Part 5: Let’s Get It Done

In the first four posts in this series, we described the basics of a hotel PSA and then reviewed many of the major points of the PSA. In this final post, we discuss some of the other points to get to a successfully executed PSA.

Other Items

Remember that a PSA is a lengthy contract to cover the legal governance for the transaction. In addition to the previously discussed items, there are numerous other items covered in the PSA including but not limited to:

  • Mutual indemnification between Buyer and Seller
  • Representations and warranties covering many aspects of the transaction
  • Risk of loss and potential ability to terminate the agreement
  • Rights to physical inspection of the property
  • Federal, state, and local jurisdiction specific requirements
  • If the transaction can be part of a 1031 Exchange (like-kind exchange as governed by Section 1031 of the Internal Revenue Code)
  • The method, if any, for amending the PSA
  • Method of correspondence and parties required to be notified, e.g., must communication be in writing, is email acceptable, or must paper documents be sent via delivery service such as FedEx, UPS, or the like

Additionally, there is typically a schedule of documents that will be added to the end of the PSA including at a minimum:

  • Legal description of the land
  • Description of the hotel and its contents
  • Copy of the franchise agreement, if applicable
  • Copy of the management agreement, if applicable
  • Contents that may be excluded from the sale such as personal property of the Seller
  • Licenses and permits

Remember that this list and the items described in this series of posts may not be all inclusive as each transaction is unique, but it is a general guideline to help you navigate the process. While negotiating the PSA is generally done within a short timeframe, ensuring that both sides have their needs met will make the rest of the process after PSA execution smoother. Work closely with legal counsel but ensure that legal nuances and particularities do not get in the way of getting the PSA done. For example, while each party should be satisfied that its needs are met, getting into the nitty gritty on every single detail is a sure fire way to cause frustration throughout the process that may cause the transaction to fall apart.

Keep in mind the goal, to get the transaction completed! The Seller wants to dispose of an asset and the Buyer wants to acquire an asset. The PSA is the legal contract to facilitate this and provide as smooth of a process as possible. Understanding the general items covered in a PSA will help both parties come to an agreement and complete the transaction as planned.

Thank you for joining us on this journey and if we can be of any assistance be it on the Buyer or Seller side, we’d be happy to help. Good luck and stay safe.