[bouldercouncilhotline] Hotline: Proposed Purchase of the Hospital

[cmosupport at bouldercolorado.gov]

Sender: Cowles, Macon

Sorry to get this to you so late, Tom and Jane. But I have concerns about the provisions of the Agreement in Principle and Letter of Intent (they are not the same) that we will be considering at the Special Meeting tonight. There are four main points, described in the following:

The provisions of the “Agreement in Principle” described in the packet at p. 4 are not the same as those in Boulder Health’s proposed Letter of Intent attached to the 9-page packet.
1. Conditions for Refund of the Earnest Money
As an example of how the provisions differ, the description of the Agreement in Principle says that the $3M deposit is non-refundable unless, [presumably “at the sole discretion of the City” is intended] either the environmental assessment or the building inspection is “unacceptable.” See p. 4.

Contrariwise, the Letter of Intent says that the $3M deposit is non-refundable “immediately after the Boulder City Council approves this agreement by a motion on July 14, 2015, only subject to Seller default and Seller's Board approval described below in paragraph 7.”  See Letter of Intent, ¶¶ 3 and 7. In other words, the $3M is refundable only if the Hospital Board does not approve the agreement (presumably the Letter of Intent) or if the Hospital otherwise decides not to sell the property to the City.

2. Building Inspection, Environmental Assessment and Sole Discretion of the City

The Letter of Intent is silent about the Building Inspection and the Environmental Assessment, while the description of the Agreement in Principle requires that the Inspection and Assessment be “acceptable” as a condition to the City’s obligation to close on the property. It is not stated who determines whether the Inspection and Assessment are acceptable. It is normal in such contracts to state that it is the buyer’s sole discretion that will determine whether or not the Inspection and Assessment are acceptable.

The Letter of Intent is quite clear on this: the City forfeits the $3M deposit even if the City finds the Assessment or Inspection to be unacceptable.

I have been told that there was a gas station on part of the site. This does raise a question about whether environmental remediation may be required, and if it is required, than can be quite expensive. This expense can become a material element of the contract between seller and buyer. It does not seem fair that before the City and BCH have entered into a final contract, the risk of environmental cleanup should be shifted to the City.

3. Merchantability of Title
It is highly unusual for earnest money to be non-refundable before the seller produces and the buyer reviews and accepts the state of the title, including active leases as well as encumbrances.

4. Rent for the post closing occupancy of the site
The description of the Agreement in Principle, last bullet p. 4, and the Letter or Intent, ¶6, both state that the seller will continue to occupy the property for two years after closing. But there is no agreement as to the amount of rent that will be paid for this occupancy. The amount of rent is a material provision that should be included in the agreement.

Summary: No delay to closing

The City is acting without delay to enter into a contract that meets the needs of Boulder Health. No lack of interest in closing this deal should be implied by the advice that I have which is this:  The $3M earnest money should become non-refundable only after the city had determined, in its sole discretion, that the Environmental Assessment, the Building Inspection and the state of the title is acceptable to the City.    
I look forward to our discussion of this tonight.

Macon Cowles
Boulder City Council Member
1726 Mapleton Ave.
Boulder, Colorado 80304
CowlesM at bouldercolorado.gov
(303) 638-6884