: ______________________ | |By /s/______________________ |
| | |[Typed name of seller or signer for seller] |
|Dated: ______________________ | |By /s/______________________ |
| | |[Typed name of buyer] |
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