Commercial Real Estate Purchase Agreements: What Must Be Included
- Tom
- Jun 4
- 5 min read
Buying or selling commercial property is a significant financial decision—and one that hinges on a legally sound and comprehensive Commercial Real Estate Purchase Agreement (CREPA). Whether you’re acquiring office space, a retail complex, or an industrial warehouse, this document serves as the foundation of your transaction. It's not just paperwork—it’s a powerful legal tool that safeguards your rights and clarifies obligations.
At The Real Estate Law Firm, we help clients across Illinois and beyond navigate the complexities of commercial property transactions. In this guide, we break down everything that must be included in a Commercial Real Estate Purchase Agreement to ensure clarity, compliance, and protection.
What Is a Commercial Real Estate Purchase Agreement?
A Commercial Real Estate Purchase Agreement is a legally binding contract between a buyer and a seller outlining the terms and conditions of a commercial property sale. Unlike residential transactions, commercial deals often involve more complexity, higher stakes, and custom clauses, making professional legal oversight essential.
Why Getting It Right Matters
An improperly drafted agreement can lead to lawsuits, financing delays, regulatory issues, and failed closings. The Real Estate Law Firm emphasizes the importance of meticulous drafting to protect our clients from legal exposure and business risk.
Key Elements That Must Be Included in a Commercial Real Estate Purchase Agreement
1. Identification of the Parties
The contract must clearly state the full legal names of the buyer and the seller. In cases involving LLCs or corporations, the legal entity’s name must be used, along with proof of authority from the signing representatives.
2. Property Description
An accurate legal description of the property is vital. This includes:
Street address
Parcel number
Legal land description (as listed in county records)
Ambiguity in the property description can lead to major legal disputes.
3. Purchase Price and Payment Terms
This section outlines:
The agreed-upon sale price
Deposit amount (earnest money)
Payment structure (e.g., lump sum, financing)
Escrow arrangements
The Real Estate Law Firm ensures these financial terms are clearly defined to avoid post-agreement confusion.
4. Due Diligence Period
Commercial transactions typically include a due diligence period during which the buyer can inspect:
Title and zoning records
Environmental conditions
Lease agreements (if the property is tenant-occupied)
Structural integrity
This clause should define:
The length of the inspection window
What happens if issues are found
Whether the deposit is refundable during this time
5. Contingencies
Contingencies give buyers an "out" if certain conditions aren’t met. Common contingencies include:
Financing contingency (if the buyer is seeking a loan)
Appraisal contingency
Environmental inspection contingency
Lease or tenancy review contingency
The Real Estate Law Firm helps clients tailor contingency clauses to their specific situation.
6. Title and Survey
The agreement must address how title issues will be handled, including:
Who pays for the title search and insurance
What constitutes a "marketable title"
Handling of encumbrances or liens
A current survey is often required, and the agreement should specify who is responsible for obtaining and paying for it.
7. Representations and Warranties
This section lists promises made by both parties. For example:
The seller confirms they have the legal authority to sell
The property complies with zoning regulations
No undisclosed environmental hazards exist
The Real Estate Law Firm advises clients to carefully word these statements to reduce liability and litigation risk.
8. Closing Details
Critical details include:
Closing date and location
Prorations for taxes, rents, and utilities
Transfer of keys and documents
Final payment instructions
This section ensures that the actual closing goes smoothly and all parties know what to expect.
9. Default Provisions
The agreement should spell out what happens if one party fails to perform. Remedies may include:
Forfeiture of earnest money
Specific performance (forcing the sale to proceed)
Legal damages
The Real Estate Law Firm includes clearly enforceable default clauses to protect our clients in the event of a breach.
10. Dispute Resolution
How disputes are handled—through litigation, mediation, or arbitration—should be clearly stated. This clause can save both time and money in the event of disagreements.
11. Assignment Rights
Can the buyer assign the agreement to another party (e.g., a related LLC)? Many sellers want restrictions here. Whether you’re buying or selling, The Real Estate Law Firm helps you structure this clause to reflect your business needs.
12. Brokerage Disclosures
If real estate brokers are involved, their names, commissions, and roles must be disclosed. Illinois law requires clear broker identification in commercial contracts.
13. Signatures and Notarization
The agreement must be signed by all parties and often notarized to be enforceable and to meet recording requirements in some counties.
The Importance of Legal Review
Commercial real estate transactions often involve multiple layers of complexity—from municipal zoning compliance to tenant lease transfers. A standard template won’t cut it. The Real Estate Law Firm custom drafts, reviews, and negotiates these agreements to ensure our clients’ investments are legally secure and business-ready.
Final Thoughts
The Commercial Real Estate Purchase Agreement is more than just a formality—it’s the legal backbone of your investment. Every word matters, and missing a single clause could cost thousands. Whether you're a seasoned investor or entering the commercial market for the first time, partnering with The Real Estate Law Firm ensures your agreements are not just complete—but strategically crafted for your goals.
FAQs: Commercial Real Estate Purchase Agreements
1. What is the difference between a commercial and residential real estate purchase agreement?
Commercial agreements are more complex, involving additional elements like lease review, zoning compliance, and environmental inspections.
2. Can I use a generic template for a commercial real estate purchase agreement?
Using a generic form is risky. Every property and deal is unique. The Real Estate Law Firm strongly recommends using a custom-drafted agreement.
3. What happens if a buyer backs out after signing the agreement?
The outcome depends on the agreement’s default clause. They may lose their deposit or face legal consequences.
4. Do I need a lawyer to buy commercial real estate in Illinois?
Yes. Illinois law encourages legal review for all commercial real estate contracts. The Real Estate Law Firm can assist you with comprehensive legal guidance.
5. What is a due diligence period, and how long does it last?
It’s a timeframe (typically 30–60 days) for buyers to inspect the property and cancel the deal without penalties if issues arise.
6. Can I make the agreement contingent on getting financing?
Yes. Financing contingencies are common and should be clearly written into the agreement.
7. What is title insurance, and is it necessary?
Title insurance protects against ownership disputes and hidden liens. It’s highly recommended and often required by lenders.
8. Can a commercial real estate purchase agreement be assigned to another buyer?
Only if the contract allows it. Many sellers restrict assignment rights to maintain control.
9. Who pays for the closing costs in a commercial transaction?
This varies by deal and should be spelled out in the agreement. Typically, costs are negotiated between buyer and seller.
10. What’s the role of The Real Estate Law Firm in these transactions?
We provide expert legal drafting, negotiation support, due diligence oversight, and closing representation to protect your commercial investment from start to finish.
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