Commercial Real Estate Agreement
In an effort to sell or lease a piece of property, a landlord or real estate agent will often use a commercial real estate nondisclosure agreement.3 min read
2. How to Prepare a Purchase Agreement
3. Estoppels Certificates
4. How to Expedite the Transfer
5. How to Counteract an Unreasonable Commercial Real Estate Agreement
A commercial real estate agreement is needed in several situations. In an effort to sell or lease a piece of property, a landlord or real estate agent will often use a commercial real estate nondisclosure agreement, which allows the agent or landlord to disclose financial or confidential information.
How to Complete a Transfer of Property
In order to complete transfer of property, a purchase agreement is provided, which identifies all the actions both the buyer and seller must take. Also included are:
- Description of the property.
- The agreed upon purchase price.
- Any legal obligations.
Unlike residential transactions, a commercial real estate purchase contract is often uniquely written. The agreement is a binding agreement and is normally a written document that is signed by all parties involved.
How to Prepare a Purchase Agreement
When preparing a purchase agreement, it is important to make sure the property is described in complete detail. Do not rely on previous or outdated descriptions that may not reflect the current condition or description of the property. Failure to provide an accurate description can often lead to zoning issues or boundary disputes and can even be an obstacle if in the future you decide to sell the property.
Be sure to allow yourself enough time to gather all information and details. Timelines are very short in today's world of national and international investors. Reviews, title searches, inspections and assessments all take time, and twenty-one days is often not adequate.
In addition, you may need additional time to review any applicable tenant lease, along with learning and understanding the local zoning ordinances. While many times, transactions are sold, listing no issues, there is almost always a few issues that most likely need to be addressed or considered. Do your due diligence so that you satisfy all legal requirements.
Be sure and address any necessary upgrades on the front end of the deal. New parking lots, HVAC, signage and other repairs are often areas for negotiation but should be discussed in the beginning when agreeing and not after the purchase agreement has been signed. Each state will vary in rules and regulations so it is good practice to gain an understanding of the local taxes and fees where the property is located.
In order to ensure the seller/landlord has fulfilled all the existing lease obligations and to ensure that any obligated work will be completed, always get estoppels certificates from the tenants. Any expenses for the certificates should be addressed and listed in the purchase agreement. Due to time restraints and expense, estoppels certificates are often tempting to dismiss, but they are necessary and should be requested.
How to Expedite the Transfer
To avoid cost in terms of waiting, it is important to evaluate the process periodically. Tying up the property for an extensive amount of time, while waiting on the buyer to investigate or complete obligations only increases the potential risk of an earnest money deposit going hard or becoming nonrefundable. Reviewing timelines and milestones are all a part of the due diligence process and are good practice.
How to Counteract an Unreasonable Commercial Real Estate Agreement
Occasionally, you may see a purchase agreement that is excessive in the request. In order to avoid the buyer from requesting a ridiculous amount of guarantees and warranties to be included in the purchase agreement, you can suggest using the language “to the knowledge of the seller” in the agreement.
Lastly, do not make excuses as to why you should not have an attorney examine the purchase agreement document. Hiring an attorney can clarify uncertainty, which can ensure you don't have surprises on the closing date. A purchase agreement is a legal document, and it is important that a qualified attorney, who understands the intricacies of a purchase agreement, helps all the parties understand the contractual language that is not practiced in everyday language.
In today's global economy, it is not uncommon for transactions to involve people from different cities, states, and even countries. With a professional's assistance, you can ensure that you do not miss important legal consequences caused by intercity or interstate agreements.
Even though attorneys may slow down the process, and fees for a reputable attorney are expensive, the cost is really minimal compared to the expense of fighting an incomplete contractual obligation in court. Do not skip this part of the business transaction because an attorney is your best investment to prevent future problems.
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