Commercial Real Estate Purchase Contracts

Your commercial real estate purchase contract should include industry standardized language to ensure your rights are protected properly.

Representations and Warranties

You might think that representations and warranties in commercial real estate purchase contracts are set in stone; however, everything in a contract can be negotiated, so you don't have to agree to any terms or conditions unless you want them. The other party to the agreement must be willing to negotiate, or you will have to go elsewhere. Some special guarantees that can be negotiated include, but are not limited to:

• Guarantee that rental property income is accurately quoted;
• Guarantee as to the condition of any building or land; or
• The property can be sold without any guarantees at all.

Your lawyer may wish to add a clause indicating that all guarantees are to the best of the party's knowledge to protect you from any undiscovered facts at the time of purchase.

What Happens If One Party Backs Out?

Usually, the sales agreement will specifically say what is to happen in the event the sale does not go through as a result of either party's choice. You will need to ask your attorney for any terms you would like before signing any paperwork. Sometimes a fee, deposit and/or liquidated damages can result from failure to close an agreement. On the other hand, if the sale does not go through due to unmet conditions to the contract, then you may be entitled to a remedy for the other party's failure to comply with the agreement.

Get It in Writing

The law states that in order for a land purchase contract to be enforceable, it must be in writing. You cannot rely on someones word or a handshake in real estate transactions, you must get it in writing if you want to make sure the agreement can be enforced. The agreement should at a minimum describe the property to be purchased and the agreed upon price. Of course, it is recommended that you include other terms to protect your rights.

Getting Legal Advice

If you are purchasing or selling commercial property, you will be well served if you hire an experienced real estate attorney in your state. An attorney will help you understand your contract and draft any part of the agreement necessary given your specific circumstances. In case of any litigation resulting from the contract, an attorney can assist you every step of the way.