Safeguard Your Real Estate Investment With A Well-Crafted Contract
Commercial real estate contracts require a higher level of knowledge and experience, as commercial property agreements involve terms not found in personal property contracts. At Simkin & Associates, we provide guidance for commercial entities looking to buy, sell, manage or develop real property.
Commercial real property can include high-rise office buildings, malls, hotels or restaurants, warehouses, commercial docks, storage facilities and more.
Common Commercial Real Estate Disputes
Commercial real estate agreement disputes frequently involve:
- Purchasing
- Selling
- Leasing of property
- Claims of:
- Fraud
- Misrepresentation
- Unfair business practices
- Conversion
- Construction disputes or defects
Answers To Common Questions About Commercial Contracts
Commercial real estate transactions involve complex legal considerations that differ significantly from residential deals. The answers to these questions can offer crucial guidance.
What contingencies are essential for a buyer to include in a California commercial purchase agreement?
Buyers should negotiate contingencies that protect their investment. Common commercial-specific contingencies include:
- Zoning/entitlement contingency to confirm the property may legally support the buyer’s intended operations
- Tenant/lease review contingency to evaluate existing leases, rental income and tenant obligations
- Environmental review contingency to assess potential contamination or regulatory issues
- Financing contingency to allow withdrawal if loan terms are unfavorable or funding is denied
The right contingencies provide a structured exit strategy and help buyers avoid costly surprises after closing.
Why does the “time is of the essence” clause mean in a California commercial real estate contract, and who gains the most from it?
Including this clause makes all contract deadlines legally binding and enforceable. If a party fails to meet a deadline, it is considered a material breach of contract. Unlike residential transactions, where delays may be tolerated, commercial contracts with this clause impose strict performance expectations.
The clause best benefits the party that is prepared to perform and wants to hold the other party accountable to the agreed timeline. It is especially useful in competitive markets or time-sensitive deals.
In what ways does the earnest money deposit structure differ between commercial and residential transactions in California?
In commercial transactions, earnest money deposits are more flexible and subject to negotiation than those in residential agreements. The amount varies based on deal size and risk tolerance. A critical milestone is the date the deposit becomes “hard,” meaning nonrefundable, which typically occurs after the due diligence period ends.
Once the deposit is hard, it often serves as the seller’s sole remedy if the buyer defaults, functioning as liquidated damages. Buyers should carefully track this timeline and work to resolve issues before the deposit becomes nonrefundable.
As a commercial seller in California, which property disclosure obligations can be legally limited?
Commercial sellers face fewer disclosure obligations than residential sellers. Most commercial properties are sold “as-is,” and sellers are not required to complete a Transfer Disclosure Statement. However, they must still disclose known material defects and environmental hazards.
The duty to disclose these issues cannot be waived and applies regardless of contract language. Sellers who fail to disclose known material issues may face legal liability even if the property is sold “as-is” or the contract attempts to limit disclosures.
Conduct Commercial Real Estate Transactions With Confidence
At Simkin & Associates, managing partner Michael Simkin has more than 30 years of experience in real estate and commercial law. Discuss your real estate agreement goals with him in an initial consultation. Call 888-288-5723 or email us to schedule a meeting.