• Maria Chernetska

Which types of contracts are related to commercial real estate?

The purchase and sale agreement (the “PSA”) is the central document for the sale of commercial real property and one of the most important.


The terms of the agreement are negotiated between buyer and seller often after a letter of intent (“LOI”) has been signed, although sometimes the parties may forego an LOI and jump straight to the PSA. For best practices, an LOI should be used to ensure the parties agree on the basic terms of the sale before investing time and energy into negotiating the PSA, which is often a lengthy and time-consuming process involving multiple rounds of revisions before an agreement acceptable to both sides is reached.


Under the law, a legally binding contract has six elements.


  • The seller must offer a property or service,

  • The buyer agrees to show legal acceptance,

  • Both parties mutually oblige to the terms,

  • The buyer gives something of value legally called a consideration,

  • The buyer, seller, and broker have the legal capacity to perform such actions,

  • Lastly, the contract conforms to the Uniform Commercial Code (UCC).


Below is a list of common sections included in Commercial Real Estate Purchase Agreements. These sections are linked to the below sample agreement for you to explore.


  • SALE OF PROPERTY

  • TITLE AND SURVEY

  • INSPECTION AND DUE DILIGENCE PERIOD

  • REPRESENTATIONS, WARRANTIES, AND COVENANTS

  • CLOSING

  • TERMINATION AND DEFAULT

  • CASUALTY DAMAGE OR CONDEMNATION

  • REAL ESTATE COMMISSION

  • MISCELLANEOUS

Your commercial broker should have the standard government-approved contract form that is commonly used for the purchase and sale of commercial properties. On this form, which has many pages, you will find all kinds of articles to cover all the situations that might come up. Ask your broker to provide you with a copy of this form to help you familiarize yourself with it.


There are some disadvantages when using your government-approved form, however. The main drawback is that the approved form likely contains several clauses that you may not want to include in your agreement. There's nothing to worry about. You can use a simple addendum to delete or modify any language so that it sounds exactly as you wish. The secret is to place the addendum at the end of the model agreement so that you can make your changes after the dealer and seller have come through all the good things, officially ringing.


A real estate purchase agreement is a definitive legal document that details the particular terms and conditions under which a property will be sold. Built to protect both buyers and sellers, and to ensure a smooth transaction, it’s designed to help you avoid hiccups by accounting for variables associated with selling a home.
3 views0 comments