Gap Indemnity Agreement Meaning
With regard to compensation for deficiencies, it is important that the person liable for compensation is a financially responsible party. Often, the owner of a commercial property is a single asset whose only asset is the underlying real estate. Once this property has passed into the hands of the buyer, anyone looking for recourse against the seller (now without fortune) can only find empty bags. The best practice is to ask a seller`s parent company or other financially viable party to compensate for this deficiency. So who bears the risk? In some countries, it is customary for title companies to take the risk. This risk can be reduced in part by updating the title just before the conclusion – which reduces the gap and forwards documents to the title company to a local agent who registers once received. In addition, title companies often attempt to spread the risk by requiring a gap offset in which the seller compensates the title company for business that arises between the date of the commitment and registration. This “gap” can occur for a number of reasons. For example, several states have a registration delay – which means that even if documents are presented for registration on closing day, they may not be processed for several weeks.
It is more likely that the buyer is in one State, the seller in another and the property in another. In such scenarios, financial statements are typically made through the title company designated by the buyer in the state where the buyer is located. The title company is responsible for keeping all documents, receiving and paying funds, and depositing the final documents. However, as domestic transactions become more frequent due to the increase in portfolio transactions (buyers who acquire multiple properties, perhaps in multiple states, through the same seller), the likelihood of recording the “closing day” is less and less likely. In the current climate of commercial real estate transactions, bridging the gap is not just an option – it is a frequent necessity. Below is our assessment of the above issues and recommendations. Finally, it is important that the buyer advisor carefully prepares his final letter of instruction to the title company. Among other key elements, the final letter of instruction should, in closing the gap, require society to adopt the policy in the form of a marked or pro forma bond “without additional exception.” This ensures that the title company is required to adopt the same directive for which the buyer negotiated, regardless of the intervention issues. If you take these steps, understand the process and use high-quality title insurance companies to ensure that closing the gap runs smoothly and that the parties get the benefits of their agreement. This blog post was written by Brian Memory and Caleb Rush, lawyers in the office of Spencer Fane LLP Plano, TX. For more information, see spencerfane.com. Looking ahead to 2013 and beyond, there is no doubt that one element of commercial real estate transactions will be used more often: see, this gap is filled.
Although it has been around for a few decades and is often referred to as the “New York” style, filling in the gaps is a mechanism that makes it easy to pass on real estate through parties who never leave the comfort of their own offices. Given that business is becoming more and more global, given that registries des deeds suffer from larger registration arrears, given that lawyers and clients are entering into business from all over the country, the “traditional” conclusion of commercial real estate could follow the path of the dodo. Given changing conditions, it is important for commercial real estate lawyers and their clients to understand bridling the gap – their virtues and the problems it can pose. This memorandum is about some of the changes we are seeing in the title insurance industry due to COVID-19. . . .