Louisiana Commercial Purchase Agreement
Louisiana commercial purchase agreement is an agreement to buy or sell a commercial property and also an important document when buying a property.4 min read
Louisiana commercial purchase agreement is an agreement to buy or sell a commercial property. A purchase agreement is an important document. Not having a purchase agreement can delay or complicate the deal.
Use of Mandatory Purchase Agreements in Louisiana
While buying or selling a residential property in Louisiana, you must use the Louisiana Residential Agreement to Buy or Sell.
According to the Louisiana Real Estate Commission (LREC) rules, the licensees representing a buyer or a seller of residential real estate must use the Residential Agreement to buy or sell as the purchase agreement form. The standard Residential Agreement to Buy or Sell is available on the Louisiana Real Estate Commission website.
Consistency in using a standard purchase agreement form reduces the scope of one party taking an unfair advantage of the other by using tricky language.
If the buyer refuses to use the standard form prescribed by LREC, the real estate agent should take the following steps:
- Advise his client about the potential risks associated with using a non-standard form.
- Advise his client to get all the offers, counter-offers and terms of purchase reviewed by an attorney.
- Document his file stating the above facts.
Commercial Real Estate Listing Agreements
Most of the commercial real estate sales begin with the seller hiring a broker to sell his property. While choosing a broker, the seller may consider a number of factors like past dealings, broker's background and the amount of commission.
The next step involves executing a listing agreement. Brokers usually prepare it by customizing a standard form for the proposed transaction. Different brokers may use different listing agreements. However, most of the listing agreements are similar in substance, and almost all the terms of the agreement are negotiable.
Many states protect the broker's right to receive a commission. Often, a broker is entitled to receive a commission simply by procuring a buyer willing to buy the property, at the seller's price, irrespective of whether the deal closes or not. Even if the state legislation may not mandate such conditions, listing agreements often contain these provisions. While this may be good for protecting the broker, it may force the seller to pay commission even if the property remains unsold.
Most of the brokers do not object to adding a clause to make the commission conditional upon closing the sale. Moreover, it's in the interest of the seller to elaborate on this condition, so that no compensation or reimbursement, except certain fees and expenses, is payable to the broker before the sale of the property. For example, as a seller, you may not want to pay any part of forfeited deposit to the broker or reimburse any unexpected expenses incurred by him.
While a broker would generally agree to the payment of commission upon closing the sale, he may want to have some sort of protection against losing his commission in the event of the seller entering into an alternative transaction, instead of selling the property. An alternative transaction usually includes deals like, transferring the ownership interest in the entity owning the property, leasing out the property or forming a joint venture to develop the property.
Brokers are usually cautious about situations wherein unscrupulous sellers may wait for the listing to expire before formally closing a deal in order to avoid paying a commission. To preempt this risk, most listing agreements require the seller to pay commission if he sells the property to a buyer introduced by the broker during the listing period.
The language used in some listing agreements may create an implied obligation on the seller to accept an offer that meets the listing price. The seller should insist on removal of such language and clearly provide in the agreement that he is free to accept or reject any offer at his sole discretion.
Listing agreements are usually made for a certain period of time. However, sometimes, the seller may not be satisfied with the broker's efforts and may want to hire the services of another broker. Hence, the seller should retain the right to terminate the listing, with or without notice, depending upon the reason for such termination.
Another important provision to negotiate is that of indemnification. Brokers usually require the seller to indemnify them if any property-related claim is made against them. As a seller, you may not want to have a broad indemnity provision that makes you responsible for a third party's conduct. So, the indemnity clause should be framed in a manner that you are held responsible only for your own conduct.
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