A commercial purchase agreement sets the closing requirements, your right to leave the deal and what happens to your deposit. In Massachusetts, an accepted offer may become enforceable before you sign a purchase and sale agreement, or P&S, if it includes the main terms and shows an intent to be bound. Clear language delaying a binding agreement until the P&S is signed may prevent that result.
A commercial purchase agreement commonly addresses these five areas:
1. Property and included assets
The agreement may identify the property and any equipment, leases, permits or other assets included in the sale. A precise description helps prevent disputes over what transfers at closing.
2. Price, deposit and financing
The contract may state the purchase price, deposit amount, payment schedule and any financing conditions. It may also explain when the seller may keep the deposit and when you may receive it back.
3. Property review and seller statements
During your due diligence, or review period, you may examine the building, leases, zoning, permits and financial records. Representations and warranties are written promises about issues such as pending disputes, existing leases and the seller’s right to complete the sale. The agreement can address inaccurate statements.
4. Title and environmental concerns
The agreement identifies easements, or rights others have to use the property, and restrictions you will accept. It also identifies liens the seller must resolve and can assign responsibility for environmental testing or contamination under Chapter 21E, Massachusetts’ hazardous material law.
5. Closing and default terms
The contract can establish the closing date, how taxes, rent and other expenses are divided and which documents each party must provide. It can also explain the consequences if the buyer or seller does not meet an obligation. It may also identify the type of deed used to transfer ownership.
Understand when your ability to negotiate changes
You generally have more control over contract terms before you sign an offer or P&S. After a document becomes legally enforceable, changing a deadline, responsibility or right to leave the deal may require the other party’s approval. Recognizing that a draft may become binding can help you evaluate its terms before committing to a commercial property purchase or sale.
