100+ unit contract question

6 Replies

Hello, I'm nearing the end of a contract negotiation for a 100+ unit property, and the "final" request the seller came back was the following: 

Our CPA recommended that we add a sentence to Paragraph 8: EVENTS OCCURING AT CLOSING. Seller shall deliver to Buyer:


(g) Buyer & Seller agree that the valuation of the Personal Property conveyed under this contract is $1,000 & any sales tax will be paid by Seller.

I sent the question to my attorney, but he's out of pocket at the moment. Any guidance on what this actually means would be helpful from a Buyer's perspective. Thanks!

@Kyle Jones

I would also ask your CPA.  Soliciting advice on BP is good for general information and big picture ideas but contract negotiation on a 100+ unit is very specific to that deal and the parties involved that are well informed about all its moving parts.  I would wait for your attorney AND would talk to your CPA as well.  The seller and seller’s CPA are looking out for their interests not yours.

Personal property would be items such as furniture in the leasing office, the computer, etc. My contracts just state that the sale includes these items so not sure why your CPA wants to separate it out and assign a value to it. Like Salvatore said, I would ask him and confirm the reasoning.

I'm not a lawyer and have no desire to be one, but:

A. I agree with @Salvatore Lentini , run it by your experts. I'm sure waiting for a response won't kill the deal.

B. From a "what does this mean, should it be stressing me out?" perspective, my gut says no. I think it is a minor detail that will have no bearing on you. It seems to be protection so the IRS doesn't determine that something within the building is personal property valued at "$x" and not part of the apartment sale, thus requiring tax to be paid on it. This clause basically says all personal property on premises is worth no more than $1000. Better to add this detail than let the IRS determine it. Plus, the CPA has to justify his existence/fee. 

Here is an article from a lawyer that relates to this issue, https://ronwebster.com/content/sale-furnished-prop...

Good Luck! 

Thanks Michael and Scott for some input. I realize these questions are always best suited for the experts, but I know there are experts on these forums as well. That's the beauty of the forum :-)

I’m going to state the obvious - 

Sounds to me like seller must pay taxes on the personal property for whatever reason and they’re not wanting to pay taxes on the true value. $1000 is reasonable and taxes on that are minimal. 

Why they would need to breakout personal property from the rest I couldn’t say

Originally posted by @Kyle Jones :

Hello, I'm nearing the end of a contract negotiation for a 100+ unit property, and the "final" request the seller came back was the following: 

Our CPA recommended that we add a sentence to Paragraph 8: EVENTS OCCURING AT CLOSING. Seller shall deliver to Buyer:


(g) Buyer & Seller agree that the valuation of the Personal Property conveyed under this contract is $1,000 & any sales tax will be paid by Seller.

I sent the question to my attorney, but he's out of pocket at the moment. Any guidance on what this actually means would be helpful from a Buyer's perspective. Thanks!

You may want check to see what 'personal property' was supposed to be included in the sale of this 100+ units, and if in any way the seller is trying to get around including those things in the contract with this line. Personal property can usually refer to appliances, furniture, fixtures, and much more (in the 100+ units!). Make sure all of those things are included in the contract.

Is the seller selling this property as a 1031 exchange? if so, the CPA might be wanting to cover all bases with the new law regarding 1031's applying only to real property and not personal property. However, in my opinion, and all CPAs I've spoken with agree that the rule does not apply to personal property withing the actual real property (rather personal property on it's own, like a car, plane, etc.)

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