The 5 Biggest Mistakes Made in Contracts to Sell Commercial Real Estate
Drafting a contract for the sale of commercial real estate is a detailed task. It involves careful consideration of the entire transaction and a lot of knowledge about the parties and property. Often, when buyer and seller or real estate agents try to draft these contracts, it results in mistakes. As a NY commercial real estate lawyer, many of these mistakes come across my desk.
Here is a list of five big mistakes made in contracts to sell real property.
Using an Unmodified Form Document
The use of a template or form document for the sale of commercial real estate can seem efficient in terms of cost and time. However, these templates also create a significant number of legal issues. Every sale of real estate in New York is unique. You are a unique seller, your buyer is a unique purchaser, and the property at issue has a history and qualities different from all other property in New York.
A template cannot account for the specific differences between the sale of your property and the sale of other property. When you utilize an unmodified form document, all parties to the agreement are at risk that the document contains inaccurate information, terms and conditions that are misunderstood by the parties, and gaps in the agreement. This increases the likelihood of disagreement, disruption of the sale, and potentially termination of the transaction down the road.
Limited or Inaccurate Property Description
In New York, a contract for the sale of real property must be in writing. What goes into your written sales contract is the entirety of your agreement, and what would be enforced by a court in the event of a dispute. Undoubtedly, one of the most important pieces of information included on a contract for the sale of commercial real estate is the legal description. Yet, it is shocking how many people fail to include a legal description or do not check that it is accurate.
Double check, triple check, and have a commercial real estate lawyer review your legal description for any sale.
Not Completing the Effective Date
Another common and costly mistake made in commercial real estate contracts in Long Island is failing to date the contract. Most sales of commercial real estate include a due diligence period. During this timeframe both the buyer and seller are subject to specific deadlines and deliverables. Failing to meet these deadlines can kill the deal.
Many parties determine these deadlines based on the “Effective Date” of the agreement. In New York, this can be the date the parties sign the contract or a different date, as agreed by buyer and seller. If the parties fail to stipulate this date within the written agreement, all following deadlines are unclear and confusing. It is an issue certain to cause later disagreement between the parties or a party not being able to cancel the contract under a contingency.
Setting an Unreasonable Due Diligence Timeframe
The success of any sale is centered around the timeframe for due diligence or a contingency period, but when drafting a contract, both parties feel motivated to conclude due diligence as rapidly as possible. This can be a big mistake. A lot of real property in New York has interesting and lengthy history.
There is uncertainty what lies under the ground and within the walls of this real property, and the buyer needs sufficient time to obtain inspections, financing, surveys, and title insurance related to the property.
Incorrectly Stating the Buyer’s Name
This mistake in contracts for sale occurs more often than most clients believe. A buyer’s name must be accurately and completely stated in the contract. If a natural person, nicknames or shortened versions of a name are problematic. If a business, the exact spelling and punctuation involved in the company’s registered business name is needed. Failure to do this could result in a non-binding contract.
Contact a Commercial Real Estate Lawyer
The best way to ensure your contract for sale of real property in accurate and complete is by consulting a NY commercial real estate lawyer. The Law Office of Samilde Perez can assist with drafting a contract that reflects your specific transaction and provide advice on an existing contract. Call (516)-216-5060 today.
The information in this blog post (“Post”) is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this Post should be construed as legal advice from The Law Office of Samilde Perez or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter.