How to Avoid Risks in Real Estate Acquisition: Our Bukovel Hotel Case Study
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One of our clients was interested in buying a hotel in Bukovel. It's important to note that the hotel wasn't a single property unit but rather composed of separate real estate pieces owned by the seller. The seller had incorporated the hotel into the charter capital of a newly established company and offered our client the opportunity to purchase the hotel as a stake in this company's charter capital.
Furthermore, the purchase terms set by the seller required dividing the payment into several installments, with ownership rights transferring only after the full payment was made. This presented our client with a considerably risky proposition that could potentially work against their interests at any moment.
Our clients frequently face challenges and complexities when it comes to finalizing deals, particularly in the acquisition of unique real estate properties. The risks inherent in such deals often lead to hesitations or abandoning potentially lucrative or appealing opportunities, primarily due to the fear of losing money, or property or ending up in a disadvantageous situation. In essence, the absence of guarantees and legal protection forms a substantial hurdle in achieving their objectives.
Confronted with this risky situation in the real estate purchase, the client sought our assistance in agreement analysis. However, given the client's essential need to acquire the hotel, we advised against proceeding with an agreement that didn't offer adequate security as a real estate buyer.
Leveraging our lawyers' experience of over 10 years in handling similar or even more complex scenarios, we know how to act effectively to ensure our clients' security. We also proposed dissecting the situation and providing the client with one or more safe options for acquiring the property, which was eventually what we did.
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Analysis of the Agreement and Strategy for Protecting the Client's Interests in a Complex Deal
When confronted with the intricacies of a risky hotel acquisition deal, our client approached us for an in-depth agreement analysis and consultation. During our thorough examination of the situation, we pinpointed several key issues and significant challenges that demanded attentive and responsible handling.
- Our investigation into the information and documentation revealed that the hotel sale included two small land plots, whose zoning status was in the process of being changed.
- The real estate, integrated into the company's charter capital, necessitated planning the hotel acquisition through a legal entity, which the seller believed would lessen tax obligations.
- There were servitudes on the hotel property.
- Crucially, the proposed sale method of the hotel involved specific periodic payments.
- Our client was an international buyer.
With all this information in hand, our goal was to ensure maximum protection for our client's interests. We diligently crafted a strategy to address each identified concern.
We proposed the following options to the client:
- Purchasing the hotel and its land with a mortgage arrangement, where the real estate serves as collateral until the debt is fully paid. This option allows our client to gain ownership of the property while continuing to make payments over a specified term. It is the safest route for the client, assuming compliance with the contract's terms.
- Sale with deferred payment. Here, the property ownership remains with the seller until the buyer's financial obligation is fulfilled. This scenario places a restriction on the seller against disposing of the property until the client completes the payments and both parties settle accounts in full. To safeguard the obligation, the hotel is put under the buyer's management. This arrangement tends to favor the seller's security.
- For the agricultural land plots included in the sale, it was decided to handle their sale separately after the zoning change, considering the buyer's foreign nationality.
Ultimately, the parties reached a consensus and selected the first option. As legal professionals, we facilitated the documentation, notarization, and formalization of this chosen approach.
Legal Support and Protection of Your Interests in Contractual Agreements
Our lawyers' expertise and experience are pivotal in guiding clients to engage in or modify contractual relationships both effectively and correctly. This includes handling complex issues and even seemingly straightforward matters such as amendments to existing contracts. So, if your business encounters any contractual challenges, do consult with our firm's legal experts. By choosing our services, you will benefit from:
- Professionally prepared documents that comply with legal standards while addressing your specific needs;
- A clear understanding of potential risks and strategies to efficiently avoid them;
- Confidence in the solidity of your agreement, assured by the expertise of our legal professionals;
- Legal support and robust defense in case of disputes with business partners;
- The convenience of not having to personally delve into the intricacies of legal regulations, as our lawyers will handle it for you.
We promise not just professional legal support, but also peace of mind and assurance throughout all phases of your contractual engagements.
For more details and pricing of our contract law services, please refer here.