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A commercial real estate purchase agreement is a business property sale contract. The agreement names the buyer, the seller, the property, the price, the deposit and the closing date. Buyers and sellers of business property sign it; this guide walks through each clause.
Key facts
A commercial real estate purchase agreement is the written contract that sets the terms of a sale of business property: who buys, who sells, what land and buildings change hands, the price and the dates that lead to closing. The document is signed before any money beyond the deposit moves.
The agreement does not transfer ownership by itself. The deed signed at closing does that. Between signing and closing, the agreement is the rulebook both sides follow: it says how long the buyer may inspect, who holds the deposit, what happens to the deposit if the deal fails and when the seller hands over title.
A commercial contract differs from a home purchase contract in what it has to account for. Leases, tenants, business income, zoning for a planned use and environmental testing rarely matter in a house sale but often decide a commercial one. The agreement gives each of these a clause, a deadline or a contingency.
Commercial property is real estate that a buyer uses for business or rents out to earn income. The agreement fits any of these property types:
The property type changes the review, not the form. A hotel or a restaurant depends on daily operations. An office building or a retail store depends on tenants and leases. Vacant land depends on access, utilities and zoning for the use the buyer plans.
A commercial purchase agreement is the document to sign once a buyer and a seller agree on price and terms for business property, before inspections begin and before the buyer spends money on loan fees, surveys or reports.
The agreement fits these situations:
A different document fits other deals. A house, a condominium or a small rental of up to four units goes on a residential real estate purchase agreement. A sale of equipment or a vehicle alone, with no land, goes on another type of purchase agreement.
A commercial purchase agreement includes twelve standard parts, from the agreement date to the closing terms. Each part covers one piece of the deal, so a missing part shows up as a blank on the form before anyone signs.
The agreement date is the day both sides agree to start the transaction, and the form's other deadlines often count from it. The seller line gives the seller's full name and business address. The buyer line gives the full name of the person or the business entity buying, such as a company or a trust.
The classification describes the real estate and its category, such as a retail store with a parking lot. The street address is the property's own address, not the seller's. The tax parcel information is usually found on the property deed, as a Parcel ID or a Tax Map & Lot; without a deed, the county office that keeps property records has it.
The personal property clause lists items the seller owns that are part of the price, such as shelving, advertising displays or prepaid service subscriptions. Listing them protects the buyer's claim to everything paid for and tells the seller what stays behind.
The purchase price clause states the exact price and checks one of three ways to pay:
The closing clause gives the closing date and who pays which closing costs. The final clauses cover any sale contingency, the assignability of the buyer's rights, notice addresses for both sides and disclosures. Some forms add a governing law clause and a date when the offer expires.
The earnest money deposit is the buyer's good faith payment toward the price, held by a neutral escrow agent until the sale closes or ends. The agreement sets the amount, the deadline to pay it and the escrow agent's name.
The escrow agent is the entity that will hold the earnest money until the sale has been completed. A title company or an attorney often serves in that role, and the agent signs the agreement to accept the deposit.
The deposit clause decides who keeps the money if the deal fails. The agreement states when the deposit goes back to the buyer, for example after a failed inspection or a denied loan inside the contingency period, and when the seller keeps it, for example when the buyer walks away after every contingency has passed. The amount itself is a matter of negotiation.
The inspection period is the window the agreement gives the buyer to examine the property, its records and its finances before the deposit is at risk. The form states its length and what the buyer may do if the results are not acceptable.
Due diligence is the buyer's own review of a commercial property before the sale closes. The review shows what the property is worth and whether the planned use fits it. A buyer who finds a problem may negotiate a repair or a lower price, or cancel inside the period on the terms the agreement sets.
Many buyers organize the review around these areas:
A contingency is a condition the sale depends on; if it fails by its deadline, the agreement lets the protected party cancel, usually with the deposit returned to the buyer. Commercial agreements commonly carry four of them.
Each contingency works only with a deadline and a notice method. The agreement says how many days the buyer has and how the buyer tells the seller in writing that a contingency failed.
The title clause records the type of deed that will transfer ownership, the title insurance, the deadline to object to title problems and the survey. Together these confirm that the seller can convey what the agreement describes.
The cure period is the time the seller has to fix a title problem the buyer objects to, such as an old lien or an unreleased mortgage. If the seller does not fix it in time, the agreement usually lets the buyer cancel or accept the title as it is. The clause also states who orders and pays for the survey and the title insurance.
A commercial real estate purchase agreement is enforceable in Alabama, Massachusetts and West Virginia only when it is in writing and signed by the party it is enforced against, under the land sale statutes in the table, with the exception noted for Alabama.
| State | What the statute says | Condition | Citation |
|---|---|---|---|
| Alabama | Every contract for the sale of lands, or of any interest in them, is void unless it or a note of it expressing the consideration is in writing and subscribed by the party to be charged. | Except leases for a term not longer than one year, and unless the purchase money or a portion of it is paid and the seller puts the purchaser in possession. | Ala. Code § 8-9-2 |
| Massachusetts | No action is brought on the contract unless it, or a memorandum or note of it, is in writing and signed by the party to be charged or by a person lawfully authorized. | When the action is upon a contract for the sale of lands or of any interest in or concerning them. | Mass. Gen. Laws ch. 259, § 1 |
| West Virginia | No contract for the sale of land, or the lease of it for more than one year, is enforceable unless the contract or some note or memorandum of it is in writing and signed by the party to be charged, or by an agent. | Only a contract for the sale of land, or a lease of land for more than one year. | W. Va. Code § 36-1-3 |
The table quotes these three statutes only. The statute where the property sits sets the rule for a given sale, so a signed written agreement is the safe course everywhere.
A commercial building sale falls outside the seller disclosure statutes in the table when the building is not residential property of one to four dwelling units, the scope each of these statutes sets for itself. A sale of land needs its own check, as the Wisconsin and Wyoming sections below show.
| Place | Property the disclosure statute covers | Citation |
|---|---|---|
| Connecticut | Applies only to transfers by sale, exchange or lease with option to buy of residential property of one to four dwelling units, including cooperatives and condominiums. | Conn. Gen. Stat. § 20-327b(c) |
| Michigan | The seller disclosure requirements of sections 4 to 13 apply to real estate of 1 to 4 residential dwelling units, including a residential cooperative interest. | Mich. Comp. Laws § 565.952 |
| Ohio | Residential real property means real property improved by a building or other structure that has one to four dwelling units. | Ohio Rev. Code § 5302.30(A)(4) |
| Wisconsin | Real property that includes 1 to 4 dwelling units, except property that has not been inhabited. | Wis. Stat. § 709.001(5)(a) |
An office building, a store, a warehouse or a building of five or more apartments has no dwelling units or more than four, so it falls outside those definitions. A mixed building with apartments over a store is worth checking against the exact wording.
A building of five or more apartments can still need a lead notice outside those statutes. In Massachusetts, all persons selling premises shall, prior to the signing of a purchase and sale agreement, provide a copy of the lead form and the other materials prepared under subsection (a) to the prospective purchaser (Mass. Gen. Laws ch. 111, § 197A(b)). The seller checks whether the building counts as premises under that section before the agreement is signed.
A Wisconsin land sale can call for a different report than the one for dwelling units. Under Wis. Stat. § 709.02, the owner shall furnish, not later than 10 days after acceptance of a contract of sale or option contract, a completed copy of the report under s. 709.03 or 709.033, whichever is applicable, subject to s. 709.035 (Wis. Stat. § 709.02). The seller of Wisconsin land checks which of the two reports applies before the agreement is signed.
Wyoming has its own disclosure rule for land: unless the buyer waives it, every seller of vacant land shall provide a prospective buyer a property disclosure statement (Wyo. Stat. Ann. § 34-1-151). Under Wyo. Stat. Ann. § 34-1-151, vacant land means land with no habitable dwelling, not within a platted subdivision, city or town, and less than 140 acres.
A Michigan commercial seller can owe a written notice when the land is contaminated. Under Mich. Comp. Laws § 324.20116(1), a person who knows, or is on notice through a recorded instrument, that a portion or all of a parcel is a facility shall not transfer an interest in that real property unless he or she provides written notice to the purchaser (Mich. Comp. Laws § 324.20116(1)). Under Mich. Comp. Laws § 324.20116(1), the notice discloses the known general nature and extent of the hazardous substance release and any known land or resource use restrictions.
Beyond these statutes, silence about a defect still carries risk. In Alabama, suppression of a material fact that a party is under an obligation to communicate is fraud, and that obligation may arise from the parties' confidential relations or the particular circumstances of the case (Ala. Code § 6-5-102).
The commercial purchase agreement form is filled in from the top down, one clause at a time, with every blank completed or marked not applicable. The facts to gather first are the parties' names and addresses, the property address and parcel ID, the price, the payment method and the escrow agent.
The signing pages take three signatures: the buyer's, the seller's and the escrow agent's.
The sample below shows how the main fields can look once filled in. The names, addresses and amounts are made up.
| Field | Sample entry |
|---|---|
| Agreement date | March 3 |
| Seller | Brian Cole, 45 Oak Avenue, Springfield |
| Buyer | Anna Baker Holdings LLC |
| Classification | Retail store with a parking lot |
| Street address | 123 Main Street, Springfield, with the county and state |
| Tax parcel information | Parcel ID 000-111-222 |
| Personal property | Shelving and an exterior sign |
| Purchase price | $850,000, paid with bank financing |
| Earnest money deposit | $25,000, held by the escrow agent |
| Escrow agent | Lakeside Title Company |
| Inspection period | 30 days from the agreement date |
| Title | Special warranty deed, owner's title insurance, survey ordered by the buyer |
| Closing | June 15, closing costs split as the agreement states |
A commercial purchase follows six steps, from checking what lenders and sellers expect to recording the deed, and the purchase agreement is signed at the fourth. Prices depend on market conditions and on any income the property earns from tenants.
The most common mistake in a commercial purchase agreement is a deadline nobody tracked: an inspection period, a financing date or a title objection date that passed while the deposit was still at stake.
The buyer and the seller sign and print their names on the agreement. The escrow agent also signs and dates it to accept the earnest money.
The agreement decides it. Most commercial agreements return the deposit when a contingency fails inside its deadline and let the seller keep it when the buyer cancels without a contractual reason.
Yes, the buyer line takes the full name of a person or a business entity. A company buying in its own name signs through an officer or member with authority to sign for it.
A pre-qualification letter shows the buyer's debts, assets, income and investments without a loan commitment. A pre-approval letter states the maximum loan amount, the down payment and the interest rate.
Many buyers and sellers ask a real estate attorney to review the agreement before they sign, because commercial deals involve large amounts of money and terms such as the cure period and the contingencies decide who bears a loss.
The inspection period starts, the buyer pays the deposit to the escrow agent and works through financing, title and survey. At closing the seller is paid, the deed is signed and the buyer records it with the county.
General information, not legal or tax advice.
