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Reviewing a commercial real estate contract before signing

On Behalf of | Jun 20, 2023 | Real Estate |

Entering the world of commercial real estate can be both exciting and daunting. As a business owner or investor, signing a commercial real estate contract is a significant step that can have profound implications for your financial future.

One must never underestimate the importance of thoroughly reading a commercial real estate contract before signing it.

Commercial real estate contracts

Commercial real estate contracts cover the agreement between the buyer and the seller regarding the sale, purchase or lease of a commercial property. These documents include terms about the property’s price, conditions of use, responsibilities of each party and other essential details. The contract contains critical details that could influence your decision-making process, your business operations and your financial well-being.

Ramifications of not reading the contract

Signing a contract without thoroughly reading it first can lead to misunderstandings. It can also result in unforeseen costs, unanticipated responsibilities and unexpected liabilities. For instance, the contract may contain clauses that require you to take on maintenance or repairs, impacting your financial planning.

Terms and conditions

Each clause in the commercial real estate contract serves a purpose. Some clauses might define the responsibilities of each party, while others might set out the penalties for breaching the contract. Misunderstanding or overlooking any of these terms could lead to breaches of the contract and severe financial consequences.

The role of negotiation

Reading the entire contract enables you to identify any terms that you might want to negotiate before signing. Whether it is the price, the length of the lease or the maintenance responsibilities, knowing the contract’s content helps you secure a deal that works for you.

The act of signing a commercial real estate contract assumes that you have done your due diligence and agree to the terms. Approaching a contract mindfully can help you avoid unwanted surprises, mitigate potential risks and secure a deal that aligns with your business goals.

Founding Partners Damaso W. Saavedra and Allyson D. Goodwin