Real estate transactions are a big part of what we do at Wright Beamer. Lately I’ve noticed an uptick in sales involving commercial properties using residential purchase agreements. Here are a few reasons why it is never a good idea to use a one-size-fits-all residential template for a commercial transaction:
- Unlike residential PAs, which always include a generic list of items that are included in the sale, commercial sales all have items that are specific to the property and need to be itemized in the PA.
- Certain disclosures are required for residential transactions, but do not apply to commercial deals and should not be referred to in the PA.
- Commercial transactions include extensive due diligence and inspections, far beyond those included in a residential template.
- Environmental disclosures and investigations are extremely important in commercial transactions but are rarely addressed in residential PAs.
- While surveys are not typically an issue in residential transactions (especially with platted subdivisions), surveys showing everything that is present upon or that impacts the property are important in commercial transactions.
- Zoning considerations are important in commercial transactions. Residential templates seldom address zoning concerns.
- Commercial real estate is usually owned by corporations or limited liability companies. This raises questions such as whether the entity is validly formed and in good standing, and who has the authority to negotiate the transaction and sign the documents. These questions are not addressed in residential templates.
Using the wrong document is like trying to fit a square peg in a round hole, and usually results in confusion and problems. If you’re involved in a commercial real estate transaction and someone has given you documentation that doesn’t seem to apply or just doesn’t look right, we can help. Call us at (248) 477-6300.