Negotiating a Commercial Real Estate Purchase Agreement in Illinois

 Posted on March 15, 2024 in Commercial Real Estate

When it comes to commercial real estate, the purchase agreement is one of the most important documents involved in a transaction. This document outlines the terms of the sale and sets forth the obligations of both the buyer and the seller. As a result, it is essential that both parties understand all of the clauses in the agreement before signing on the dotted line. 

However, there are a number of potential pitfalls that can arise during the negotiation process, which a trained attorney in Illinois can help you avoid. By being aware of these possible problems, real estate developers and others who are involved in a transaction can determine the best strategies for avoiding issues and negotiating a successful commercial real estate purchase agreement.

Common Issues Affecting Commercial Real Estate Transactions

Some concerns to be aware of during the purchase agreement negotiation process include:

• Zoning contingencies - If a project requires governmental approvals, such as rezoning, the purchase agreement should include a contingency allowing the deal to be canceled if these approvals are not obtained.

• Due diligence period - This is a period of time during which the buyer can review all documents and inspect the property before closing on the deal. It is important to have a clear timeframe for the due diligence period in order to avoid potential delays in closing. This period should be long enough for due diligence to be fully completed, and the earnest money should be refundable if the buyer chooses to back out of the transaction. 

• Seller representations and warranties - The contract should provide assurances from the seller regarding the condition and ownership of the property. It is also important for buyers to understand any potential liabilities related to the property. This will ensure that the buyer is fully informed before closing on the deal. 

• Environmental concerns - A property may have environmental issues, such as hazardous waste or contaminated soil, that need to be addressed before development can begin. It is important for a buyer to be able to thoroughly research the property and address any potential environmental concerns before closing on the deal.

• Seller covenants - The purchase agreement should include any promises or obligations from the seller, such as agreeing to vacate the property by a certain date or providing certain leases and tenant information. This will ensure that the buyer will be able to assume control of the property and begin executing their plans for the use of the property.

• Existing tenants - The buyer will usually assume the leases of any tenants who are currently using the property. To ensure that they fully understand these leases, estoppel certificates should be obtained from tenants. These documents will confirm the terms of leases and the amount of rent that tenants are paying, and they may also provide information about any disputes or other issues that could potentially affect the rent that the new owner will receive from tenants.

• Financing contingencies - If the buyer requires financing for the transaction, a contingency should be in place, allowing for cancellation of the contract if financing is not obtained. 

Contact Our DuPage County, IL Commercial Real Estate Attorneys

It is crucial for all parties involved in commercial real estate transactions to review and understand all aspects of the purchase agreement thoroughly. At Lindell & Tessitore, P.C., our skilled Oak Brook, IL commercial real estate lawyers can assist with all aspects of a transaction, and we have extensive experience negotiating successful deals for our clients. Contact us today at 630-778-3818 to schedule a consultation.