Understanding commercial real estate contract provisions

Understanding commercial real estate contract provisions

| Jun 22, 2021 | Real Estate |

Commercial real estate can be an appealing investment option for people in Hawai’i and around the country. For business owners, dealing with commercial property contracts is a necessity to expand your company into the brick and mortar space. When preparing to buy and sell commercial real estate, however, there are many issues to keep in mind. The contracts involved in these transactions may be complex and unfamiliar, especially if you have only dealt with residential properties in the past.

Negotiating your commercial real estate contract

The contract of sale is meant to lay out both parties’ obligations, responsibilities and rights. When it involves a commercial property transaction, the document can be as short as a few pages or as long as many novels. The contract should provide clarity, regardless of length; in many cases, a longer contract may prove simpler to understand and deal with than a short document. You can expect both parties to make revisions to the initial draft before it is signed.

What you can expect to find in the contract

The contract text should include “whereas” clauses, which describe some facts. However, if this is meant to provide a binding obligation or right, it should be moved elsewhere in the document. It should also lay out a full and complete description of the commercial real estate, including any legal descriptions or survey terms, any necessary licenses, mineral or water rights, and whether the property is being sold “as-is,” without the seller promising a certain condition of the real estate.

Of course, the contract will also deal with legal documents like the property deed, the purchase price and any deposit, and contingencies that may affect the buyer’s completion of the deal. All of these may be subject to negotiation throughout the process, and a real estate attorney may help you to represent your rights and interests while concluding your transaction.