I was invited recently to speak at the Illinois Institute for Continuing Legal Education Annual Real Estate Short Course to discuss what every lawyer should know about commercial real estate development agreements. In preparing for the presentation, a developer client suggested it is not only attorneys who need to know about development agreements; developer clients do as well.
So, on that note, the following is my list of the top 10 things attorneys and developers should know about commercial real estate development agreements.
TOP 10 THINGS TO KNOW ABOUT COMMERCIAL REAL ESTATE DEVELOPMENT AGREEMENTS
Legal Authority for Illinois Municipalities to Provide Public Money for Private Development
The legal authority of Illinois municipalities to provide public money to private developers to promote economic development is confirmed, inter alia, in the following cases:
- People ex rel. City of New Salem v. McMackin 53, Ill. 2d 347, 291 N.E. 2d 807, 813 (1972)
- Clayton v. Village of Oak Park, 171 Ill. Appp.3d, 560, 73 Ill.Dec. 112 (1st Dist. 1983).
- People ex rel. City of Urbana v. Paley, 68 Ill. 2d 62, 11 Ill. Dec. 307 (1977)
- Kelo v. City of New London, Connecticut, 545 US 469, 162 L. Ed. 2d, 439, 125 S.Ct. 2655 (2005)
Money continues to be tight for developers, and economic development is badly needed by most communities. The solution for each can often be a public-private partnership to encourage economic development and bridge the funding gap. The first task is to recognize the opportunity. Next is to know how to proceed to plan and facilitate commercial real estate development that accommodates a public purpose to justify the infusion of public funds to promote economic development. Last, is to execute the development plan to fulfill the mutual benefit of community stakeholders, the developer and its investors.
The commercial real estate development agreement is the vehicle by which the public-private partnership is documented to protect the interests of the respective stakeholders. It’s purpose is to document in clear and legally enforceable terms, the scope of the development plan and what is to be expected by each participant in the public-private partnership.
A properly envisioned and drafted commercial real estate development agreement will help assure that all stakeholders have a clear understanding of their rights and obligations – including development criteria and funding commitments – to minimize future disputes and maximize the likelihood of successful development.
Public-private partnerships are not new, but they are the wave of the foreseeable future. Public-private partnerships serve to stimulate economic development to achieve local government objectives and to enable commercial real estate development in uncertain economic times.
Thanks for listening.
Photo Credit: “Architecture Concept” by Grant Cochrane FreeDigitalPhotos.net
Source: R. Kymn Harp Blog Harp on This