USA - NEW YORK Law and Practice Contributed by: Adam S. Walters, Erin C. Borek, Timothy P. Moriarty and Kelly E. Marks, Phillips Lytle LLP
2.5 Typical Representations and Warranties
This final step is important because New York State is a “race-notice” jurisdiction. This means a party can simultaneously issue two deeds to two separate parties for the same real property. The party that wins the “race” to the applicable county clerk’s office and has their deed recorded first will be the owner of the real property, pro - vided that such party had no knowledge of the other deed. 2.4 Real Estate Due Diligence Depending on the complexity of the acquisition, purchasers of real estate typically engage third parties such as attorneys, institutional lend - ers, real estate brokers, appraisers, engineers, surveyors, architects, general contractors, title insurance/search companies, accountants, insurance agents, environmental consultants, zoning research companies, representatives from local municipalities, and other third par - ties. Sophisticated purchasers often commu - nicate directly with the above-referenced third parties. Contracts for the purchase and sale of real property typically provide the purchaser a specific time period in which to conduct all real estate due diligence. Purchasers engage attorneys to coordinate with and review the work of the above-referenced third parties. Attorneys are also responsible for examining abstracts of title, instrument surveys, and other title documents to ensure the purchas - er is receiving good and marketable title to the property. Although purchasers are responsible for con - ducting due diligence and choosing to proceed with the real estate transaction, sophisticated purchasers are increasingly relying on the opin - ions and expertise of third parties to determine whether various aspects of the real estate are satisfactory for its end use.
While representations and warranties in a pur - chase and sale contract can vary greatly, in com - mercial transactions, the following representa - tions and warranties are common: • authority and capacity to execute the agree - ment and perform the obligations under the agreement; • no pending or threatened lawsuits against the parties or the subject real property; • no pending or threatened eminent domain or condemnation proceedings against the real property; • no pending or threatened changes in the assessed valuation or tax rate applicable to the real property; • no pending or threatened changes in the zon - ing classification of the real property; • no known environmental defects with the real property or any actions being taken by any agency with respect to the environmental condition of the real property; and • the existence and good standing of all per - mits and certificates necessary for legal use or occupancy of the real property. In commercial transactions, there are generally no representations or warranties provided for under state or local law. This is not true of resi - dential transactions. For instance, with respect to newly built homes, each sale is subject to certain warranties regarding the quality of con - struction under the Housing Merchant Implied Warranty. For pre-built homes, sellers are required to make certain disclosures with respect to the condi - tion of the real property in a Property Condition Disclosure Statement. These forms require the owner to represent certain facts, including gen -
1250 CHAMBERS.COM
Powered by FlippingBook