Your Purchase-Sale-Agreement should always include the 1031 Exchange Language that puts the buyer on notice that the seller has the intent and option to close this transaction as a like-kind-exchange. This is important, as it will require the buyer to cooperate with this process. It also allows for the assignment of rights/obligations, and holds the seller harmless for any delays in the closing. While there are various notice-language that we have seen used, Petroleum Strategies offers the following language for your use in any PSA where there is a possibility that you may want the option to close as a like-kind-exchange. Please copy and paste from below or click here for a PDF document of the language.
Like-Kind Exchanges. Each party consents to the other party’s assignment of its rights and obligations under this Agreement to Petroleum Strategies Inc., the Qualified Intermediary (as that term is defined in Section 1.1031(k)-1(g)(4)(v) of the Treasury Regulations), or to its Qualified Exchange Accommodation Titleholder (as that term is defined in Rev. Proc. 2000-37), in connection with effectuation of a like-kind exchange. However, Seller and Buyer acknowledge and agree that any assignment of this Agreement to Petroleum Strategies, or to a Qualified Exchange Accommodation Titleholder, does not release either party from any of their respective liabilities and obligations to each other under the Agreement. Each party agrees to cooperate with the other to attempt to structure the transaction as a like-kind exchange.