Commercial real estate contracts are complex and often involve multiple parties, contingencies, and liabilities. If you are not careful, you could end up facing costly disputes, delays, or losses. That's why you need a solid strategy for avoiding commercial real estate contract risks and protecting your interests. Here are some tips to help you do that.
Before you sign any commercial real estate contract, make sure you understand all the terms and conditions, and how they affect your rights and obligations. Look for any clauses that could create ambiguity, confusion, or conflict, such as indemnification, arbitration, force majeure, or assignment. If you have any questions or concerns, consult a qualified commercial real estate attorney who can advise you on the legal implications and potential pitfalls of the contract.
You can’t unsign a contract so it’s best to go your thinking before you sign it. If you need help negotiating construction contracts please get in touch
Remember that ambiguous language in a contract may be deliberate, and should therefore always be treated as a red flag. Insist on clarity in the contract language and save yourself conflict later if or when the contract parties interpret the terms or conditions differently.
Commercial real estate contracts are not set in stone. You have the opportunity to negotiate the terms and conditions that suit your needs and goals. For example, you can ask for more favorable rent, security deposit, maintenance, or renewal options, or request modifications or waivers of certain provisions. However, you should also be realistic and flexible, and avoid making unreasonable or unrealistic demands that could jeopardize the deal. Remember, negotiation is a give-and-take process that requires compromise and communication.
One of the most important steps in avoiding commercial real estate contract risks is to perform due diligence on the property, the seller, and the market. Due diligence is the process of verifying the information and documents provided by the other party, and conducting your own research and inspection to uncover any issues or defects that could affect the value or performance of the property. For example, you should check the title, zoning, environmental, and structural reports, as well as the financial statements, leases, and tenant profiles of the property. You should also evaluate the market conditions, trends, and competition in the area. Due diligence can help you avoid unpleasant surprises, identify potential risks, and negotiate better terms.
Choose a Buyers Agent with grey hair (we’ve valuable experience to share). Graeme Freer 0414816408 Freer Property and Finance
Contingencies are conditions that must be met before a commercial real estate contract can be finalized. They are designed to protect the interests of both parties and allow them to back out of the deal if certain criteria are not met. For example, common contingencies include financing, appraisal, inspection, and environmental approval. However, contingencies can also create delays, disputes, or cancellations if they are not handled properly. Therefore, you should manage your contingencies carefully and efficiently, and comply with the deadlines, requirements, and procedures specified in the contract. You should also monitor the progress and status of the other party's contingencies, and be prepared to respond to any issues or changes that may arise.
Communication is key to avoiding commercial real estate contract risks. You should communicate clearly, honestly, and respectfully with the other party, as well as with your broker, attorney, lender, and other professionals involved in the deal. You should also document all the communications and agreements in writing, and keep copies of all the correspondence and records related to the contract. Communication can help you prevent misunderstandings, resolve problems, and build trust and rapport with the other party.
Commercial real estate contracts are not something you should handle on your own. You should seek professional guidance from experts who have the knowledge, experience, and skills to help you navigate the process and avoid the risks. For example, you should hire a reputable commercial real estate broker who can represent your interests, find the best opportunities, and negotiate the best deal for you. You should also consult a qualified commercial real estate attorney who can review the contract, advise you on the legal aspects, and protect your rights and liabilities. Additionally, you may need the assistance of other professionals, such as appraisers, inspectors, engineers, or accountants, depending on the type and complexity of the contract.