Drafting a Commercial Real Estate Purchase Agreement

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

When it comes to commercial real estate transactions, having a comprehensive purchase agreement is essential in order to protect the interests of both parties and ensure that the buyer receives everything they are entitled to. The Genie AI team, specialists in providing free commercial real estate purchase agreement templates and guidance, understand the importance of this document.

A purchase agreement should include all terms and conditions of the sale that have been agreed upon between the buyer and seller, including closing date and payment plan, as well as contingencies – allowing either party to back out without penalty – should certain conditions not be met. In addition, dispute resolution provisions should also be included in order to avoid costly litigation if disagreements arise. Finally, there should be a clause allowing either party to terminate the agreement at any point if they choose.

Having an accurate and up-to-date purchase agreement is key for any successful commercial real estate transaction - from start to finish. With this in mind, the Genie AI team has created a step-by-step guide for drafting your own high quality legal documents with their community template library. For more information on their template library or for help drafting your own documents today, read on below!

Definitions (feel free to skip)

Negotiating: Discussing the details of a transaction in order to reach an agreement.
Documenting: Writing down or recording the details of a transaction.
Encumbrances: Restrictions or rights of access granted to third parties, such as utility companies.
Easements: Legal rights to use another person’s land for a specific purpose.
Due Diligence: Research done to assess the trustworthiness of a transaction.
Financing: Obtaining the money needed to purchase a property.
Closing Agent: A professional responsible for overseeing a real estate transaction.
Liens: A legal claim on a property by a creditor.

Contents

• Overview of the Commercial Real Estate Purchase Agreement
• Negotiating and Documenting the Terms of the Agreement
• Describing the parties involved
• Establishing the purchase price
• Specifying the terms of payment
• Addressing potential disputes
• Defining the Property
• Identifying the location of the property
• Listing any improvements or fixtures included in the sale
• Describing any easements or other encumbrances
• Conducting Due Diligence
• Inspecting the property
• Gaining access to documents and records
• Researching zoning and other regulations
• Financing the Property
• Verifying the availability of financing
• Agreeing on the terms of the loan
• Establishing a timeline for closing the transaction
• Closing the Transaction
• Appointing a closing agent
• Verifying the terms of the agreement
• Preparing the closing documents
• Transferring the title
• Reviewing the Terms of the Agreement
• Ensuring all documents are in order
• Verifying that all liabilities are addressed
• Confirming the purchase price
• Addressing Potential Issues
• Identifying any potential problems
• Resolving any outstanding issues
• Executing the Agreement
• Signing the agreement
• Completing any remaining paperwork
• Post-Closing Matters
• Recording the deed
• Distributing the funds
• Issuing any required notices

Get started

Overview of the Commercial Real Estate Purchase Agreement

• Understand the scope of the purchase agreement, including the parties and property involved in the transaction
• Identify the terms and conditions of the agreement, such as the purchase price, closing date, and any contingencies
• Research and evaluate the property to confirm that it meets the buyer’s needs and objectives
• Consider any environmental or zoning issues that may affect the purchase
• When you have gathered all the necessary information and have a good understanding of the terms of the agreement, you will be ready to move on to the next step in drafting a commercial real estate purchase agreement.

Negotiating and Documenting the Terms of the Agreement

• Reach an agreement with the seller on the terms of the deal. This should include the purchase price, closing date, financing details, and any other conditions of the sale.
• Have a real estate attorney review the agreement to ensure that it is compliant with all applicable laws, regulations, and zoning codes.
• Have both the buyer and seller sign and date the agreement.
• Create an escrow account and deposit the buyer’s down payment, if applicable.
• Schedule an inspection of the property, if necessary, and resolve any issues that arise.
• Exchange the necessary documents and funds to complete the sale.

You’ll know you have completed this step when all parties have signed the agreement, the escrow account has been set up, and all necessary documents and funds have been exchanged.

Describing the parties involved

• Identify the seller and purchaser by name and address
• Obtain basic information about the seller and purchaser, such as the company name, contact information, and type of legal entity
• Clearly define each party’s roles and responsibilities
• If a broker is involved, list their name and address in the purchase agreement
• Check that all parties are legally authorized to enter into the agreement
• When all parties have been identified and their information is accurate, you can check this off your list and move on to the next step.

Establishing the purchase price

• Agree on the terms of the purchase price between the buyer and the seller
• The purchase price should be determined by both parties and is usually based on a fair market value assessment of the property
• The purchase price should also include any additional costs such as closing costs, appraisal fees, and title insurance
• Once the purchase price has been agreed upon and included in the purchase agreement, it should be considered binding
• Once the purchase price has been established, you can move on to the next step of specifying the terms of payment.

Specifying the terms of payment

• Determine the method of payment (e.g. cash, check, etc.)
• Agree on whether or not the payment will be made in a lump sum or in installments
• Determine the amount of the down payment and when the payment must be made
• Agree on the payment schedule (including the due date for any installment payments)
• Determine if any additional fees or costs will be associated with the purchase

When you have agreed upon the terms of payment, you can check this off your list and move on to the next step.

Addressing potential disputes

• Set out the dispute resolution process: This should include the process for resolving any disputes that arise in the purchase of the property. It should cover the processes for both negotiation and mediation, as well as the procedure for filing a lawsuit, if necessary.
• Outline the applicable governing law: This should state which state’s laws will be applied to any potential disputes.
• Include a clause for attorney’s fees: This should state that the prevailing party in any dispute will be awarded their attorney’s fees by the other party.
• When you’ve addressed all potential disputes, you can check this step off your list and move on to defining the property.

Defining the Property

• Determine the exact legal description of the property
• Research the zoning restrictions, such as permitted uses, setbacks, etc.
• Determine the total acreage of the property
• Identify any easements or restrictions that may affect the property
• Include a legal description of any fixtures or personal property included in the sale
• Once all of the above have been included in the purchase agreement, you can move forward to the next step.

Identifying the location of the property

• Verify the legal description of the property, including any zoning and lot designations.
• Make sure the address is accurate and corresponds to the legal description.
• Check that any outbuildings, such as sheds or garages, are included in the address.
• Make sure the boundaries of the property are accurately described.

When you have identified the exact legal description and address of the property, you can check this step off your list and move on to the next step.

Listing any improvements or fixtures included in the sale

• Take inventory of any improvements or fixtures that are included in the sale of the commercial real estate property
• This could include air conditioning units, elevators, fencing, or any other fixtures or improvements that are included in the sale
• Make sure to accurately list all improvements and fixtures that are included in the sale
• Once you have compiled a list of all improvements or fixtures included in the sale, add this list to the Commercial Real Estate Purchase Agreement
• Once all improvements and fixtures have been listed in the agreement, you can move on to the next step of describing any easements or other encumbrances.

Describing any easements or other encumbrances

• Obtain a copy of the title search report to identify any existing easements or encumbrances on the property.
• Determine if any of the easements or encumbrances need to be listed in the purchase agreement.
• If any easements or encumbrances need to be listed, then carefully describe them in the purchase agreement.
• Make sure to include any restrictions or limitations associated with the easements or encumbrances.
• Once all easements or encumbrances have been listed, you can check this off your list and move on to conducting due diligence.

Conducting Due Diligence

• Gather all the necessary documents, such as the property deed, survey, title report, and any other relevant documents
• Review all documents thoroughly and ensure that the information is accurate
• Consider hiring a professional to conduct an environmental assessment of the property to identify any potential issues
• Research local zoning laws and other ordinances that could affect the property
• Research any existing liens on the property and determine if they will need to be cleared prior to closing
• Determine if any additional permits or licenses will be necessary prior to closing
• When you are finished with your due diligence, you can move on to the next step of inspecting the property.

Inspecting the property

• Visit the property in person and take a tour of the building
• Make notes about any existing issues or potential improvements that need to be addressed
• Check the condition of the physical structure, systems, and equipment
• Take pictures of the property and any issues that should be noted in the purchase agreement
• When you have completed the inspection, you can move on to the next step of gaining access to documents and records.

Gaining access to documents and records

• Make a list of all documents and records that you need to access in order to draft the commercial real estate purchase agreement
• Contact the owner or their agent to request access to the documents and records
• If the documents and records are stored off-site, arrange for transportation and access to the documents and records
• Review the documents and records to ensure they are accurate and up-to-date
• Once you have access to all of the documents and records needed, you can check off this step and move on to researching zoning and other regulations for the property.

Researching zoning and other regulations

• Research the zoning laws, building codes, environmental regulations, and other applicable regulations in the jurisdiction where the property is located.
• Contact the local government office responsible for enforcing regulations and request copies of relevant documents.
• Analyze the documents and records to ensure that the property complies with all applicable regulations.
• Research any other applicable regulations, such as local ordinances, which may affect the use and occupancy of the property.
• When you have completed your research, gather all relevant documents and records together for review by your lawyer.

Once you have gathered all relevant documents and records, you can check this step off your list and move on to financing the property.

Financing the Property

• Contact a lender or financial institution to arrange for financing
• Submit the required documents and information (such as credit score, income, assets, etc.) to the lender or financial institution
• Negotiate the terms of the loan
• Execute the loan documents
• Ensure that the loan is funded when closing on the property

Once you have arranged for financing, you will be able to check this step off your list and move onto the next step.

Verifying the availability of financing

• Contact the lender to ensure that the loan you need for the purchase is available
• Negotiate the terms of the loan and ensure that the loan amount and repayment plans are agreeable
• Make sure that all other conditions that the lender has set are met
• Have the lender commit to providing the loan and sign any documents needed to confirm this commitment
• Once the lender has confirmed their commitment and all conditions are met, you can move on to the next step
  of agreeing on the terms of the loan.

Agreeing on the terms of the loan

• Confirm the loan term, interest rate, and any other important details with the lender.
• Discuss the amortization schedule and any other due dates/payments with the lender.
• Have the buyer sign a loan application if necessary.
• Have the buyer provide any necessary documents to the lender.
• Obtain the lender’s commitment letter or other necessary documents.
• When the lender’s commitment letter has been received, the terms of the loan will have been agreed upon and the buyer can move on to the next step.

Establishing a timeline for closing the transaction

• Contact the mortgage lender to obtain information on their process and timeline for closing the loan
• Agree on a closing date with the seller
• Determine the timeline for due diligence, including the date of delivery of documents, the date of expiration of the due diligence period, and date of closing
• Request a closing date that allows enough time to complete all contingencies
• Include all of these dates in the purchase agreement
• Once the timeline is established and agreed upon, you should have a closing date that works for both the buyer and seller and is included in the purchase agreement - you can check this off your list and move on to the next step.

Closing the Transaction

• Secure signatures from all parties on all documents
• Ensure that all closing conditions have been met
• Ensure that all closing funds have been received by the appropriate parties
• Submit final closing statement to all parties
• Record the deed and other closing documents with the county recorder
• Once all of the above steps have been completed, the transaction is officially closed and the deed is now in the buyer’s name
• Check off this step and move on to appointing a closing agent

Appointing a closing agent

• Decide who will act as the closing agent and select them.
• Make sure that the closing agent is licensed to practice law in the applicable state(s) and has the experience and expertise necessary to handle the closing of the transaction.
• Confirm that the selected closing agent is available and willing to act as the closing agent.
• Once the closing agent is selected, the parties will need to agree on the terms of the engagement and the fees payable for the closing agent’s services.
• Obtain a written agreement from the closing agent confirming the terms of their engagement.
• You’ll know you can check this off your list when you have both agreed on the terms of the closing agent’s engagement and you have obtained a written agreement from the closing agent.

Verifying the terms of the agreement

• Review the purchase agreement document and make sure that all terms and conditions are consistent with the verbal agreement between the buyer and seller.
• Confirm that the seller has the right to transfer the property in question, that all taxes and fees have been paid, and that all zoning laws have been met.
• Ensure that the purchase agreement document lists both the buyer and seller’s contact information, legal addresses, and signatures.
• Make sure that the purchase agreement document states the purchase price and the terms of payment.
• Verify that the document lists the exact property address, legal description, and any other relevant details.
• Make sure all contingencies are included in the purchase agreement document.

Once you have verified all the terms of the agreement, you can check this step off your list and move on to the next step.

Preparing the closing documents

• Obtain the closing documents from the seller, including the deed, title, survey, and other documents necessary for the closing
• Have an attorney review the closing documents to ensure everything is in order
• Make any necessary changes to the closing documents, such as the purchase price, closing date, and other conditions
• Have both the buyer and seller sign the closing documents
• When all the closing documents are signed by both parties, you can move on to the next step of transferring the title.

Transferring the title

• Obtain a title report from the appropriate county recorder’s office to ensure that the buyer is acquiring a marketable title.
• Have the title company or closing agent prepare the deed transferring title from the seller to the buyer.
• Have the seller sign the deed.
• Have the deed recorded with the appropriate county recorder.
• Once the deed has been recorded, you will have completed the title transfer portion of the real estate purchase agreement.

Reviewing the Terms of the Agreement

• Carefully review the terms of the agreement and make sure that it accurately reflects the negotiated terms between the parties
• Ensure that all of the essential elements are present, such as the purchase price, closing date, and any contingencies that may apply
• Take note of any additional conditions or requirements that must be satisfied prior to closing
• Ask questions and seek clarification from the other party if anything mentioned in the contract is unclear
• Once you have a thorough understanding of all of the terms and conditions of the agreement, you can proceed to the next step.

Ensuring all documents are in order

• Gather all documents related to the purchase agreement including any leases, surveys, appraisals, title insurance policies, and any other relevant documents
• Ensure all documents are up to date and accurate
• Review all documents to ensure they match the terms of the purchase agreement
• Request any necessary changes or updates to documents
• Check that all documents are signed by all parties
• You know you can check this off your list and move on to the next step when all documents are up to date, accurate, and signed by all parties.

Verifying that all liabilities are addressed

• Review the purchase agreement to ensure that any outstanding liabilities of the seller are addressed in the agreement.
• Review the purchase agreement to ensure that any outstanding liabilities of the buyer are addressed in the agreement.
• Request and review evidence of payment of any outstanding debts or liabilities of the seller.
• Request and review evidence of payment of any outstanding debts or liabilities of the buyer.
• Confirm that all liabilities of both parties have been addressed in the purchase agreement.
• Confirm that all evidence of payment of any outstanding debts or liabilities of both parties have been provided.

Once you have confirmed that all liabilities of both parties have been addressed in the purchase agreement and that all evidence of payment of any outstanding debts or liabilities of both parties have been provided, you can check this step off your list and move on to the next step of confirming the purchase price.

Confirming the purchase price

• Negotiate with the seller to arrive at a mutually agreed-upon purchase price.
• Determine whether the purchase price includes any additional items such as furniture, appliances, etc.
• Make sure that any potential contingencies, such as obtaining financing, have been taken into account in the purchase price.
• Once the purchase price has been agreed upon, the seller and buyer should sign the purchase agreement confirming the agreed-upon purchase price.
• You will know that you have completed this step when the purchase agreement has been signed by both parties.

Addressing Potential Issues

• Identify any potential problems that could arise from the sale, such as title issues, zoning or environmental problems, or a need for repairs
• Determine how you and the seller will handle any problems that may arise from the sale
• Consider having a professional inspect the premises to help uncover any issues that might not be immediately apparent
• Include provisions in the purchase agreement that address any potential legal or other issues that could arise from the sale
• Once you and the seller have agreed on how to address any potential issues, you can check this off your list and move on to the next step.

Identifying any potential problems

• Research local zoning ordinances, title issues, and deed restrictions that may affect the property
• Consult with an attorney to ensure that any potential issues are identified before entering into a purchase agreement
• Have a licensed real estate appraiser conduct an appraisal to determine the fair market value of the property
• Determine if the property is subject to any pending litigation or legal actions
• Review the title search report and verify that the title is marketable
• Make sure that all required permits and licenses are up to date
• Contact the local building authority to ensure that the property is in compliance with building codes

Once all potential issues have been identified, you can move on to the next step of resolving any outstanding issues.

Resolving any outstanding issues

• Identify any potential problems that have been identified in the due diligence process and work to resolve them
• Develop a resolution strategy that meets the interests of all parties involved
• Make sure the resolution is clearly outlined in the agreement
• Obtain any necessary third-party approvals or documentation
• Make sure that all parties involved understand the resolution and agree to its terms
• When all issues have been resolved and all parties have agreed to the resolution, you can check this off your list and move on to executing the agreement.

Executing the Agreement

• Have a lawyer review and approve the agreement
• Make sure the agreement is signed by all relevant parties
• Have all relevant documents, such as title reports, surveys, and other documents related to the real estate, ready to be submitted
• Finalize the agreement and have all parties confirm that the agreement is complete
• Once all parties have signed the agreement and all relevant documents have been submitted, the agreement has been executed and the process is complete

You’ll know you can check off this step and move on to the next step when all parties have signed the agreement and all relevant documents have been submitted.

Signing the agreement

• Obtain the signatures of all parties listed in the agreement
• Have the agreement notarized by an official notary
• If any additional documents are required to be signed, such as an escrow agreement, make sure to obtain the signatures of all parties specified
• Check that all signatures are present and all documents are properly filled out
• When all signatures are obtained and all documents are signed, the agreement is ready to be completed and the purchase process can move forward.

Completing any remaining paperwork

• Gather all relevant documents, such as the Notice of Transfer, signed Transfer Agreement, and Deeds
• Complete any remaining paperwork, such as any assignment or estoppel certificates
• Notify all parties to the agreement that the paperwork is completed and signed
• Check with the appropriate government agency to make sure the deed is recorded
• When all paperwork is completed and signed, you can proceed to the next step: Post-Closing Matters.

Post-Closing Matters

• Ensure that all closing documents are signed, notarized, and delivered to the appropriate parties
• Schedule and coordinate delivery of any keys or access cards
• Confirm that all closing funds have been deposited and that any loan documents are in order
• Confirm that all title documents have been recorded
• Confirm that all necessary transfer taxes have been paid
• Confirm that all necessary insurance policies have been transferred

When all of the above items have been completed and verified, this step will have been successfully completed and you can move on to the next step.

Recording the deed

• Record the deed with the county recorder in the county where the property is located.
• Include the names of the buyer and seller, the legal description of the property, and a copy of the deed that was signed by both parties.
• Pay the associated recording fee.
• Once the deed is recorded, you can check this off your list and move on to the next step of distributing the funds.

Distributing the funds

• Ensure that all parties to the agreement have received their respective deposits in accordance with the terms of the purchase agreement.
• Obtain a written receipt from each of the parties confirming that they have received the respective deposits.
• When all parties have received the deposits and have provided written acknowledgement, the funds have been successfully distributed.

Issuing any required notices

• Notify all parties of the signed purchase agreement, including any lien holders
• Provide notice to any tenant of any improvements to the real estate that are being sold
• Provide notice to any tenant of any changes in the terms of their lease, if applicable
• Provide notice to any tenant of any effect on their occupancy of the real estate, if applicable
• Notify all parties of the closing date and time
• Once all notices have been issued and all parties have been notified, this step can be checked off the list.

FAQ:

Q: Does the law differ across jurisdictions when it comes to drafting a commercial real estate purchase agreement?

Asked by Peter on April 5th 2022.
A: Yes, the law does differ across jurisdictions when it comes to drafting a commercial real estate purchase agreement. The law changes from country to country, and in some cases, even within different states or provinces. In the United States, for example, there are different laws in each state that govern the drafting of such agreements. In Europe, there are also different laws in each country that govern the drafting of such agreements. It is important to consult a qualified lawyer who is familiar with the laws of your jurisdiction before you draft any legal documents.

Q: What information should be included in a commercial real estate purchase agreement?

Asked by Julia on August 15th 2022.
A: A commercial real estate purchase agreement should include all of the details related to the transaction, including the purchase price, closing costs, deposits, and other financial arrangements. It should also include any restrictions on the property and any conditions related to its use or transferability. Additionally, it should include provisions for title insurance and lien releases, as well as provisions for dispute resolution.

Q: What steps should I take to ensure that my commercial real estate purchase agreement is legally binding?

Asked by Logan on June 22nd 2022.
A: When drafting a commercial real estate purchase agreement, it is important to ensure that all of the terms and conditions included in the document are legally binding. First, make sure that all parties involved understand and agree to all of the terms and conditions included in the document. Second, have an attorney review it to ensure that it is legally sound and all of its terms are binding. Finally, you should have both parties sign the document in front of a notary public or other witness who can attest to its validity.

Q: Is it possible to modify an existing commercial real estate purchase agreement?

Asked by Emily on February 3rd 2022.
A: Yes, it is possible to modify an existing commercial real estate purchase agreement as long as all parties involved agree to do so. However, it is important to note that any modifications must comply with applicable state or federal laws and regulations and should be reviewed by an attorney before being implemented. Additionally, you may need to obtain approval from any lenders involved with the transaction before making any changes to the agreement.

Q: What kind of risks am I taking by entering into a commercial real estate purchase agreement?

Asked by Matthew on October 5th 2022.
A: When entering into a commercial real estate purchase agreement there are several risks that should be taken into consideration. First and foremost is ensuring that you are getting what you pay for; this includes making sure all of the terms and conditions in the contract are legally binding and that any lien releases or title insurance requirements are met. Additionally, you may face unexpected delays or costs due to unforeseen circumstances such as environmental issues or zoning changes. Finally, if you fail to comply with any of the terms in the contract you may be liable for damages or other penalties under applicable law.

Q: How can I protect my interests when entering into a commercial real estate purchase agreement?

Asked by Madison on July 28th 2022.
A: The best way to protect your interests when entering into a commercial real estate purchase agreement is to work with an experienced attorney who can review all of your documents and help you understand your rights and responsibilities under applicable law. Additionally, you should make sure that all parties involved understand their rights and obligations under the contract before signing anything. Finally, you should make sure that any lien releases or title insurance requirements are met before closing on the property so that you are protected from any potential liability after closing.

Q: What factors should I consider when negotiating a commercial real estate purchase agreement?

Asked by Michael on December 6th 2022.
A: When negotiating a commercial real estate purchase agreement there are several factors that must be considered in order for it to be successful for both parties involved. First and foremost is ensuring that all parties understand their rights and obligations under applicable law; this includes making sure all of the terms and conditions in the contract are legally binding and enforceable in court if necessary. Additionally, you will need to consider things like deposits and closing costs as well as any restrictions on use or transferability of the property itself; these may have an impact on both sides of the transaction so must be taken into account when negotiating your contract terms. Finally, you may want to consider provisions for dispute resolution so that if any issues arise during or after closing they can be resolved quickly without having to go through costly litigation processes down the line.

Example dispute

Suing for Breach of a Commercial Real Estate Purchase Agreement

• Plaintiff must prove that the defendant breached the agreement, such as failing to make payments, not following the closing timeline, or not performing other duties as stated in the agreement.
• The plaintiff must provide evidence of the breach, such as documents or emails that show the defendant was in breach of the agreement.
• The plaintiff may seek damages for the breach, such as lost profits, lost rent, and/or punitive damages.
• Damages can be calculated by determining the market value of the property at the time of the breach, calculating the amount of rent that was lost, or determining the amount of money that would have been made if the breach had not occurred.
• The court may order the defendant to fulfill the agreement and provide restitution to the plaintiff.
• The court may

‍