SAMPLE
REAL PROPERTY
EXCHANGE AGREEMENT
TABLE OF CONTENTS
1. EXCHANGE OF PROPERTIES 1
2. DISPOSITION OF RELINQUISHED PROPERTY 1
3. EXCHANGE BALANCE 1
4. ACQUISITION OF REPLACEMENT PROPERTY 2
5. OWNER'S AGREEMENTS REGARDING REPLACEMENT PROPERTY 2
6. DIRECT DEEDING OF TITLE 2
7. INTERMEDIARY'S FEES 2
8. OWNER'S RIGHT TO RECEIVE BOOT 2
9. PLACEMENT OF FUNDS; INTEREST 3
10. FIRST AMERICAN CLOSING PROTECTION GUARANTEE 3
11. OWNER'S INDEMNIFICATION OF INTERMEDIARY 3
12. SCOPE OF INDEMNIFICATION 3
13. OWNER'S REPRESENTATIONS REGARDING ENVIRONMENTAL RISK 3
14. INTERMEDIARY'S RESERVATION OF RIGHTS 4
15. NO AGENCY 4
16. TIME OF ESSENCE 4
17. AMENDMENTS 4
18. NOTICES 4
19. PARAGRAPH HEADINGS 5
20. SEVERABILITY5
21. GOVERNING LAW AND VENUE 5
22. COUNTERPART EXECUTION 5
23. SUCCESSORS AND ASSIGNS 5
24. THIRD PARTY BENEFICIARY 5
25. INTEGRATED AGREEMENT 5
26. ASSIGNMENT 5
27. WAIVER 5
28. ATTORNEY'S FEES 5
29. EXHIBITS 5
30. TITLE INSURANCE 5
31. NO TAX ADVICE 5
32. RISK OF LOSS 6
33. TAXPAYER IDENTIFICATION NUMBER 6
34. FIRPTA EXEMPTION 6 LIST OF EXHIBITS
A: FEE SCHEDULE
B: PROPERTY IDENTIFICATION FORM
C: SUBSTITUTION AGREEMENT AND NOTICE - RELINQUISHED PROPERTY
D: SUBSTITUTION AGREEMENT AND NOTICE - REPLACEMENT PROPERTY
E: CLOSING PROTECTION GUARANTEE
SAMPLE
REAL PROPERTY
EXCHANGE AGREEMENT
This Real Property Exchange Agreement ("Agreement") is entered into by and between
___________________________________("Owner") and FIRST EXCHANGE
CORPORATION, a California corporation ("Intermediary"), in consideration of the following:
A. Owner is presently the owner of certain real property located in the County of
_________________, State of _______________, commonly known as Assessor's Parcel #
_________, located at _____________________________, ____________________
("Relinquished Property").
B. Owner desires to acquire in exchange as replacement property certain other "Like-
kind" real property by way of an Internal Revenue Code ("Code") Section 1031 exchange (an
"Exchange Transaction").
C. Intermediary has agreed to act as a qualified intermediary to facilitat e the
Exchange Transaction by discharging the contractual obligation of Owner to transfer the
Relinquished Property to one or more third-party buyers (the “Buyer"), acquiring other United
States real property (the 'Replacement Property") of "like kind" (within the meaning of Sec tion
1031 of the Code) to the Relinquished Property from one or more third-party sellers (the
"Seller"), and causing the transfer of the Replacement Property to Owner pursuant to the t erms of
this Agreement.
D. 1. Title to Relinquished Property shall be deeded directly from Owner to the
Buyer, and title to the Replacement Property shall be deeded directly from the Seller to Owner.
E. The parties intend to achieve a valid exchange as set forth in applicable law and
regulations, including Treasury Regulations Section 1.1031(k)-1, now and as it may be amended
or modified.
F. Owner shall bear the sole and exclusive risk of whether the transactions
contemplated by this Agreement qualify under Section 1031 of the Code. Intermediary, its
agents, and its counsel shall have no responsibility or liability concerning such qualification.
NOW, THEREFORE, in consideration of the recitals above, and the other agreements
set forth in this Agreement, the parties agree as follows:
1.EXCHANGE OF PROPERTIES. Subject to the terms of this Agreement,
Owner agrees to transfer to Intermediary the Relinquished Property, and Intermediary agrees
immediately after this transfer to retransfer the Relinquished Property tot he Buyer. In
consideration of and in exchange for this transfer, subject to the terms of this Agreement,
Intermediary shall acquire and transfer to Owner one or more Replacement Properties of "like
kind".
2.DISPOSITION OF RELINQUISHED PROPERTY.
a. At least (5) business days prior to the closing of the sale of Relinquished
Property to Buyer ("Initial Closing Date"), Owner shall provided Intermediary with a copy of the
final agreement for the sale of the Relinquished Property to Buyer.
b. Prior to Initial Closing Date, Owner shall cause the Intermediary to be
substituted as seller of the Relinquished Property, using the assignment attached as Exhibi t "C",
and Intermediary shall cause the transfer and conveyance of the Relinquished Property to B uyer
by direct deed in accordance with Paragraph 6.
3. EXCHANGE BALANCE. Owner and Intermediary agree that the gross fair
market value of Owner's interest in Relinquished Property is that value shown on the purchase
contract or exchange instructions signed by Owner in connection with the transfer of
Relinquished Property (the "Exchange Value"). Intermediary shall credit Owner, in exchange
for the transfer of Relinquished Property, with an amount ("Exchange Balance") equal to such
Exchange Value, plus any additional cash deposited by Owner with Intermediary for the
acquisition of Replacement Property and any prorations credited to Owner, less all of the
following:
a. The amount of all principal and accrued interest on any obligation secured
by relinquished Property as of the Initial Closing Date of Relinquished Property (including any
prepayment penalty).
b. All settlement costs, prorations, and other transactional expenses charged
to Owner or Intermediary in connection with the exchange, acquisition and disposition
transaction contemplated by this Agreement,
c. Any actual direct costs and expenses incurred or expended by
Intermediary to third parties pursuant to this Agreement (less any of such amounts returned to
Intermediary),
d. Any amount of tax that Intermediary shall have been required to withhold
pursuant to state oInitial Closing Date and subject to the time limits set fort h in the next sentence,
as Owner locates each Replacement Property, Owner shall give written notice to Intermediary
("Identification Notice") using the Replacement Property Identification Form attached as Exhibit
"B" that such property is to constitute Replacement Property. This shall occur during t he
identification period beginning on the Initial Closing Date (the "Identification Period"). Owner
shall have the right to rescind any such Identification Notice at any time during the Identification
Period by written notice to Intermediary. Upon entering any agreement for the acquisition of
Replacement Property (and in no event less than two (2) business days prior to the closing of
such agreement), Owner shall promptly provide Intermediary with copies of such final
agreement for Intermediary's review. Prior to the closing of the acquisition of Replaceme nt
Property (which shall be within the "Exchange Period", which is the period beginning on the
Initial Closing Date and ending at the close of the one hundred eightieth (180th) day aft er the
Initial Closing Date), Owner shall cause Intermediary to be substituted as purchaser of the
Replacement Property, using the assignment attached as Exhibit "D". If all conditions to the
transfer of the Replacement Property have been satisfied or waived, Intermediary shall c ause the
transfer of the Replacement Property to Owner by direct deed in accordance with Para graph 6 in
consideration of and in exchange for the transfer by Owner of Relinquished Property pursuant to
the terms of this Agreement.
b. Obligation limited to Exchange Balance. Intermediary shall participate in
the acquisition of Replacement Property upon specific terms and conditions as negotiate d and
specified in writing by Owner and agreed to by Intermediary. In the event that additional cash or
other consideration is required by Intermediary to acquire Replacement Property, all of suc h
additional cash and otntermediary by Owner through the Exchange Transactions. Intermediary
shall have no obligation to participate in the acquisition of Replacement Prope rty unless all such
additional consideration has been deposited in the Exchange Transaction by Owner. Owner
agrees that Owner must approve in writing all final terms and conditions for the acquisit ion of
Replacement Property.
c. Intermediary shall not be in breach of its obligations under this
Agreement, nor shall Intermediary incur any liability under this Agreement, on account of
Intermediary's inability to acquire any Replacement Property on the terms and condit ions
specified by Owner in any Identification Notice or on account of Intermediary inability to
perform under any Replacement Property purchase agreement unless such failure shall arise out
of the willful default by Intermediary under this Agreement. If notwithstanding Intermediary's
good faith attempts, Intermediary is unable to acquire a Replacement Property, Inte rmediary
shall, within five (5) business days following Intermediary's or Owner's written notice tot he
other assign to Owner (without recourse and without any warranty or representation in
connection therewith) all rights, claims, causes of action, or other rights that Inte rmediary may
have under such Replacement Property purchase agreement.
5.OWNER'S AGREEMENTS REGARDING REPLACEMENT PROPERTY.
Owner agrees as follows:
a. Every designation of Replacement Property, and any Identification Notice
delivered to Intermediary by Owner, shall be made on the basis of Owner's own investigation of
the physical condition of the land and improvements, including subsurface conditions and
environmental conditions; and
b. Each and every transfer made by Intermediary to Owner of any
Replacement Property shall be conveyed to Owner "as-is" and with all defects, whether la tent or
patent, and Owner shall assume all risks relating tot he Replacement Property, incl uding adverse
physical conditions which may not have been revealed by its investigation.
6.DIRECT DEEDING OF TITLE. Owner and Intermediary agree that
Intermediary shall cause the Relinquished Property to be directly conveyed to Buyer from Owner
and the Replacement Property to be directly conveyed to Owner from Seller of the Re placement
Property, in both cases using the services of First American Title Insurance Company or its
underwritten agent.
7.INTERMEDIARY'S FEES. Owner agrees to pay as consideration for the
activities undertaken by Intermediary pursuant to the terms and conditions of this Agreem ent, the
fees calculated pursuant to the schedule attached as Exhibit "A". Such sums shall be disbursed
to Intermediary directly from the funds held by Intermediary, and charged against the Exchange
Balance, without the requirement of authorization or further approvals by Owner.
8.OWNER'S RIGHT TO RECEIVE BOOT.
a. All funds received by Intermediary from the transactions described in
Paragraph 2 shall be utilized by Intermediary to acquire the Replacement Properties or for the
charges permitted under Paragraph 3 and Paragraph 7. Owner shall have no right to receive,
pledge, borrow or otherwise obtain the benefits of such funds or other consideration held by
Intermediary or anything other than "like kind" real property other than as set forth under
Paragraph 8.b. b. Notwithstanding the foregoing, Intermediary shall distribute any
unexpended portions of the Exchange Balance and accrued interest to Owner (i) after the e nd of
the Identification Period, if there are no identified Replacement Properties whic h have not been
acquired, (ii) upon or after the receipt by Owner of all of the Replacement Properties i dentified
within the Identification Period, (. Section 1.1031(k)-1(g)(6)(iii), or (iv) after the end of the
Exchange Period, if there shall be any remaining Exchange Balance.
c. Owner acknowledges that no Exchange Balance shall be distributed prior
to the occurrence of events listed in Paragraph 8.b.
9.PLACEMENT OF FUNDS; INTEREST. Owner and Intermediary agree that,
during the term of this Agreement, all funds held by Intermediary shall be placed in an interest-
bearing account with a financial institution or institutions approved by First American T itle
Insurance Company, with all interest in such account or accounts to accrue to the a ccount of
Intermediary and to be added to the Exchange Balance. Owner shall receive inte rest on the
funds to be utilized by Intermediary pursuant to this Agreement in an amount equal to the
interest earned by Intermediary on such funds. Owner shall have no right tot receive, to pledge,
borrow or otherwise obtain the benefits of such interest before the end of the Exchange Period,
except as otherwise provided in Paragraph 8. All monetary obligations of Intermediary under
this Agreement are specifically limited to the availability of funds from such account or
accounts, and Intermediary (as distinguished from First American Title Insurance Company
under Paragraph 10) shall have no liability on account of the failure or delay of any depository
financial institution (or other party holding funds( in repaying any deposit or interest on deposits.
10.FIRST AMERICAN CLOSING PROTECTION GUARANTEE.
Notwithstanding anything this Agreement to the contrary, if First American Title Insurance
Company approves the financial institution holding the funds comprising the Exchange Bala nce,
as an additional protection in this transaction, Owner shall be provided with an Exchange
Closing Protection Guarantee in the form of Exhibit "E".
11.OWNER'S INDEMNIFICATION OF INTERMEDIARY. Owner releases,
indemnifies, holds harmless, and agrees to defend Intermediary from any and all loss, cost s,
expenses, liability, damage or injury, including actual attorneys' fees (as defined in Para graph
28), in any manner arising out of or incident to Intermediary's participation in the acquisi tion,
ownership, and/or disposition of any interest in the Relinquished Property or the Replacement
Property or Intermediary's holding or holding or disposing of funds or other consideration
pursuant to this Agreement. This rmediary's participation in any aspect of the Exchange
Transaction, including, without limitation, any and all consequential damages arising therefrom,
except liability arising directly from Intermediary's own willful misconduct or gross neglige nce.
The parties further agree that Intermediary is participation in the disposition of Relinquished
Property and the obtaining of the Replacement Property in furtherance of Owner's desire to
accomplish an Exchange Transaction.
12.SCOPE OF INDEMNIFICATION. For purposes of this Agreement, the
indemnification by Owner shall include the active defense by attorneys selected by Inte rmediary
of any claim made against Intermediary, all legal expenses and costs incurred by Inte rmediary in
connection therewith, including the expense of duplication of the rate of Fifteen Cents ($0.15)
per page in response to any summons subpoena, judicial or administrative process or any
correspondence, and an allowance at the rate of One Hundred Fifty Dollars ($150.00) per hour
for the time of any employee of Intermediary (plus actual attorneys' fees of Intermedi ary) who is
required or asked to prepare or respond to summons, complaints, applications, discovery,
motions, demurrers, answers, affirmative defenses, counterclaims, crosscomplaints, and
administrative proceedings, or for time that is spend in negotiation toward settlement, or in
traveling to or from and attending hearings, trials, depositions, meetings or other proceedings
related to matters indemnified against pursuant to this Agreement, or for time that is incurred in
connection with any governmental tax audit or proceeding regarding the Exchange Transaction.
13.OWNER'S REPRESENTATIONS REGARDING ENVIRONMENT RISK.
a. Owner represents and warrants to Intermediary that there are no underground
storage tanks on Relinquished Property and, as to any Replacement Property, that there shal l not
be any such tanks, nor shall there be any evidence on the Relinquision by any hazardous or t oxic
materials as defined by any governmental agency, and that Owner has no reason to suspect the
existence thereof in or upon Relinquished Property, nor shall Owner shall such suspicion to exi st
as to any Replacement Property. For the purposes of this paragraph "hazardous or toxic
materials" shall include by not be limited to substances defined as "hazardous substance s,"
"hazardous material," or "toxic substances" in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq., the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.; the Resources
Conservation and Recovery Act, 42 U.S.C. 6901, et seq.; and corresponding statutes enacted by
any state in which either Relinquished Property or any Replacement Property is located, as any
of the above mentioned laws may be amended from time to time, and in the regulations adopted
and the publications promulgated pursuant to such laws.
b. Intermediary is expressly relying upon these representations by Owner in
entering into this Agreement. Owner agrees that the indemnity and hold harmless provisions of
Paragraphs 11 and 12 shall specifically include any liability arising by reason of any
contamination found to have existed on Relinquished Property or on any Replacement Property
which in any way jeopardizes or causes liability to Intermediary. Owner assigns to Intermediary
any and all rights to indemnification which Owner may have against any third party t o the extent
Intermediary suffers any damage, liability and/or cost as a result of the presence of
environmental contamination or hazardous or toxic materials upon Relinquished Property or any
Replacement Property.
14.INTERMEDIARY'S RESERVATION OF RIGHTS. Intermediary reserves
the right, in its absolute discretion, to resign as an intermediary pursuant to this Agreement.
Intermediary also reserves the right, in its absolute discretion, to withhold acceptance and
participation in the assignment of rights substituting Intermediary in the contract for disposition
of Relinquished Property or the contract to acquire of this paragraph, Intermediary shall
immediately cease to act as intermediary, Intermediary shall return to Owner any remaining
balance of the Exchange Balance and Intermediary shall have no further obligations under this
Agreement. Notwithstanding the resignation of the Intermediary, the indemnification provisions
of Paragraphs 11, 12, and 13, and the provisions of Paragraphs 21, 28, 31, and 32 shall survive
the resignation of Intermediary.
15.NO AGENCY. Intermediary shall not have any obligations to Owner as an agent
of Owner nor shall Owner have any obligations to Intermediary as a principal of Intermediary.
16.TIME OF ESSENCE. Time is of the essence of each and every term and
provision of this Agreement.
17.AMENDMENTS. This Agreement m party may be required or desires to serve
upon the other parties under the terms of this Agreement shall be in writing, and shall be served
upon the other parties at the following addresses:
If to Intermediary, to: If to Owner:
First Exchange Corporation
930 Laguna Street
Santa Barbara, CA 93101
Telephone: (805) 962-2264
Fax (805) 965-5996
19.PARAGRAPH HEADINGS. Paragraph and other headings contained in this
Agreement are for reference purposes only and are in no way intended to describe, to interpret ,
define or to limit the scope, extent or intent of this Agreement or any provision of this
Agreement.
20.SEVERABILITY. All paragraphs, clauses and covenants contained in this
Agreement are for reference purposes only and are in no way intended to describe, to interpret ,
define or to limit the scope, extent to intent of this Agreement shall be interpre ted as if the
invalid paragraphs, clauses or covenants were not contained in this Agreement.
21.GOVERNING LAW AND VENUE. The internal laws of the State of
California concerning contracts made and to be performed wholly within that state (other than its
rules for conflict or choice of laws), without regard to the conflicts of laws principles of suc h
state, shall govern the validity of this Agreement, the interpretation of its term s, and the rights
and duties of the parties (whether a cause of action is asserted in contract, in tort, or otherwise, at
equity or at law). Any suit brought in connection with this Agreement, whether in contract , tort,
equity or otherwise, shall be brought in the state courts sitting in Santa Barbara, C alifornia, the
parties waiving any claim or defense that such forum is not convenient or proper. Each party
agrees that any such court shall have in personam jurisdiction over it, consents to service of
process in any manner authorized by California law, and agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner specified by law.
22.COUNTERPART EXECUTION. This Agreement may be executed in any
number of counterparts wit the same effect as if all parties have signed the sam e document. All
counterparts shall be construed together and shall cod shall inure to the benefit of the respective
heirs, successors and assigns of the parties, provided, however, that Owner shall have no right to
assign Owner's interest under this Agreement without the prior written consent of Intermediary.
24.THIRD PARTY BENEFICIARY. Except as otherwise provided in this
Agreement, this Agreement is made for the sole benefit of the parties signatory to i t. Subject to
the provisions of Paragraph 23, no other persons shall have any rights or remedies by reason of
this Agreement against any parties signatory to it or shall be considered to be third pa rty
beneficiaries of this Agreement in any way.
25.INTEGRATED AGREEMENT. This Agreement and its exhibits and the
Exchange Closing Instructions entered into pursuant to this Agreement constitute the ent ire
understanding and agreement among the parties with respect to the subject matter of this
Agreement, and there are no agreements, undertakings, restrictions, representations or warrantie s
among the parties in writing. In the case of any conflict between this Agreement a nd any other
agreement entered into between the parties, this Agreement shall prevail.
26.WAIVER. The failure of any party at any time to enforce performance by
another party of any provision of this Agreement shall in no way affect the party's rights to
enforce that performance, nor shall the waiver by any party of any breach of any provision of this
Agreement be deemed to be a waiver by that party of any other breach of that provision or any
other provision of this Agreement.
28.ATTORNEYS' FEES. If any legal action, arbitration or other proceeding is
brought for the enforcement of this Agreement, or because of any alleged dispute, breach, defaul t
or misrepresentation in connection with this Agreement, the successful or prevailing party sha ll
be entitled to recover actual attorneys' fees (including fees for paraprofessionals and si milar
personnel and disbursements) and other costs it incurred in that action or proceeding, in a ddition
to any other relief to which it may be entitled. The parties agree that act ual attorneys' fees shall
be based on the attorneys' fees actually incurred (based on the attorneys' customary hourly bi lling
rates) rather than the court or arbitrator making an independent inquiry concerning
reasonableness.29.EXHIBITS. All exhibits are incorporated in this Agreement by reference.
30. TITLE INSURANCE. TITLE INSURANCE SHALL BE REQUIRED IN ALL
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND SHALL BE
PROVIDED BY FIRST AMERICAN TITLE INSURANCE COMPANY OR THEIR
UNDERWRITTEN AGENT.
31.NO TAX ADVICE. OWNER HAS RECEIVED THE ADVICE OF AN
INDEPENDENT TAX ADVISOR OF OWNER'S CHOOSING CONCERNING THIS
TRANSACTION AND ITS STATUS AS AN EXCHANGE PURSUANT TO INTERNAL
REVENUE CODE SECTION 1031 AND CORRESPONDING PROVISIONS OF STATE
INCOME TAX LAW AND AGREES TO OBTAIN THIS TAX ADVISOR'S SIGNATURE
INDICATING TAX ADVISOR'S REVIEW OF THIS TRANSACTION. OWNER FURTHER
UNDERSTANDS AND AGREES THAT NO EMPLOYEE, OFFICER, AGENT, OR
COUNSEL OF EITHER INTERMEDIARY OR FIRST AMERICAN TITLE INSURANCE
COMPANY HAS MADE OR MAY BE RELIED UPON AS MAKING ANY
REPRESENTATIONS OR RENDERED ANY ADVICE CONCERNING THIS
TRANSACTION OR ITS COMPLIANCE, IN WHOLE OR IN PART, WITH THE
REQUIREMENTS OF SECTION 1031 AS A TAX-DEFERRED EXCHANGE FOR FEDERAL
OR STATE INCOME TAX PURPOSES.
32.RISK OF LOSS. OWNER SHALL BEAR THE SOLE AND EXCLUSIVE
RISK OF WHETHER THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
QUALIFY UNDER SECTION 1031 OF THE CODE, AND INTERMEDIARY AND ITS
EMPLOYEES, OFFICERS AND AGENTS SHALL HAVE NO RESPONSIBILITY OR
LIABILITY CONCERNING SUCH QUALIFICATIONS.
33.TAXPAYER IDENTIFICATION NUMBER. Owner(s) represent(s) that
his/its/their social security/taxpayer/employer identification number
is/are______________________.
34.FIRPTA EXEMPTION. Prior to Initial Closing Date, Owner shall provide
Intermediary with satisfactory evidence of exemption from withholding under the Foreign
Investment in Real Property Tax Act, and other federal or state laws concerning tax withholding.
Executed effective _______________________, 199__. INTERMEDIARY
FIRST EXCHANGE CORPORATION,
a California corporation
By: ____________________________
____________, President
By: _____________________________
____________, Vice President
OWNER____________________________________________________________________
I HAVE ADVISED OWNER AS
TO THE TAX RAMIFICATIONS
OF THIS TRANSACTION:
_____________________________ Dated: _________________
Name:
Tax Advisor for Owner
FEE SCHEDULE
Fee Schedule for First Exchange Corporation acting as a Qualified Intermediary in a deferred
exchange:
Set Up Fee $500
For each month, or portion thereof,
that we hold each $100,000, or portion
thereof $100
Rates apply to either cash or notes held in the name of First Exchange Corporation. In the event
of cancellation of the transaction prior to the completion of an intended first closi ng, there is a
minimum fee of $500.
NOTE 1: We must have at least five working days notice for processing and documentation or a
RUSH FEE of $500 will apply.
NOTE 2: Should the exchangor acquire more than Two Replacements Properties, there will be
an additional administrate fee of $200 for each additional property.
E X H I B I T " A "
Replacement Property Identification Form
Pursuant to a Real Property Exchange Agreement, dated ________________, 199___,
between me/us and First Exchange Corporation, I/we identify the following United States rea l
property (which I/we certify meets the requirements set forth in that Agreement) as Re placement
Property:
Replacement Property __________________________________________________
Address/Description __________________________________________________ ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Conditions: ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
_____ PROPERTY WHICH YOU DESIGNATE
E X H I B I T " B "
SUBSTITUTION AGREEMENT AND NOTICE - RELINQUISHED PROPERTY
This Substitution Agreement and Notice - Relinquished Property ("Agreement") is
made by and between _____________________________________________________________
("Owner"), ____________________ )"Buyer"), and FIRST EXCHANGE CORPORATION, a
California corporation ("Intermediary"), with reference to the following:
A. Owner is presently the owner of certain real property located in the County of
____________________, State of ______________ commonly known as Assessor's Parcel #
____, located at ____________________, ______________ ("Relinquished Property").
B. Owner and Buyer have entered into an agreement ("Purchase Agreement") that
provides, among other things, for Buyer to purchase the Relinquished Property from Owner for
such purchase price ("Purchase Price") as may be agreed to in writing by Owner.
C. Owner desires to structure Owner's disposition of the Relinquished Property by
way of an Internal Revenue Code ("Code") Section 1031 exchange (an "Exchange Transaction").
D. Intermediary has agreed to act as a qualified intermediary to facilitate the
Exchange Transaction.
E. Buyer agrees to cooperate in the Exchange Transaction by permitting
Intermediary to be substituted as the seller of the Relinquished Property.
F. The parties desire that the transfer of Relinquished Property to Buyer shall be
accomplished by a single direct deed from Owner to Buyer.
NOW, THEREFORE, in consideration of the recitals above, and the other agreements
set forth in this Agreement, the parties agree to amend the Purchase Agreement as follows:
1.SUBSTITUTION. Intermediary shall be substituted for Owner as the seller of
the Relinquished Property.
2.ACCEPTANCE OF PERFORMANCE. Buyer agrees to accept the
Relinquished Property and all other required performance from Intermediary and to render it s
performance of all of its obligations under the Purchase Agreement (including the payment ofe d
to Buyer from Owner using the services of First American Title Insurance Company of their
underwritten agents.
E X H I B I T " C "
4. BREACH BY OWNER OR INTERMEDIARY. In the event of the breach of
any representations, warranties, obligations or undertakings by Owner or Intermediary in
connection with the Purchase Agreement or the acquisition of the Relinquished Property by
Buyer or in the event of any claim upon any indemnity of Owner or Intermediary in connect ion
with the Purchase Agreement or the acquisition of the Relinquished Property by Buyer (whether
the representation, warranty, indemnity, obligation or undertaking is express or implied), Buyer's
exclusive recourse shall be against the Owner, and Buyer shall have no recourse of any type
against the Intermediary arising from the Purchase Agreement or the transfer of the Relinquished
Property, except for Intermediary's breach of its agreement to transfer the Relinquished Propert y
to Buyer if Intermediary shall have acquired it.
5.BREACH BY BUYER. All of Buyer's representations, warranties, obligations
and undertakings (whether express or implied) shall be enforceable by Owner, as if made
directly to Owner, without the need to join Intermediary as an additional party in order to enforce
such representations, warranties, obligations or undertakings.
6.REPRESENTATIONS AND WARRANTIES. Owner shall be treated as
making directly to Buyer any representations or warranties concerning the condition of
Relinquished Property contained in the Purchase Agreement or otherwise implied at law.
7.HOLD HARMLESS. Buyer shall hold Intermediary harmless with respect to
any condition of Relinquished Property.
8.COUNTERPART EXECUTION. This Agreement may be executed in any
number of counterparts with the same effect as if al parties have signed the sam e document.
All counterparts shall be construed together and shall constitute one agreement.Executed effective __________________, 199__.
INTERMEDIAR______
Barbara Hester, Vice President
OWNER____________________________________________________________________
BUYER____________________________________________________________________
SUBSTITUTION AGREEMENT AND NOTICE - REPLACEMENT PROPERTY
This Substitution Agreement and Notice - Replacement Property ("Agreement") is
made by and between ____________________ ("Owner"), _______________________
("Seller"), and FIRST EXCHANGE CORPORATION, a California corporation
("Intermediary"), with reference to the following:
A. Seller is presently the owner of certain real property located in the County of
______________, State of ______________, commonly known as Assessor's Parcel # ____,
located at ___________________, __________________ ("Replacement Property").
B. Owner and Seller have entered into an agreement ("Purchase Agreement") that
provides, among other things, for Owner to purchase the Replacement Property from Seller for
the purchase price of $__________________ ("Purchase Price"), payable at closing.
C. Seller acknowledged that Owner is including this Property in a deferred
exchanges transactions and agrees to cooperate in the exchange transaction by permitt ing
Intermediary to be substituted as the buyer of the Replacement Property.
D. The parties desire that the transfer of Replacement Property to Owner shall be
accomplished by a single direct deed from Seller to Owner.
NOW, THEREFORE, in consideration of the recitals above, and the other agreements
set forth in this Agreement, the parties agree to amend the Purchase Agreement as follows:
1.SUBSTITUTION. Intermediary shall be substituted for Owner as the purchase
of the Replacement Property.
2.ACCEPTANCE OF PERFORMANCE. Seller agrees to accept the Purchase
Price and all other required performance from Intermediary and shall transfer the Replace ment
Property at closing to Intermediary or its nominee.
3.TITLE TO THE REPLACEMENT PROPERTY. At closing, the Intermediary
shall cause all rights of ownership, including title, to Replacement Property to be di rectly
conveyed to Owner using the services of First American Title Insurance Company or their
underwritten agrmediary in connection with the Purchase Agreement or the acquisition of the
Replacement Property by Owner or in the event of any claim upon any indemnity of Owner or
Intermediary in connection with the Purchase Agreement or the acquisition of the
E X H I B I T " D "
Replacement Property by Owner (whether the representation, warranty, indemnity, obligation or
undertaking is express or implied), Seller's exclusive recourse shall be against the Owner, and
Seller shall have no recourse of any type against the Intermediary arising from the Purchase
Agreement or the transfer of the Replacement Property, except for Intermediary's breach of its
agreement to transfer the Replacement Property if it shall have acquired it.
5.BREACH BY SELLER. All of Seller's representations, warranties, obligations
and undertakings (whether express or implied) shall be enforceable by Owner, as if made
directly to Owner, without the need to join Intermediary as an additional party in order to enforce
such representations, warranties, obligations or undertakings.
6.HOLD HARMLESS. Seller shall hold Intermediary harmless with respect to
any condition of Replacement Property existing at the time of closing.
7.REPRESENTATIONS AND WARRANTIES. Seller shall be treated as
making directly to Owner any representations or warranties concerning the condition of
Replacement Property contained int he Purchase Agreement or otherwise implied at law.
8.TAX WITHHOLDING. Prior to closing, Seller shall provide Intermediary with
satisfactory evidence of exemption from withholding under the Foreign Investment in Real
Property Tax Act, and other federal or state laws concerning tax withholding.
9.COUNTERPART EXECUTION. This Agreement may be executed in any
number of counterparts with the same effect as if all parties have signed the sam e
document. All counterparts shall be construed together and shall constitute one agreement.Executed effective __________________, 199__.
INTERMEDIARY
FIRST EXCHANGE CORPORATION,
a Califo______________
SELLER____________________________________________________________________
CLOSING PROTECTION GUARANTEE
First American Title Insurance Company
(Date)
To: (Exchangor) Re: Exchange Closing Protection Guarantee
Dear ___________________: First American Title Insurance Company, a California corporation, hereinafter called
"First American" and First Exchange Corporation, a California corporation, hereinafter call ed
"Exchange Corp" have agreed to cooperate in an effort to allow parties interested in participating
in a delayed exchange the opportunity to consummate their transactions, preserve the procee ds of
the sale and, consistent with the instructions of all necessary parties, see to the proper disposition
of funds, documents and properties.
The following assurances shall apply subject to the conditions and exceptions hereinafter
stated:
A. When Exchange Corp is specified as an intermediary in connection with a delayed
exchange of real estate and First American issues all policies of title insura nce on the exchanged
properties, it is intended that First American, either directly or through one of its affiliated
companies, will direct the placement of funds resulting from the sale of the property de scribed in
Exhibit "A" attached hereto and incorporated herein. In such event First American exte nds its
indemnification to you, as the exchangor, that once proceeds of the sale are placed at the
direction of First American, that First American shall assure their safe keeping and t imely
availability to consummate the terms of an intended exchange or other authorized pe rmitted
distribution.
B. First American does not, however, guarantee the availability of funds placed with
any financial institution selected by the exchangor that is outside the control of Fi rst American
including, but no limited to, loss or impairment of such proceeds while on deposit with a bank or
other similar institution due to the institution's failure, insolvency or suspension, except as shall
result from First American or Exchange Corp's failure to comply with your written instructions
to drse you for the actual loss incurred in connection with the real estate transac tion settlement
and exchange services when such loss arises from the fraud or dishonesty of the Exchange Corp
in handling funds or documents in connection with the such exchange services.
T E R M S A N D C O N D I T I O N S
1. When First American shall have reimbursed you pursuant to this letter, it shall be
subrogated to all rights and remedies which you would have had against any person or property
had you not been so reimburse. Liability of First American for such reimbursement shall be
reduced to the extent that you have knowingly and voluntarily impaired the value of such ri ght or
subrogation.
2. Any liability of First American for losses incurred by you in connection with
closing of real estate transaction by Exchange Corp shall be limited to the prote ction provided by
this letter. However, this letter shall not affect the protection afforded or contrac t rights of
escrow instructions, a title insurance binder, commitment or policy of First American.
3. Claims shall be made promptly to First American at its principal office at 114
East Fifth Street, Santa Ana, California 92701. When the failure to give prompt notice shall
prejudice First American, then the liability of First American hereunder shall be re duced to the
extent of such prejudice.
The protection herein offered will be effective upon receipt by First American of your
acceptance in writing which may be made on the enclosed copy hereof.
FIRST AMERICAN TITLE INSURANCE COMPANY
SAMPLE ONLY
______________________________________ (Vice President)
Accepted: _____________________, 199__ SAMPLE ONLY
______________________________________
