Even if you have experience with residential real estate, special considerations apply when purchasing commercial property. Understanding the ins and outs of this type of contract can help you avoid common pitfalls.
Review these commercial contract terms when investing in this type of real estate.
After signing a letter of intent, both the buyer and seller must go through a due diligence period. You and your team will review the property for zoning compliance, environmental issues, necessary renovations and clear title. At this type, you may want to negotiate available extension rights for due diligence, the notice required to terminate the contract if necessary after due diligence, and the amount of insurance coverage required on the property during the due diligence period.
Property description and condition
When you buy an older commercial building, the contract may have legacy language that does not adequately describe the property or its features. Make sure the contract has an accurate update, including current information about the condition of all aspects of the property. You may also want to negotiate upgrades to outdated, damaged or unsafe elements of the building.
Representation and warranties
This section of a commercial property contract is important because it allocates risk among the buyer and seller. These provisions require careful attention, as they cover items such as judgments, liens, litigation, service contracts, environmental issues, subleases, insurance and maintenance obligations.
Professional contract review can limit your company’s risk when signing a purchase contract for commercial property. These agreements tend to be as unique as the properties in question.