When purchasing a piece of commercial real estate, it can be very helpful to understand each of the steps that need to take place during the closing process. While a lot of it is similar to closing on a residential real estate deal, there are some unique things to be aware of so that you’re prepared.
Holding Your Escrow Company
When closing on a commercial real estate deal it is typically necessary to have a deposit held “in escrow” while the final steps are completed. This is also common for residential real estate transactions. Our firm holds the money in escrow, and then releases it according to the instructions found on the purchase contract. This usually only occurs after all necessary due diligence, such as a title search and verification that the title transfer will have been completed.
Companies Making the Purchase
In most commercial real estate deals, the property is going to be transferred from one legal entity to another rather than from one person to another. While people will be doing all the negotiating and other work, it is important to have the name of the LLC, corporation, partnership, or other legal entity on all the paperwork rather than the names of the people doing the work. In addition, the people signing the paperwork must be legally authorized to make these types of decisions on behalf of the company.
Customized Purchase Contracts
Commercial real estate transactions can be significantly more complicated than those for residential purchases. This is why very few commercial purchase contracts can use standardized forms to complete the process. Instead, each party in the transaction should have their attorney write up, or approve, the purchase contract to ensure every detail is properly addressed before the closing has been completed. Even small oversights can cause serious issues at the closing, and for years into the future.
Any Existing Contracts Are Transferred
When buying or selling most types of commercial real estate, there will be existing contracts that impact the property in place. For example, if you are buying a piece of commercial property with multiple stores that are leasing space, the lease contracts need to be honored. Part of the closing process is to transfer the existing contracts over to the new owner. Notifying existing tenants or other parties involved should also be done at this time.
Get Help to Ensure a Successful Commercial Real Estate Closing
If you are buying or selling any type of commercial real estate, it is important to have an attorney with you to ensure everything is handled properly. Contact the Reyes Law Group to set up a consultation to go over the specifics of your real estate deal, and get everything taken care of on your behalf.