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Common errors in standard commercial real estate agreements

Standard commercial real estate agreements are tempting. This boilerplate contract may come with at a lower initial price point, but the long-term consequences of a fill in the blank document can be very costly.

These forms generally have blanks that allow the user to fill in the parties’ names and specific information about the deal. Although they allow for some level of personalization, the information added to the prepopulated contract may not be enough to specifically safeguard your business interests.

Ideally, a commercial real estate agreement is crafted to reflect your specific transaction. However, three specific areas to review include:

  • Use. Commercial real estate transactions represent a broad market. These transactions can include everything from a large retail store to a small family restaurant. The contract should be tailored to reflect the property’s specific use.
  • Remedies. It is important to include a provision addressing the remedies available in the event of a conflict. Will certain contract breaches require specific performance on the part of the violating party? If not, what other options are available?
  • Warranties. Review the promises outlined within the agreement. A recent publication in the Daily Business Review delves into this issue with the common example of a tenant occupied transaction. In this example, it is important the contract include a warranty that the seller has not received rent payments. Without this representation, you may not receive all anticipated income.

It is important to address these questions before signing the contract to help mitigate the risk of a surprise in the future. An attorney experienced in crafting commercial real estate agreements can review and revise a proposed agreement with your business interests in mind.

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