Purchase and sale agreements for commercial property acquisitions and dispositions.
The purchase agreement sets the entire transaction timeline
Commercial real estate purchase agreements are more heavily negotiated than typical residential contracts, reflecting the property's income potential, zoning, environmental profile and financing structure. Every deadline in the agreement (deposit, due diligence, financing, closing) should be realistic and enforceable.
Due diligence and inspection
The due diligence period is the buyer's window to investigate the property before the deposit becomes non-refundable. It typically covers physical condition, zoning and permitted use, environmental status, leases and tenant estoppels if the property is occupied and financial records if the transaction is income-based.
Title and survey
- Title commitment review for liens, easements and exceptions that could affect use or financing.
- Survey review to confirm boundaries, encroachments and easement locations match the title commitment.
- Negotiating which title objections the seller must cure before closing.
Closing mechanics and foreign-seller withholding
Closing involves coordinating the deed, closing statement, prorations and any lender requirements. When the seller is a foreign person, federal law generally requires withholding on the sale of a U.S. real property interest, and the agreement should address the mechanics of that withholding at closing.
Process
- 1
Letter of intent
Confirm price and key terms before the purchase agreement is drafted.
- 2
Contract negotiation
Negotiate diligence period, contingencies, deposit terms and remedies.
- 3
Diligence
Complete title, survey and property-condition review within the contract window.
- 4
Closing
Finalize closing documents, prorations and any required withholding.
Answers
Frequently asked questions
- Can I cancel the contract during due diligence?
- Most commercial purchase agreements allow the buyer to terminate for any reason during the due diligence period and receive a deposit refund, though the specific terms depend on the negotiated contract language.
- What is title insurance and why is it required?
- Title insurance protects the buyer and any lender against defects in the property's title that were not identified during the title search. It is typically obtained through a title commitment reviewed and cleared before closing.
- What is FIRPTA withholding?
- Federal law generally requires the buyer to withhold a portion of the purchase price when acquiring a U.S. real property interest from a foreign seller and remit it to the IRS, subject to exceptions and reduced-withholding certificates. Current IRS guidance should be confirmed for the specific transaction.
- Can I take title through an entity I haven't formed yet?
- Often yes, through an assignment clause allowing the buyer to designate a related entity to take title at closing. The purchase agreement should expressly permit this to avoid a dispute over who the closing party is.
- What is an estoppel certificate and when do I need one?
- An estoppel certificate is a statement from a tenant confirming lease terms, rent and the absence of landlord defaults. Buyers of leased property typically require estoppels from existing tenants as a closing condition.
Official sources
Consult the official sources above for current rules and procedures.