All of the necessary documents are then looked over, and initial terms are agreed upon between sides. The latter may be in written form – as a memorandum of understanding, an agreement about a depos¬it, or an initial agreement. Alternatively, the initial terms may be expressed in speech only – through price negotiations, arrange¬ment for payments, or agreements regard¬ing the timing. The best thing is to confirm the initial phase of the acquisition (build¬ing or facility) on paper, since this phase involves actions that impact the later sale; this includes certain obligations incumbent to either side leading up to the actual sales agreement. Quite frequently, the sides sign an initial agreement. Its basic purpose is to serve as a guarantee for the cosignatories, in case the other side decides to abandon the deal for some reason. Article 429 of the Legal Code stipulates that when one party, having signed an initial agreement, later refuses to sign the actual agreement, then the opposing party has the right to appeal to a court with a plea to coerce the refusing party into signing the agreement with the previously agreed-upon terms.
During this phase, the rights of the seller are also defined: what documents prove ownership and sole authority over the object for sale. In other words, he reveals all the necessary documents that prove his rightful ownership over the real estate property.
Which points deserve particular atten¬tion? It is necessary to clear up when and how ownership was established over the real estate object – that is, to verify the legiti¬macy and lawfulness of privatization. It is also worth calculating the probability and consequences of a ruling against the ini¬tial ownership rights. When all the facts are revealed about the proprietor’s ownership rights, it is possible to do an expert analysis of the documents establishing and confirm¬ing ownership rights to the property up for sale (agreements, certificates of ownership rights, BTI documents, or a technical data sheet). Full knowledge of these documents will permit certain conclusions about the eligibility of the real estate acquisition and its history, since these documents contain information regarding the existing encum¬brances (regarding current rental agree¬ments, sublets, unauthorized construction, and unregistered renovations), information regarding the rights and obligations of the previous building (facility) owner.
If the seller utilizes a representative dur¬ing the real estate transaction, it is neces¬sary to verify that the powers of the latter have been properly registered, and to thor¬oughly analyze the contract explaining the exact nature of his work; the text should contain a straightforward list of his powers, passport information, and registration.
If the agreement involves the supervi¬sion of an agency under contract, the sales agreement should be signed not by the agent, but by the director of the agency, or by an empowered representative of the agency. Also remember that the contract between the seller and the agency should stipulate the agency's right to empower third-party representatives.
After a thorough analysis of the regis¬tered documents of the seller (legal party), it is possible to determine the set of powers belonging to those government bodies that may undertake a legal procedure with the property of the given legal party.
As a rule, the sale (disposal) of any real estate object pertains to the company’s major transactions. According to current legislature, these transactions require the approval of the supervising bodies of the legal party. For example, if a real estate prop¬erty (whose value makes up more than 25% of all the company’s property) is surrendered by a collective with limited liability, there must be approval from a full congregation of the relevant body. If there is a board of directors (oversight committee), they must also give approval. Rules also exist for stock¬holders’ bodies acting as sellers. When the cost of the property under consideration comprises 25-50% of the organization’s net assets value, the board of directors (oversight committee) decides whether to approve the sale. If the cost of the assets surpasses 50% of the net assets belonging to the stockholders’ body, a full congregation of the stockholders must decide whether or not to approve the sale. The decision to approve or reject the transaction must be supported by no less than 75% of the stockholders with voting rights at the congregation. If the above rules are not observed, the sub¬sequent agreements may be recognized as invalid in the future. Therefore, it is neces¬sary to conduct an immediate investigation into the documents confirming the approval of the company’s relevant governing bodies. The same kind of procedure pertains to the buyer, if he or she happens to be a stockhold¬ers’ body or a limited liability collective.
If the seller of a real estate property is an actual person, it is necessary to remember that, according to the statutes of article 35 of the Family Code: “the ownership, use and disposal of shared property between spouses takes place with the mutual consent of both spouses. When one spouse reaches an agree¬ment involving the ownership of common property, it is assumed that he or she is work¬ing with the consent of the other. In order for one of the spouses to complete an own¬ership transfer of a real estate property, or to complete any transaction requiring notari¬zation and (or) registration in any law-gov¬erned manner, it is necessary to receive the notarized agreement of the other spouse. If a transaction is completed without the notarized consent of one spouse, he or she has the right to demand that the transac¬tion be recognized as invalid though a court hearing, which must take place within a year from the date of notification of the sale, or the date when this notification was sup¬posed to occur.” Investigating these ques¬tions at the right time prevents many prob¬lems later on.
During the preparation for a future com¬mercial real estate sales transaction, it is worth paying close attention to the docu¬ments establishing ownership rights to the land plot underneath the building for sale. If the land plot is rented out to the seller, then the rental agreement must be analyzed, as well as the conditions, rental periods, con¬ditions for continuation, designated pur¬pose of the plot, etc. Also, remember to go through the history of rental payments, and the reconciliation act.
Good preparation for a commercial real estate transaction involves clarifying any encumbrances in the use or ownership of the real estate object or the land underneath it. Make sure to find out whether any of the units inside the building are rented out, and whether the real estate object itself is held as security by a bank. When dealing with rental agreements, remember that any agreement for a term greater than one year must be registered with the government. Go through the rental agreements and keep in mind that the transfer of ownership rights to a building or facility which is currently rented out does not provide a legal basis for dissolving the agreement, or altering it in any way. Therefore, find out all the condi¬tions of the pre-existing rental agreements, and all the tenant’s rights. Make sure the rented-out facility agrees with the opera¬tional designation provided in the BTI tech¬nical documentation.
The next phase is the actual signing of the agreement, which follows the prepa¬ration and collection of all the necessary paperwork – the appropriate paperwork is composed and prepared – agreements about the transfer of property, transfer deeds, BTI documents, cadastral plans for the land plots, etc. After all these docu¬ments have been coordinated and signed, they are turned over to the registration body, and only when the registration proce¬dure has been completed is the transaction considered finalized and over.
It is not just the buyer who takes a risk when engaging in a real estate transac¬tion – the seller also experiences a number of serious threats. In order to successfully sell a real estate object, it is necessary to be extremely attentive to the preparation of the property for sale, competently organize the sales procedure and registration of the transaction.
When getting the real estate prop¬erty ready for sale, the seller must take all the right actions to make the building (facility) as attractive as possible to the potential buyer. It is also necessary to do everything possible for the “legal purity” of the building (unit, facility) and the land plot. Clearly, the buyer puts a lot of thought into potential risks, and tries to keep them to a minimum. Buyers want to know about previous renovations, building projects that were not registered properly, the proper registration of land ownership, current encumbrances (rentals, security, servitudes, etc.), judicial debates and ownership claims from third parties, etc. In other words – the same things that were mentioned earlier in this article.
On the basis of everything spelled out above, it is possible to conclude that the process of preparing, signing and finaliz¬ing a sales agreement is complicated, and requires the careful study of a multitude of legal nuances and paperwork. It is crucial to remember that insufficient attention to all the facets of the impending sale may lead to the worst kind of legal consequences in the future – pertaining first and foremost to the buyer of the real estate property.
