# North Quay Hospitality — Ordered Closing Plan (Halberd Hotel) ## 0. Bottom line before the details The only genuinely scarce item here is **information**, not money. The price is $6.4M; any plausible payoff (see the arithmetic in §3) is a small fraction of the seller's proceeds. The lien can be paid or escrowed **out of closing proceeds** at the settlement table. The gating item is a **current written payoff statement and the creditor's release terms** — which the seller has not even requested. Everything below is designed to (a) preserve every buyer right on the record, and (b) force the payoff letter into the file fast enough to close inside the cure period. Do **not** close Friday on the seller's proposal. --- ## 1. Written defect notice — send today (Wednesday) **Deadline:** Rule 2 requires written notice no later than one business day before closing. With Friday closing, the outside date is **Thursday**. Send it **today, Wednesday**, by every method the contract's notice clause permits (and one belt-and-suspenders method), with proof of transmission retained. Do not let this slip to Thursday; a blown notice forfeits the extension, arguably forces an election between closing on defective title and defaulting, and destroys the "ready, willing, and able" posture under Rule 8. **Contents of the notice:** 1. Identify the defect precisely: judgment creditor, court, docket/index number, date of entry (four years ago), original amount $420,000, 8% simple interest, unidentified docket credits, and the title commitment number/exception number listing it. 2. State that it is a **monetary lien** that North Quay does **not** expressly accept under Rule 1, and that title is therefore unmarketable. 3. Invoke Rule 2's automatic extension and **state the computed new closing date** (see §2), inviting written confirmation. 4. Enumerate the **only three acceptable cures** (Rule 3): (i) satisfaction and release of record; (ii) a binding release delivered at closing; (iii) an insurer-approved escrow supporting an **unconditional** policy with **no exception** for the lien. 5. **Reject in advance**, on the present record, (a) the general indemnity (Rule 7), (b) the $300,000 holdback with seller's counsel, and (c) any post-closing "true-up" promise (Rule 5). 6. **Demand**, within one business day: (i) a signed authorization/consent letter from the seller directing the judgment creditor and its counsel to issue a current payoff to the title company, the lender, and North Quay's counsel; (ii) the creditor's contact information; (iii) written confirmation the seller will direct sale proceeds to the payoff at closing. 7. Reserve **all rights and remedies**, expressly including termination and deposit return, specific performance, and damages; state that no act, forbearance, participation in cure efforts, or scheduling accommodation constitutes waiver of the defect or of the notice. 8. Copy the escrow/title agent and the lender; instruct escrow that the $320,000 deposit remains held and is not to be disbursed to the seller. --- ## 2. The five-business-day cure extension - Timely notice **automatically** extends closing five business days from Friday: **Monday, Tuesday, Wednesday, Thursday, Friday → extended closing is Friday of next week** (assuming no Dorran holiday; verify the calendar and, if a holiday intervenes, recompute and re-paper the date). - Confirm the date in writing with the seller, escrow, insurer, and lender so no one later argues a different outside date. - The extension is the **seller's** cure window. North Quay must **honor it** (Rule 8) — do not declare default or terminate before that date, and do not withdraw the tender. - Simultaneously extend the operational scaffolding to the new date: rate lock / funding authorization, insurer commitment effective date, prorations, closing statement, hotel operating transition items, and the contractor's mobilization slot (hold it; do not sign irrevocable renovation commitments yet). --- ## 3. Exact payoff information that must be obtained Insist on a **current written payoff statement from the judgment creditor or its counsel of record** (Rule 4 forbids the insurer from estimating from the docket). It must state: 1. **Remaining unpaid principal** after all credits. 2. **Itemization of every docket credit**: date received, amount, and how applied (interest first vs. principal), so the interest computation is auditable. 3. **Accrued interest to date**, computed at 8% simple with the credit dates applied. 4. **Collection/enforcement costs**: attorney's fees, sheriff/execution/levy fees, statutory costs, recording fees for the satisfaction — separately itemized. 5. **Total payoff and a per diem** accrual figure. 6. **"Good through" date** — must extend to the **extended closing date plus at least 10 days**, or the letter must include per diem so escrow can fund the gap. 7. **Release conditions**: exact form of satisfaction/release, who executes, whether it is delivered at closing or mailed after, who records and when, wiring instructions (verified by callback to a known number, not by email), and whether the creditor will pre-execute a release held in escrow pending wire. 8. **Chain and scope**: confirmation the judgment has not been assigned (or identification of the assignee), that no revival/renewal changed the amount, that the judgment is docketed in the county where the hotel sits and does encumber this parcel, and that no execution, levy, garnishment, or sheriff's sale is pending. 9. **Authority**: signature of counsel of record or an authorized officer, on letterhead. 10. **Insurer's written requirement letter** listing exactly what it needs to delete the exception, plus updated judgment/lien searches against **all name variations** of the seller entity and principals. **Worst-case math to frame urgency and escrow sizing.** If *no* credits are given effect: $420,000 + (8% × 4 yrs × $420,000 = $134,400) = **$554,400**, plus costs; per diem ≈ $92/day. A 125% escrow on that is **≈ $693,000** — essentially the seller's entire stated $700,000 capacity, before costs. If the seller's "under $300,000" guess is right, 125% ≈ $375,000. That spread ($375K vs. $693K+) is precisely why the guess is worthless and the payoff letter is mandatory. --- ## 4. Cure ranking — what North Quay will and will not accept **Preferred (A): Pay at closing from seller's proceeds + release.** Escrow agent wires the payoff **directly to the creditor** per the payoff letter (never to the seller or the seller's lawyer), against a **pre-executed satisfaction/release held in escrow** and delivered/recorded at closing. Insurer confirms in writing it will delete the exception on both the owner's and loan policies. Escrow also funds recording fees and any per diem to the recording date. This costs the seller nothing it does not already have — the money is its own sale proceeds. **Acceptable (B): Binding release for delivery at closing** (Rule 3(ii)) — same mechanics, with the creditor's release in escrow and irrevocable payoff instructions. **Acceptable fallback (C): Insurer-approved escrow at 125% of the current written payoff** (Rule 4). Conditions: escrow held by the **title company** (or an insurer-approved agent), under an escrow agreement the **insurer drafts or approves in writing**; insurer commits in writing to issue owner's and lender's policies **with no exception**; escrow funded 100% from seller proceeds at closing; disbursement mechanics, release-recording obligation, per diem coverage, and a defined outside date for satisfaction; lender's counsel approves the agreement. **Only as a supplement (D): Purchase-price credit.** Useful as the *funding mechanism* — reduce the price by the payoff/escrow amount and direct the funds to the creditor or escrow. A credit alone does **not** cure; the exception must still come off. **Never as the cure (E): Indemnity.** Rule 7 is explicit: a private indemnity does not remove the defect or satisfy the lender. Accept a seller indemnity only *on top of* A, B, or C, to backstop interest overrun, collection costs, escrow shortfall, or recording failure — and only from a creditworthy indemnitor. --- ## 5. Why the $300,000 holdback fails on this record 1. **No payoff exists**, so $300,000 is an unsupported guess; Rule 4 bars the insurer from deriving a number from the docket. 2. **It is not 125% of anything.** If the true payoff is $554,400, the required escrow is ~$693,000; $300,000 is roughly 43% of it — and it isn't even 125% of the seller's own guess ($375,000). 3. **Wrong holder, wrong instrument.** Funds with *seller's counsel* under no insurer-approved escrow agreement, with no creditor consent and no release, is not a Rule 3(iii) escrow at all. 4. **The exception stays on the policy** — so under Rule 5 the **lender will not fund**. The deal physically cannot close that way. 5. **"True it up later" is exactly the post-closing promise Rule 5 declares insufficient.** 6. **Substantive exposure:** the lien would run with the property, keep accruing (~$92/day at worst case), remain subject to execution and sheriff's sale, cloud renovation/mezzanine financing, and jeopardize the convention opening — the very risk the holdback pretends to solve. 7. **It is unnecessary.** With $6.4M of proceeds, the seller can simply pay the creditor at closing. The request to hold the money itself suggests it wants use of funds it does not yet know are sufficient. **Response:** decline in writing, on these stated grounds, while restating the three lawful cures and confirming North Quay will fund the closing the moment the insurer removes the exception. --- ## 6. Lender and title-insurer conditions to lock down in parallel **Title insurer:** written requirement letter; current written payoff; confirmed direct payment **or** 125% escrow; insurer-approved escrow agreement; **pro forma owner's and loan policies with the judgment exception deleted** (not "insured over" language, not an affirmative-coverage endorsement the lender hasn't blessed); gap/interim coverage between search bring-down and recording; closing protection letter; recording of the satisfaction confirmed post-closing; updated judgment/name-variation searches. **Lender:** written confirmation it will not accept the exception (already given — memorialize it); approval of the new closing date; rate-lock/commitment extension; approval of the escrow agreement and of any price credit's effect on LTV/appraised value and sources-and-uses; revised settlement statement; final **clear-to-fund** conditioned on the exception-free pro formas; confirmation that no post-closing indemnity substitute is acceptable. **Bring-down search on the extended closing morning** — for new judgments, executions, or levies filed during the extension. --- ## 7. North Quay's four positions, held simultaneously - **Ready, willing, and able (Rule 8):** deposit stays in escrow; loan commitment kept live; buyer's closing documents pre-signed and in escrow; funds confirmed. On both the original and extended closing dates, deliver a **written tender** stating North Quay is prepared to close on contract terms and is prevented only by the seller's failure to convey marketable title and the resulting lender refusal. This preserves specific performance and defeats any claim that North Quay defaulted. - **Termination (Rule 6):** available if the cure fails by the extended date — deposit returned, with damages/costs claims reserved. Do not exercise early; premature termination converts North Quay into the breaching party. - **Waiver (Rule 6):** legally available but **practically unavailable here** — waiving the defect leaves the exception on the policy and the lender will not fund (Rule 5). Only consider waiver if North Quay elects to close all-cash and knowingly accept a lien of *verified* size against the hotel — not recommended, and only after a payoff letter and counsel-approved risk analysis. - **Further written extension (Rule 6):** only if (i) a current payoff is in hand, (ii) the residual delay is mechanical (creditor executing the release, insurer papering the escrow), and (iii) the new date still permits the six-week convention opening. Price it: written amendment, **time of the essence**, hard outside date, seller funds the 125% escrow at signing of the amendment, seller pays rate-lock extension, carry, and contractor re-mobilization costs, deposit remains fully refundable, express no-waiver, no further extensions. - **Specific performance:** viable and attractive because the payoff is far smaller than the price — North Quay can offer to **pay the creditor directly out of the purchase price** and reduce the price accordingly. Preserve it by timely notice, honoring the cure period, continuous tender, and never demanding non-contract terms. --- ## 8. Sequence — next seven business days **Day 1 — Wednesday (today)** Send the defect notice (§1). Send the seller the creditor-authorization letter for signature. Instruct escrow to hold the deposit. Order the insurer's written requirement letter and updated judgment/name searches. Notify the lender and request date-change and rate-lock extension approval. Instruct counsel to identify creditor's counsel of record from the docket independently. Tell the contractor to hold the mobilization slot without an irrevocable commitment. **Day 2 — Thursday** Confirm notice receipt and the extended closing date in writing to seller, escrow, insurer, lender. Obtain the signed creditor authorization; counsel transmits the payoff request to creditor's counsel with a stated deadline of **Monday**. Receive the insurer's requirement letter. Begin drafting (i) the escrow agreement, (ii) the price-credit/proceeds-direction amendment, and (iii) irrevocable payoff instructions. Reconfirm the lender's refusal of any exception in writing. **Day 3 — Friday (original closing date)** Do **not** close. Deliver a written tender: North Quay is ready, willing, and able; title is unmarketable and the lender cannot fund; the Rule 2 extension is running; all rights reserved. Deposit remains in escrow. Escalate the payoff request (call creditor's counsel; confirm in writing). **Day 4 — Monday** **Hard checkpoint: payoff letter due.** If received: verify credits and interest math, compute total plus per diem, compute 125%, compare to seller proceeds, and elect Path A (pay + release), B (release in escrow), or C (125% escrow). Submit the payoff to the insurer and lender. If not received: send an escalation letter warning that absent a payoff by Wednesday, no lawful cure is possible and North Quay will terminate on Friday; begin drafting termination and extension papers in parallel. **Day 5 — Tuesday** Insurer issues **written** approval of the chosen path and pro forma owner's/loan policies with the exception deleted. Circulate the creditor's release form and escrow agreement for signature. Verify wire instructions by callback. Lender reviews and approves the escrow agreement and revised settlement statement. **Day 6 — Wednesday** Execute the escrow agreement and any price-credit amendment. Creditor's pre-executed satisfaction/release delivered into escrow. Final settlement statement with proceeds directed to the creditor. North Quay funds/confirms funds. **Decision gate:** if no payoff or no insurer approval exists by end of day, finalize the termination letter and, alternatively, a signed extension amendment for the seller to execute by Thursday noon. **Day 7 — Thursday** Bring-down title search. Lender issues clear-to-fund against the exception-free pro formas. All documents pre-positioned in escrow. Confirm recording logistics for the satisfaction. If the cure is not fully papered, execute either the extension amendment (on §7 terms) or hold the termination letter for Friday delivery. **Day 8 — Friday (extended closing date)** Close: escrow wires the payoff directly to the creditor, records deed, mortgage, and satisfaction, and issues owner's and loan policies with **no exception** for the judgment. **Or** deliver a renewed written tender plus (i) the executed further extension, or (ii) the termination and deposit demand with reservation of specific-performance and damages claims. --- ## 9. Concrete decision rules **CLOSE only if all of these are true:** 1. Current written payoff in the file, signed by the creditor or its counsel, itemizing principal, credits, interest, and costs, good through closing (or per diem funded). 2. Total payoff (plus costs, per diem, recording) is fully funded from seller proceeds, or the shortfall is covered by a purchase-price credit that the lender has approved. 3. Either (a) escrow wires the payoff directly to the creditor against a delivered/recordable release, or (b) an insurer-approved escrow of **≥125%** of the payoff is funded under an insurer-approved agreement. 4. Insurer's **written** commitment to issue owner's **and** loan policies with the judgment exception **deleted**, unconditionally. 5. Lender's written clear-to-fund and, if applicable, approval of the credit and escrow. 6. Clean bring-down search; no new liens, executions, or levies. **EXTEND (further, in writing) only if:** A payoff letter exists and the sole remaining gap is mechanical (creditor signature, insurer paperwork, recording logistics); the seller is documentably cooperating; the new outside date preserves the six-week convention opening with renovation float; and the amendment includes time-of-essence, a hard outside date, seller-funded 125% escrow, seller payment of North Quay's rate-lock/carry/re-mobilization costs, a fully refundable deposit, and express non-waiver. **TERMINATE (deposit refunded; claims reserved) if, by the extended closing date, any of these is true:** 1. No current written payoff — the insurer cannot lawfully insure over (Rule 4), so no cure is possible. 2. The verified payoff plus 125% exceeds available proceeds and the seller refuses a price credit or third-party funding. 3. The insurer will not delete the exception, or the lender will not fund. 4. The seller persists in the $300,000 holdback, a general indemnity, or a post-closing "true-up." 5. The creditor will not commit to release terms, or an execution/levy is pending against the hotel. 6. The cure timeline slips past the point where renovation can deliver the hotel for the convention. **Alternative to termination if North Quay still wants the hotel:** rather than walk, tender specific performance with a proposed price reduction equal to the verified payoff, funds directed to the creditor at closing. Because the payoff is a fraction of $6.4M, this is usually the fastest route to a clean policy — and, on this record, the seller's refusal of it would be the clearest evidence of its own default.