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Extension Not Automatic
by Ron Davis
Efforts to buy a portion of a Washington shopping center have ended after lengthy and sometimes heated negotiations failed to reach an agreement.
The shopping center is Factoria Square Mall in Bellevue. And the potential buyer had hopes of acquiring the designated portion of the center property to allow the development of multifamily housing.
Principles of the company that owns the center property that the potential buyer selected for residential use had agreed to the sale, but the deal ran into complications from the onset of negotiations.
The initial purchase price of $15,750,000 was apparently no obstacle. The main hurdle was an easement agreement that prohibits residential use of the property. So a sale of any portion of the property for multifamily housing development required agreement of both center owners as well as center tenants.
Getting the consent of all those parties required a lot of time and effort at persuasion. But the sale hinged upon a reasonable deadline. On the date of the deadline, however, consensus by those involved had not been reached. The two parties then agreed to a new closing date and to a reduction of the sales price to $14,315,000.
As fate would have it, the deal took another turn. Target Corporation expressed an interest in a portion of Factoria Square Mall. The owners of the center property sought for multifamily housing then asked for a delay in any sale “due to issues on Target’s side.”
The potential buyer replied that the owners must close on their property as agreed. But the owners rejected the request to close and called off the sale of their property. The owners also claimed that the potential buyer was entitled only to a refund of earnest money.
The potential buyer sued, seeking “an order [by the court] to force [the potential sellers] to perform all acts necessary to complete the transfer of the property and related easements….”
But was there ever a contract to enforce all the terms of the closing? The potential buyer could, under the terms of the agreement, extend the closing, but did not do so, explaining that an extension of the closing date occurred automatically.
A Washington court sided with the potential sellers of the shopping center property. Explained the judge, “The potential buyer was entitled to an extension, but it was not automatic…. [The sales agreement] required [the potential buyer] to give notice of its election to extend the closing date if the [sales transaction] was not secured by a certain date. No notice of election was given.”
(FF Realty, LLC v. Kimschott Factoria Mall, LLC WL 4008815 [Wash.App. Div. 1)
Decision: October 2010
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