Real estate purchase and sale agreements are the result of highly detailed transactions. Commercial purchase and sale transactions, in particular, entail complex challenges for real estate investors and sellers alike. Protect yourself when dealing with major investments and the considerable risks that accompany them. An experienced real estate lawyer will bring not only the legal negotiation skills you need to ensure a profitable and fair outcome, but the business acumen required to navigate the complexities of the real estate market.
What are Purchase and Sale Agreements?
Purchase and sale agreements are legally binding contracts between buyers and sellers of either commercial or residential real estate property. The most basic elements required in a valid purchase and sale agreement include offer, acceptance, and consideration. However, most forms will be quite lengthy, containing pages of special provisions tailored to the property being addressed. While there are standardized forms out there, we highly advise you to avoid these generic forms. Why?
Each party to a real estate transaction will have different situations, stipulations, and desired outcomes— no purchase and sale agreement is ever identical to the last. Even the slightest shift in nuance due to simple word choices can radically alter the effects of a legally binding contract. Therefore, to ensure that your contract includes all the necessary language needed to accurately reflect your individual circumstances, legal counsel is required.
Important Elements in a Commercial Real Estate Transaction
Most purchase and sale agreements include a letter of intent. This letter is carefully drafted by a real estate lawyer to include key provisions that will be put forth in the purchase sale agreement. Serving as the preface to a successful contract for all parties involved, this initial letter of intent should not be undertaken lightly. A real estate lawyer can expertly coordinate all stages of review, drafting, negotiation, and closing on the contract.
A well-executed commercial real estate purchase and sale agreement will include many terms and conditions pertaining to the proposed final transaction. Some of the most common terms and conditions can include:
- A description of and address of the property
- Any terms for a sale “as-is”
- Default provisions
- Special provisions
- Representations and warranties
- A purchase price, with adjustments made at closing
- Transfer document descriptions such as for a deed or bill of sale
- Naming who holds the deposit and what happens to the deposit (such as a title insurance company)
- Duties of both parties during the transaction period
- The scope of the broker’s involvement
- Assignment rights of the buyer
- Closing information
- Special boilerplate terms in use
- A confidentiality agreement
Like any legally binding contract, a well-crafted sales and purchase agreement will typically seem long, but will be pointed and precise in its aims. Trustworthy legal counsel will ensure that you are not left in the dark at any stage of a real estate transaction.
Common Real Estate Purchase and Sale Issues to Address
Like any complex contractual process, real estate purchase and sale agreements can be delayed or even fall through entirely if issues are not competently addressed. Some of these issues can be as simple as a missing document or a seemingly minor clerical error. Other times, delays can occur during escrow, ranging from title problems to loan documents containing errors or omissions.
It's also expected that most real estate purchase and sale agreements include contingencies. These contingencies could be related to financing, repairs, or inspections, for example, and closing on the property is literally contingent upon them being fulfilled. However, contingencies may also be waived, or removed from the agreement in writing. If either the buyer or the seller is unable to fulfill the contingencies despite good faith efforts, then the agreement falls through. This does not occur at penalty to either party, but rather allows renegotiation of the terms of the agreement to occur.
If either the buyer or seller backs out of the agreed upon sale of the property, that is considered a breach of contract and can be addressed in specific ways with the help of a real estate lawyer. There are occasional cases in which the court may allow either party to back out of the sale via a valid legal excuse.
Generally, a seller may not back out of a contract just because they’ve, for instance, received a more attractive offer or have suddenly decided that they no longer wish to sell the property. Similarly, a buyer may not back out of a contract to purchase without extremely good reason to do so.
In both of the above cases, either party may pursue a lawsuit against the party that is in breach. The party in breach may be ordered to pay damages to the other party for the losses incurred due to no fault of their own. A buyer can also request that the court order the seller to go through with the transaction as originally agreed upon.
How a Real Estate Lawyer Can Help
As the above issues, disputes, and contingencies help to demonstrate, it is important to obtain proactive legal counsel when entering into any real estate transaction. In particular, the earliest stages of drafting and negotiating a sales and purchase agreement require the legal and business expertise of a real estate lawyer. Don’t risk the unnecessary losses that can occur due to minor omissions, mistakes, or misunderstandings. Your property is a major investment, with the nuances of property law and an evolving market putting too much at stake if not competently navigated.
To learn more about how our real estate lawyers can help you negotiate the most favorable outcome for your property purchase or sales, request a case consultation today.