What is a Commercial Real Estate Purchase Contract Review?
If you’re purchasing or selling commercial property, you’ll need a commercial real estate purchase contract. This legally-binding contract outlines the entire deal, from who the involved parties are and what the purchase price is to property warranties.
It has to be clear and specific to prevent costly legal disputes or delay the transaction.
Read the rest of this article to learn more about what’s typically included in a commercial real estate purchase contract, how to review it, and why it’s advisable to hire a qualified lawyer to provide a thorough review that gives you peace of mind.
What are Key Terms in a Commercial Real Estate Purchase Contract?
A commercial real estate purchase contract usually contains the following terms and details:
- Parties. The commercial real estate purchase contract usually begins with clear identification of the parties involved, namely the buyer and seller.
- Property details. The commercial property’s physical address, parcel number, and inventory of what’s included in the transaction (such as fixtures) must be detailed.
- Purchase price. This is the agreed-on amount for purchasing the property.
- Payment terms. Besides providing the purchase price, the agreement must also state other payment details that apply, such as down payments and deposit terms.
- Due diligence. The agreement must include a specific time in which the buyer can investigate the property.
- Contingencies. This outlines what conditions must be met before the sale can go ahead, such as the buyer securing financing.
- Representations and warranties. This establishes what guarantees the seller makes to the buyer about the property, such as its condition.
- Closing conditions. This explains what’s included in closing the deal, such as how ownership is transferred.
What are Tips for Reviewing a Commercial Real Estate Purchase Contract?
Take some time to review all terms and clauses in the commercial real estate purchase contract. Here are some tips to guide you.
Check the Property’s Description
All property details included in the agreement must be double-checked for accuracy. This will help you minimize your risk of boundary disputes or zoning problems from invalid or outdated descriptions.
Consider Property Upgrades
Depending on the commercial property being sold, there might be upgrades required, such as the construction of a parking lot or commercial signage. These should be discussed with the other party.
Understand All Taxes and Fees
States vary in their rules, so you want to ensure that the document is aligned with laws in your jurisdiction where the property is located and that all transfer and local taxes are correct.
Establish Payment Methods
When checking the purchase price and payment terms, make sure there’s clarity about how payments will be made, such as if it’s a cash offer or financing through a lender.
Note the Included Items
For clarity between parties, the commercial real estate purchase contract should specify what’s included in the property sale, such as appliances and fixtures. This prevents ambiguity or disputes.
Explain the Earnest Money Deposit
This deposit is a way for the buyer to show good faith that they’re committing to the property purchase. It’s common for this deposit to be around two to five percent of the total purchase price. When the deal goes ahead, the deposit is usually added to the down payment or closing costs. It’s crucial to get details about how this deposit will be used and processed.
Make Sure the Closing Date is Realistic
You want to ensure that the buyer has enough time to get financing and inspect the commercial property. With that in mind, make sure that both parties agree on the closing date so there’s no risk of disputes.
Confirm Default Clauses
The commercial real estate purchase contract must include a clause about what happens if there is a default, such as if the seller or buyer doesn't fulfill their duties as outlined in the agreement. These should be clear so that both parties know the consequences.
How Does a Lawyer Help You with a Commercial Real Estate Purchase Contract Review?
It’s advisable to hire a qualified lawyer to review your commercial real estate purchase contract because they’re experienced in identifying risks and clarifying anything that could be misleading or cause disputes.
A lawyer will conduct a thorough review of your contract by:
- Checking that the purchase price and other payment terms are aligned with the specific transaction.
- Verifying that the property and any assets are accurately described.
- Reviewing contingencies, such as the due diligence period and zoning or land-use approvals.
- Checking title issues, such as liens or mortgages that could disrupt the sale.
- Ensuring all indemnities and liability allocation are properly defined, such as post-closing responsibility limits.
- Identifying any risky clauses that could put you at a disadvantage, such as deposit forfeiture or arbitration requirements.
- Ensuring that all verbal agreements between parties are included in the written contract so that they’re enforceable.
Where to Find a Lawyer for a Commercial Real Estate Purchase Contract Review
If you want to ask a lawyer to review your commercial real estate purchase contract, you don’t have to worry about where to find a reputable one. Online legal platforms make the process easy.
ContractsCounsel is one of the largest online legal marketplaces that gives you access to a curated network of vetted lawyers. All lawyers have years of experience in contract drafting and review.
Here are the steps to follow to request that a qualified lawyer on the platform reviews your commercial real estate purchase contract.
- Go to the ContractsCounsel marketplace.
- Post your project for free. Include a few details to help you find the most suitable lawyer.
- Wait for bids. You’ll receive multiple bids from lawyers directly on the platform who have the experience to help you.
- Review the lawyers’ profiles. Take some time to go through the platform’s extensive lawyer data, such as their location, client ratings for previous projects, expertise, and credentials.
- Connect with a lawyer you think is best suited to your requirements and hire them.
