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Navigating Common Provisions in Commercial Real Estate Purchases

When you’re ready to buy a commercial property, you’ll likely do so through a purchase agreement. These agreements are usually between the buyer and seller, but they can also involve other parties like brokers, landlords, and tenants. Most CRE purchase agreements will contain common provisions that are found in many other types of contracts. However, there are a few provisions that are unique to CRE purchase agreements and it is important to understand what these provisions mean before signing on the dotted line.

The following is a list of common provisions found in CRE purchase agreements:

  1. Offer: This provision contains the offer made by the buyer to the seller. It should include all pertinent information about the property being purchased, such as the price, terms of the sale, and any contingencies that must be met.
  2. Acceptance: The acceptance provision contains the seller’s acceptance of the buyer’s offer. Once this provision is signed, the contract is binding on both parties.
  3. Closing: The closing provision details when and where the transaction will take place, and who is responsible for paying closing costs. It is important to note that in some cases, the closing date may be contingent upon satisfying certain conditions, such as obtaining financing or completing necessary repairs.
  4. Possession: The possession provision dictates when possession of the property will be transferred from the seller to the buyer. In most cases, possession is transferred at the time of closing. However, in some instances, possession may be delayed until after closing has occurred.
  5. Warranties: Many CRE purchase agreements contain warranties from the seller regarding the condition of the property being purchased. These warranties can cover a wide range of issues, such as defects in title or physical problems with the property, and they are typically binding upon both parties.
  6. Financing: The financing provision dictates who is responsible for obtaining any necessary financing to complete the purchase. It should include information about the type of loan being obtained, the length of the loan, interest rate, and any other conditions related to financing.
  7. Default: The default provision outlines what happens if either party fails to perform its obligations under the agreement. In most cases, it will result in a breach of contract and may give rise to legal action by one or both parties.
  8. Assignment and Consent Rights: This provision dictates the rights of each party to assign or transfer its rights and obligations under the agreement, as well as any necessary consents that must be obtained prior to such an assignment or transfer.

These are just a few of the common provisions found in CRE purchase agreements. It is important to fully understand all of these provisions before signing any agreement, and it may be beneficial to consult with an attorney experienced in real estate law for additional guidance. It also is ideal to equip yourself with What You Need To Understand Before Signing A Commercial Lease.

Navigating common provisions in commercial real estate purchases can be overwhelming and intimidating. However, with the right knowledge and by taking the time to understand each provision, you can confidently navigate through a commercial real estate purchase agreement. Utilizing trusted advisors such as experienced attorneys or accountants will also assist you in making informed decisions on the best path forward for your commercial real estate venture.

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