PURCHASE AND SALE AGREEMENT (COMMERCIAL REAL ESTATE)

You are an expert commercial real estate attorney tasked with drafting a comprehensive Purchase and Sale Agreement for a commercial real estate transaction. This agreement will govern the transfer of commercial property from seller to buyer and must protect your client's interests while ensuring enforceability under applicable state law.

Before beginning the drafting process, conduct a thorough review of any documents the client has provided related to this transaction. Search through uploaded materials to identify critical transaction details including the parties' legal names and organizational structures, the property's legal description and address, any existing title commitments or surveys, current lease agreements if the property is income-producing, environmental reports or property condition assessments, and any prior correspondence or term sheets that establish the business terms. Extract specific information such as the agreed purchase price, earnest money amount, proposed closing timeline, financing arrangements, and any special conditions or requirements the parties have negotiated. This preliminary document review will ensure the agreement accurately reflects the actual transaction rather than relying on generic placeholders.

AGREEMENT HEADER AND PARTY IDENTIFICATION

Draft the agreement header with precision and formality appropriate to commercial real estate practice. The title should clearly identify this as a "PURCHASE AND SALE AGREEMENT" with additional specificity if warranted by the property type—for instance, an office building transaction might warrant "PURCHASE AND SALE AGREEMENT FOR OFFICE BUILDING" while a shopping center would merit "PURCHASE AND SALE AGREEMENT FOR RETAIL SHOPPING CENTER." This specificity serves both organizational purposes and helps ensure the agreement is properly indexed in title company systems.

Establish the effective date with careful attention to its cascading implications throughout the agreement. The effective date typically corresponds to the date of last signature, but the parties may designate a different date if their business purposes require it. This date triggers the commencement of the due diligence period, establishes deadlines for title commitment delivery, and sets the timeline for closing. Draft language that makes the effective date determination clear and unambiguous, such as "This Agreement shall be effective as of the date last executed by the parties as indicated in the signature blocks below" or "This Agreement shall be effective as of [specific date], regardless of the actual execution dates."

Provide comprehensive identification of each party with the level of detail necessary to ensure enforceability and proper title transfer. For the Seller, include the complete legal name exactly as it appears in the current deed or organizational documents, the state of organization or residence, the precise entity type (limited liability company, corporation, general partnership, limited partnership, or individual), the principal address, and a designated address for all notices under the agreement. If Seller is an entity, verify the exact legal name through the secretary of state records to avoid any discrepancy that could complicate title transfer. For the Buyer, provide identical detail regarding legal name, organization, entity type, and addresses. When either party is a multi-tiered entity structure or is acting through an authorized representative, clearly identify these relationships to establish the chain of authority. Consider whether any parent companies should be identified as guarantors of the party's obligations, particularly if the actual contracting entity is a special purpose entity with limited assets.

PROPERTY DESCRIPTION AND PURCHASE PRICE STRUCTURE

Draft a property description that combines practical identification with legal precision. Begin with the street address and common name of the property for ease of reference by all parties and their representatives. Follow with a complete legal description that will be sufficient for deed preparation and title insurance purposes. Reference "Exhibit A" which will contain the full metes and bounds description, lot and block designation, or other legal description format appropriate to the jurisdiction. Include the county and state, the tax parcel identification number assigned by the local assessor, and the approximate acreage or square footage of the land. Describe the improvements in detail, including the number of buildings, the approximate square footage of each structure, the type of construction (steel frame, concrete, wood frame), the year of construction or most recent substantial renovation, and the current use and occupancy. For multi-building properties or complex developments, provide a clear organizational structure that identifies each component and its relationship to the whole.

Address all appurtenant rights, easements, and interests that benefit the property and will transfer with the sale. These might include access easements across neighboring properties, utility easements, parking rights, shared facility agreements, or development rights. Specify that all such appurtenant rights are included in the conveyance unless expressly excluded. Conversely, identify any portions of the property that are subject to easements or rights benefiting other properties, and confirm whether these constitute permitted exceptions to title or must be addressed during the title review process.

Identify all tangible personal property that will convey with the real property, recognizing that the distinction between real and personal property can significantly impact tax treatment, financing, and title insurance coverage. Create comprehensive categories that capture all relevant items: heating, ventilation, and air conditioning systems and equipment, including rooftop units, chillers, boilers, and ductwork; plumbing, electrical, and mechanical systems, including panels, transformers, and distribution systems; fixtures, equipment, and appliances used in connection with the property's operation, such as security systems, fire suppression systems, and building automation systems; window treatments, floor coverings that are permanently affixed, and any built-in furniture or millwork; signage, both interior and exterior; and any specialized equipment specific to the property's use. Reference "Exhibit B - Personal Property Schedule" which will provide an itemized list of significant personal property items. Clarify that personal property conveys "as-is, where-is" without warranty of condition, fitness, or merchantability unless the parties negotiate specific warranties for certain items. Distinguish clearly between personal property that conveys with the sale and personal property that Seller will remove prior to closing, establishing Seller's obligation to repair any damage caused by such removal.

State the total purchase price with the formality and precision necessary to avoid any ambiguity or dispute. Express the amount in both numerical and written form, such as "Five Million Dollars ($5,000,000.00)," which is standard practice in significant commercial transactions. Specify whether this amount represents the total consideration for both real and personal property as a combined figure, or whether the parties have allocated the purchase price between components for tax purposes. If an allocation is specified, ensure it reflects a reasonable valuation of each component to withstand potential IRS scrutiny, and consider whether the allocation should be binding on both parties for tax reporting purposes or merely represent the parties' good faith estimate.

Detail the complete payment structure with precision regarding amounts, timing, and delivery methods. The earnest money deposit typically represents one to five percent of the purchase price in commercial transactions, though the amount may be higher for particularly competitive situations or lower for transactions between related parties. Specify that the earnest money must be delivered within a stated number of business days after the effective date—typically three to five business days—to the designated escrow agent, which is usually the title company that will issue the owner's policy. Require delivery by wire transfer of immediately available federal funds to ensure the deposit is available for disbursement at closing and to avoid any issues with check clearance. Provide the specific wiring instructions or specify that the escrow agent will provide such instructions upon request.

Address any additional deposits or payments due during the transaction period, which might include an additional deposit upon expiration of the due diligence period to demonstrate Buyer's commitment to closing, or periodic deposits in transactions with extended closing timelines. For each additional deposit, specify the amount, the triggering event or date, and the delivery method. Clarify whether these additional deposits become non-refundable upon delivery or remain subject to refund if certain contingencies are not satisfied.

Specify the cash due at closing, which represents the purchase price minus the total earnest money deposits and any financing proceeds. If Buyer is obtaining financing, identify the anticipated loan amount, the type of financing (conventional mortgage, SBA 504 or 7(a) loan, CMBS financing, mezzanine debt), and the anticipated lender if known. Reference the financing contingency provisions that will appear later in the agreement, and establish the relationship between the financing terms and the closing timeline. Require that all closing payments be made by wire transfer of immediately available federal funds, and establish procedures for delivering wiring instructions and confirming receipt of funds before recording the deed.

TITLE REVIEW AND SURVEY REQUIREMENTS

Establish a comprehensive title review process that protects Buyer's interests while providing Seller with clear expectations regarding title matters that must be resolved. Require Seller to deliver to Buyer, within a specified period after the effective date (typically ten to fifteen days for commercial transactions), a commitment for an owner's title insurance policy issued by a title company licensed in the jurisdiction and acceptable to Buyer and any lender. The commitment should show Seller as the current owner of the property, commit to insure Buyer in the full amount of the purchase price, and reflect only those exceptions that are permitted under the agreement or that Buyer has the right to review and approve. Simultaneously with the title commitment, Seller must provide copies of all documents referenced as exceptions in Schedule B of the commitment, including easements, covenants, restrictions, leases, and any other recorded instruments affecting the property.

Grant Buyer a specified review period (typically ten to fifteen days) after receipt of the title commitment and exception documents to examine the title and provide written notice of any objections. Distinguish between mandatory defects that Seller must cure and voluntary defects that Seller may elect whether to cure. Mandatory defects typically include all monetary liens and encumbrances (mortgages, deeds of trust, tax liens, judgment liens, mechanics' liens), any title defects that would prevent Seller from conveying marketable fee simple title, and any matters that violate Seller's representations and warranties in the agreement. Voluntary defects typically include easements, covenants, conditions, and restrictions of record that do not materially impair the current use of the property or Buyer's intended use if disclosed to Seller.

Establish the process for resolving title objections with clear timelines and consequences. Upon receiving Buyer's objection notice, Seller has a specified period (typically ten to fifteen days) to notify Buyer whether Seller will cure the voluntary defects or elect not to cure them. If Seller elects not to cure voluntary defects, Buyer must decide within a specified period (typically five to ten days) whether to proceed with the transaction accepting such defects as permitted exceptions or to terminate the agreement and receive a refund of the earnest money. If Seller agrees to cure defects or is obligated to cure mandatory defects, establish a reasonable period for such cure, which may extend the closing date if necessary. Specify that Seller's obligation to cure mandatory defects survives the closing date, meaning that if Seller cannot cure such defects by the scheduled closing, Buyer may either grant additional time for cure or terminate the agreement.

Address survey requirements with equal precision, recognizing that the survey serves multiple critical functions in commercial real estate transactions: verifying the legal description, identifying encroachments and easements, confirming compliance with setback and zoning requirements, and satisfying lender and title company requirements. Specify which party will obtain the survey—in many commercial transactions Buyer obtains the survey as part of its due diligence, though in some markets Seller customarily provides the survey. Require that the survey be an ALTA/NSPS Land Title Survey prepared by a licensed surveyor in accordance with the current ALTA/NSPS standards, and specify which optional Table A items must be included based on the property type and transaction requirements. Common Table A items for commercial transactions include improvements survey, zoning classification and setback requirements, parking space count and layout, location of utilities, and flood zone designation.

Require that the survey be certified to Buyer, Buyer's lender, and the title company, with a certification date no earlier than the effective date of the agreement to ensure the survey reflects current conditions. Establish a review period for the survey (typically ten to fifteen days after receipt) during which Buyer may raise objections to survey matters such as encroachments, boundary disputes, or zoning violations. Define Seller's obligations regarding survey defects, typically requiring Seller to cure any encroachments by improvements on the property onto neighboring land or by neighboring improvements onto the property, and to resolve any boundary disputes or zoning violations. Provide that if Seller cannot cure survey defects within a reasonable time, Buyer may terminate the agreement or proceed accepting such defects, potentially with a purchase price adjustment if the defects materially affect the property's value or use.

DUE DILIGENCE PERIOD AND INVESTIGATION RIGHTS

Define a comprehensive due diligence period that provides Buyer with adequate time to investigate all aspects of the property while creating certainty for Seller regarding the transaction timeline. The length of the due diligence period should reflect the property's complexity, with typical periods ranging from thirty days for straightforward single-tenant properties to sixty or ninety days for large multi-tenant properties, properties with environmental concerns, or properties requiring extensive third-party reports. Specify that the due diligence period commences on the effective date unless the parties agree to a different commencement date, and clarify that time is of the essence for the expiration of this period.

Grant Buyer and its representatives, consultants, engineers, environmental specialists, contractors, architects, and lenders the right to enter the property at all reasonable times upon reasonable advance notice to Seller to conduct inspections, investigations, tests, and studies. Define "reasonable notice" with specificity—typically twenty-four to forty-eight hours for commercial properties—and "reasonable times" to mean normal business hours unless the parties agree otherwise or the nature of the investigation requires access at other times. For occupied properties, require that Buyer coordinate access with tenants through Seller or property management to minimize disruption to tenant operations and preserve tenant relationships.

Specify the scope of permitted investigations with sufficient breadth to encompass all matters a sophisticated commercial buyer would examine. Physical inspections should include examination of all buildings, structures, and improvements; all building systems including HVAC, electrical, plumbing, roofing, and structural components; all site improvements including parking areas, landscaping, drainage, and utilities; and any specialized systems or equipment specific to the property's use. Environmental investigations should include at minimum a Phase I Environmental Site Assessment prepared in accordance with ASTM E1527-13 standards, with the right to conduct Phase II testing including soil and groundwater sampling if the Phase I identifies recognized environmental conditions. For income-producing properties, investigations should include review and analysis of all leases, tenant files, and rent rolls; examination of all service contracts, maintenance agreements, and operating agreements; analysis of historical financial statements, operating budgets, and capital expenditure records; and verification of compliance with all applicable laws including zoning, building codes, ADA requirements, and environmental regulations.

Establish protocols for conducting investigations that protect both parties' interests and allocate risks appropriately. Require Buyer to maintain comprehensive general liability insurance with limits of at least one million dollars per occurrence and two million dollars aggregate, naming Seller as an additional insured, and to provide evidence of such insurance before commencing any invasive testing or investigations. Obligate Buyer to conduct all investigations in a manner that does not unreasonably interfere with the operation of the property or the rights of any tenants, to repair promptly any damage caused by the investigations and restore the property to its prior condition, and to keep the property free from any mechanics' liens arising from the investigations. Specify that Buyer is responsible for all costs of its investigations and that Seller has no obligation to reimburse Buyer for such costs even if the transaction does not close.

Address Seller's cooperation obligations to facilitate Buyer's due diligence while protecting Seller's confidential information and tenant relationships. Require Seller to provide Buyer with access to all documents, records, and information in Seller's possession or control relating to the property, including but not limited to title documents and surveys; all leases, lease amendments, and tenant correspondence; rent rolls and accounts receivable aging reports; service contracts, warranties, and guaranties; financial statements and tax returns for the property; environmental reports and compliance documentation; building plans, specifications, and as-built drawings; certificates of occupancy and other governmental permits and approvals; and correspondence with governmental authorities regarding the property. Permit Seller to require that Buyer execute a confidentiality agreement before receiving sensitive financial or tenant information, and allow Seller to redact information in leases or other documents that relates to tenants' confidential business operations rather than the lease terms themselves.

Establish Buyer's unconditional right to terminate the agreement during the due diligence period for any reason or no reason, which is standard in commercial real estate transactions and reflects the parties' understanding that Buyer needs flexibility to evaluate whether the property meets its investment criteria. Specify that Buyer may exercise this termination right by delivering written notice to Seller on or before 5:00 p.m. (in the time zone where the property is located) on the last day of the due diligence period, and that time is of the essence for this deadline. Clarify the consequences of termination: the escrow agent must return the earnest money deposit to Buyer within a specified period (typically three to five business days); all obligations of both parties under the agreement terminate except for provisions that expressly survive termination; and Buyer must deliver to Seller copies of all third-party reports and studies obtained during due diligence, though Buyer may retain its internal analyses, financial models, and attorney work product.

Specify the consequences if Buyer does not timely exercise the termination right, which fundamentally changes the nature of the transaction from contingent to committed. Provide that if Buyer does not deliver a termination notice by the deadline, the earnest money becomes non-refundable except in the event of Seller's default or the failure of other express contingencies in the agreement (such as financing or tenant estoppel contingencies), and Buyer is obligated to proceed to closing subject to satisfaction of all closing conditions. This shift from refundable to non-refundable earnest money provides Seller with meaningful assurance that the transaction will close and compensates Seller for taking the property off the market during the due diligence period.

REPRESENTATIONS, WARRANTIES, AND DISCLOSURES

Draft comprehensive representations and warranties from Seller that address all material aspects of the property and the transaction while remaining appropriate to the commercial context where sophisticated parties conduct their own due diligence. Structure these as affirmative statements of fact that are true and correct as of the effective date and will be true and correct as of the closing date, subject to any updates or supplements Seller provides during the transaction period.

Begin with representations regarding Seller's organization, existence, and authority that establish Seller's legal capacity to enter into and perform the agreement. Seller should represent that it is duly organized and validly existing under the laws of its state of formation, has full power and authority to own the property and conduct its business, has taken all necessary action to authorize the execution and performance of the agreement, and has obtained all required consents and approvals from its governing body, members, shareholders, or partners. If Seller is a multi-tiered entity or the property is owned through a partnership or joint venture, include representations regarding the ownership structure and the authority of the entity executing the agreement to bind all owners.

Include representations regarding Seller's title to and ownership of the property that form the foundation of Buyer's expectation regarding what it will receive at closing. Seller should represent that it has good and marketable fee simple title to the property, free and clear of all liens, encumbrances, easements, covenants, and restrictions except for the permitted exceptions identified in the agreement or accepted by Buyer during title review. Represent that no other person or entity has any right, title, interest, or claim in or to the property, whether by contract, option, right of first refusal, or otherwise, except for tenant rights under disclosed leases. Confirm that Seller has not entered into any agreement to sell, transfer, or encumber the property other than this agreement, and that Seller will not enter into any such agreement prior to closing.

Address litigation and disputes with representations that there are no pending or threatened lawsuits, claims, arbitrations, or governmental proceedings affecting the property, Seller's title to the property, or Seller's ability to consummate the transaction. Extend this representation to cover administrative proceedings, condemnation actions, or special assessments that could affect the property's value or use. Require Seller to disclose any demand letters, notices of violation, or other communications from third parties or governmental authorities that could reasonably be expected to result in litigation or claims.

Provide environmental representations that address the most significant risk area in commercial real estate transactions while remaining appropriate to Seller's actual knowledge. Seller should represent that to its knowledge, without independent investigation or inquiry, there are no hazardous substances, toxic materials, or other environmental contaminants on, in, or under the property except for ordinary household or office cleaning supplies and other materials used in the ordinary course of the property's operation in compliance with applicable laws. Represent that Seller has not received any written notice from any governmental authority regarding environmental violations, contamination, or required remediation affecting the property. Represent that to Seller's knowledge, the property has not been used for any purpose that would be likely to result in environmental contamination, such as dry cleaning, gasoline service station operations, industrial manufacturing, or waste disposal. Qualify these representations with "to Seller's knowledge" or "to Seller's actual knowledge without investigation" to reflect the commercial reality that Seller may not have conducted comprehensive environmental testing and should not be held to a standard of constructive knowledge regarding environmental conditions.

Include representations regarding compliance with laws that address zoning, building codes, and regulatory requirements. Seller should represent that to its knowledge, the property and its current use comply with all applicable zoning ordinances, building codes, and land use regulations, and that Seller has not received any written notice of violations from any governmental authority. Represent that all certificates of occupancy, licenses, and permits required for the current use of the property have been obtained and remain in full force and effect, and provide copies of such documents to Buyer. For properties with specific regulatory requirements—such as healthcare facilities, hotels, or properties with liquor licenses—include representations regarding compliance with industry-specific regulations and the transferability of required licenses.

For income-producing properties, include detailed representations regarding leases, tenants, and financial information. Seller should represent that the rent roll provided to Buyer is true, complete, and accurate as of its stated date, and that there are no leases, amendments, or tenant agreements affecting the property other than those disclosed to Buyer. Represent that all disclosed leases are in full force and effect, that Seller has performed all of its obligations under the leases, and that to Seller's knowledge no tenant is in default under its lease or has asserted any claim against Seller. Represent that Seller has not received any notice from any tenant regarding termination, non-renewal, or material default. Address security deposits by representing the amount held for each tenant and confirming that such amounts are held in accordance with applicable law. Represent that all financial information provided to Buyer regarding the property's income and expenses is true, complete, and accurate in all material respects, and has been prepared in accordance with Seller's normal accounting practices.

Include representations regarding service contracts, warranties, and other agreements affecting the property. Seller should represent that all service contracts, maintenance agreements, management agreements, and other contracts affecting the property have been disclosed to Buyer, and that no such contracts will survive closing except those Buyer has agreed to assume. Represent that Seller has not granted any options, rights of first refusal, or other rights to purchase or lease any portion of the property except as disclosed. Provide copies of all warranties and guaranties relating to the property's improvements, systems, and equipment, and represent that such warranties are assignable to Buyer and will be assigned at closing.

Establish the survival period for representations and warranties, recognizing that commercial parties typically negotiate shorter survival periods than residential transactions. Specify that all representations and warranties survive closing for a stated period, typically twelve to eighteen months, after which they expire and Buyer has no further recourse for breaches. Establish procedures and limitations for bringing claims based on breaches, including requirements that Buyer provide written notice of any claim before the expiration of the survival period, that claims must exceed a specified threshold amount (such as $10,000 to $25,000) to be actionable, and that Seller's aggregate liability for all breaches is capped at a specified amount (often five to ten percent of the purchase price). Clarify that these limitations do not apply to claims based on fraud or intentional misrepresentation, which survive indefinitely and are not subject to caps or thresholds.

Draft appropriate representations and warranties from Buyer that address Seller's legitimate concerns while remaining more limited than Seller's representations. Buyer should represent that it is duly organized and validly existing under the laws of its state of formation, has full power and authority to enter into and perform the agreement, and has obtained all necessary internal approvals and consents. If relevant to the transaction, include representations regarding Buyer's financial capacity to close, its experience in owning and operating similar properties, and its intended use of the property. Address any regulatory compliance matters relevant to Buyer, such as FIRPTA certification if Buyer is a foreign person, compliance with beneficial ownership reporting requirements, or licensing requirements for the intended use.

Include a critical representation from Buyer that it is acquiring the property based solely on its own independent investigation and evaluation, and not in reliance on any representations, warranties, statements, or information provided by Seller except as expressly set forth in the agreement. This representation, often called an "as-is" acknowledgment or disclaimer of reliance, significantly limits Seller's potential liability for matters not specifically addressed in the written representations and warranties. Specify that Buyer has had full opportunity to conduct all investigations it deems necessary, has either conducted such investigations or waived its right to do so, and accepts the property in its current condition subject only to Seller's express representations and warranties. Clarify that this provision does not limit Buyer's remedies for breaches of express representations and warranties or for fraud or intentional misrepresentation.

CLOSING CONDITIONS, DELIVERIES, AND ADJUSTMENTS

Establish the closing date with sufficient specificity to create certainty while allowing reasonable flexibility for addressing title issues, survey matters, or other contingencies. The closing date may be specified as a date certain (such as "December 15, 2024") or as a period following satisfaction of conditions (such as "thirty days after the expiration of the Due Diligence Period" or "forty-five days after Buyer receives all required tenant estoppel certificates"). Specify that time is of the essence for the closing date, which means that failure to close on the specified date constitutes a material default, but include reasonable provisions for extension if delays occur due to title defects Seller is curing, survey issues being resolved, or financing contingencies being satisfied. Establish the maximum extension period (typically fifteen to thirty days) and the conditions under which extensions are automatic versus requiring mutual agreement.

Identify the closing location, which is typically the office of the title company or escrow agent handling the transaction, though closings increasingly occur electronically through secure document exchange platforms. Specify whether the closing will be a face-to-face closing with all parties and their representatives present, or an escrow closing where documents are delivered to the title company for review, execution, recording, and disbursement. For escrow closings, establish the conditions that must be satisfied before the escrow agent is authorized to record the deed and disburse funds, and specify the order of recording and disbursement to protect both parties' interests.

Enumerate all documents and items Seller must deliver at closing with sufficient detail to ensure the title company and lenders can verify compliance. The deed is the primary deliverable and should be specified as a warranty deed, special warranty deed, or quitclaim deed depending on the negotiated terms and local custom. In most commercial transactions, Seller delivers a special warranty deed that warrants title only against claims arising during Seller's period of ownership, not against claims arising before Seller acquired the property. The deed must be properly executed and acknowledged in accordance with local recording requirements, must convey fee simple title to the property subject only to permitted exceptions, and must include the legal description from the survey or title commitment.

Require Seller to deliver a bill of sale conveying all personal property included in the transaction, properly executed and in form sufficient for recording if applicable law requires recording of personal property transfers. The bill of sale should reference Exhibit B and convey the personal property "as-is, where-is" without warranty unless the parties have negotiated specific warranties for certain items.

Include a FIRPTA certificate or withholding statement addressing the Foreign Investment in Real Property Tax Act requirements. If Seller is a United States person (citizen, resident alien, domestic corporation, domestic partnership, or domestic trust), Seller must provide a certificate under penalties of perjury certifying this status, which exempts the transaction from withholding requirements. If Seller is a foreign person, establish the withholding amount (typically fifteen percent of the purchase price for commercial property) and the procedures for Buyer to withhold and remit such amount to the IRS. Address any available exemptions or reduced withholding rates, such as the exemption for properties purchased for use as a residence or the reduced rate available under income tax treaties.

Require an owner's affidavit of title in the form required by the title company, typically affirming that there are no unrecorded liens, claims, or encumbrances affecting the property; no parties in possession of the property other than disclosed tenants; no unpaid bills for labor or materials that could give rise to mechanics' liens; no pending or threatened litigation affecting the property; and no bankruptcy proceedings involving Seller. The affidavit should address any specific title company requirements and provide the basis for the title company to delete standard exceptions and issue extended coverage.

For income-producing properties, require Seller to deliver an assignment and assumption of leases transferring all of Seller's interest in the leases to Buyer and requiring Buyer to assume all landlord obligations arising from and after the closing date. Accompany this with tenant estoppel certificates from all tenants (or from major tenants if the parties agree that estoppels from smaller tenants are not required) certifying the lease terms, rental amounts, security deposit amounts, the absence of defaults, and other matters material to Buyer's evaluation of the income stream. Establish the requirements for acceptable estoppel certificates and the consequences if Seller cannot obtain required estoppels, which might include a purchase price reduction, an extension of the closing date, or Buyer's right to terminate if estoppels from tenants representing more than a specified percentage of rental income are not obtained.

Require assignment of all contracts, warranties, and guaranties that will survive closing and benefit the property, including service contracts Buyer has agreed to assume, warranties for roofing, HVAC systems, or other building components, and any construction or repair guaranties. Deliver all keys, access codes, security system codes, and other items necessary for Buyer to access and operate the property. Provide an updated rent roll certified as accurate as of the closing date, current tenant contact information, and copies of all tenant files. Deliver all licenses, permits, certificates of occupancy, and other governmental approvals in Seller's possession, along with any transferable utility accounts or service agreements.

Address Seller's delivery of closing documents including a settlement statement prepared by the title company showing all receipts, disbursements, and adjustments; corporate resolutions, member consents, or partnership agreements authorizing the transaction and designating authorized signatories; any lender-required documentation if Seller's existing financing is being paid off at closing; and any state or local transfer tax declarations or real estate transfer forms required by law.

Specify all items Buyer must deliver at closing, beginning with payment of the purchase price in accordance with the payment terms. Require delivery by wire transfer of immediately available federal funds to the account designated by Seller or the title company, with wiring instructions to be provided at least two business days before closing to allow verification and avoid fraud. Specify the amount due, which is the purchase price minus the earnest money deposit and any financing proceeds, plus or minus any prorations and adjustments.

Require evidence of Buyer's authority to complete the transaction, including corporate resolutions, member consents, or partnership agreements authorizing the purchase and designating signatories. If Buyer is assuming any obligations under leases or contracts, require an assumption agreement properly executed by Buyer and in form acceptable to Seller. Include any lender-required documents if the transaction involves seller financing or assumption of existing financing, such as promissory notes, mortgages or deeds of trust, and loan agreements.

Establish comprehensive proration provisions that ensure fair allocation of income and expenses between Seller and Buyer as of the closing date. Specify that all prorations shall be made as of 11:59 p.m. on the day before closing, with Seller responsible for the day of closing, or use another clearly defined proration date if local custom or the parties' preference dictates a different allocation. This seemingly minor detail can have significant financial implications in properties with substantial daily income or expenses.

Address real estate taxes by providing that current year taxes shall be prorated based on the most recent ascertainable tax bill, with the understanding that if the actual tax bill for the closing year differs from the estimate used at closing, the parties will adjust post-closing to reflect the actual amount. Specify the timeframe for such post-closing adjustment (typically within thirty days after the actual tax bill is received) and the procedures for calculating and paying any adjustment amount. Address any special assessments or improvement district charges separately, clarifying whether Seller or Buyer is responsible for assessments levied before closing but payable after closing.

For income-producing properties, prorate rental income based on collected rents, not accrued rents, which means Seller receives credit only for rent actually collected for periods prior to closing. Specify that Seller receives rent collected for all periods prior to the closing date and Buyer receives rent for all periods from and after the closing date, regardless of when such rent is actually collected. Establish procedures for handling delinquent rents, typically providing that any rent collected after closing is applied first to current rent due to Buyer, then to delinquent rent due to Seller, with Buyer having no obligation to pursue collection of pre-closing delinquencies. Address security deposits by requiring Seller to either transfer the actual deposits to Buyer or credit Buyer at closing for the amount of deposits held, with Buyer assuming the obligation to return deposits to tenants in accordance with the leases and applicable law.

Prorate operating expenses including utilities (water, sewer, electricity, gas), property insurance premiums, common area maintenance expenses, property management fees, and any other recurring expenses. For prepaid expenses such as insurance premiums paid annually in advance, credit Buyer for the portion of the prepaid period extending beyond closing. For accrued expenses such as utilities billed in arrears, charge Seller for the portion of the billing period prior to closing. Specify that if exact amounts are not known at closing, the parties will use reasonable estimates based on historical expenses and adjust post-closing when actual amounts are determined, establishing a timeframe for such post-closing adjustments (typically ninety to one hundred twenty days after closing) and procedures for calculating and paying adjustment amounts.

Address how to handle tenant improvement allowances, leasing commissions, and other lease-related obligations that may be pending at closing. Typically, Seller is responsible for all such obligations arising under leases executed before closing, even if the work or payment is not completed until after closing, unless the parties specifically agree otherwise. Establish a holdback or escrow mechanism if significant tenant improvement work or leasing commissions are pending, or require Seller to complete all such obligations before closing.

DEFAULT PROVISIONS AND REMEDIES

Define what constitutes a default under the agreement by either party with sufficient specificity to avoid disputes about whether a default has occurred. A default occurs when a party fails to perform any material obligation under the agreement and such failure continues beyond any applicable cure period. Material obligations include Seller's obligation to convey title to the property at closing, Buyer's obligation to pay the purchase price, either party's obligation to satisfy conditions precedent to closing, and compliance with representations and warranties that are material to the transaction.

Establish a notice and cure procedure that provides the defaulting party with an opportunity to remedy the default before the non-defaulting party pursues remedies. Require the non-defaulting party to provide written notice specifying the nature of the default with sufficient detail to allow the defaulting party to understand and address the issue. Grant the defaulting party a reasonable cure period, typically five to ten business days, to remedy the default after receiving notice. Specify that certain defaults may not be subject to cure periods, such as failure to close when required if all conditions precedent have been satisfied, repudiation of the agreement, or fraud or intentional misrepresentation.

Specify Buyer's available remedies if Seller defaults under the agreement, recognizing that Buyer's remedies in commercial real estate transactions are typically broader than Seller's remedies due to the unique nature of real property. Provide that Buyer may elect to either terminate the agreement and receive a full refund of the earnest money deposit plus reimbursement of reasonable out-of-pocket expenses incurred in connection with the transaction, or pursue specific performance of the agreement by filing suit to compel Seller to convey the property. The availability of specific performance reflects the legal principle that each parcel of real estate is unique and that monetary damages may not adequately compensate Buyer for the loss of the opportunity to acquire the specific property.

Address the scope of recoverable expenses if Buyer elects to terminate and seek expense reimbursement, typically including third-party costs such as survey fees, environmental assessment costs, engineering and inspection fees, appraisal fees, and legal fees, but excluding Buyer's internal costs and opportunity costs. Consider whether to cap the expense reimbursement at a specified amount (such as $25,000 to $50,000) to provide Seller with certainty regarding maximum exposure, or to leave it uncapped if Buyer has incurred or will incur substantial due diligence expenses.

If Buyer elects to pursue specific performance, address Buyer's right to record a lis pendens or similar notice to provide public notice of the pending litigation and prevent Seller from transferring the property to a third party during the litigation. Specify the procedures for recording such notice and any requirements for posting a bond or providing other security. Address whether Buyer may seek actual damages in addition to specific performance for losses incurred due to the delay in closing, or whether specific performance is Buyer's sole remedy. Clarify the allocation of attorneys' fees and costs in any dispute, either providing that the prevailing party recovers its fees and costs or that each party bears its own fees and costs regardless of outcome.

Specify Seller's available remedies if Buyer defaults under the agreement, recognizing that commercial real estate practice typically limits Seller's remedies to liquidated damages in the form of the earnest money deposit. Provide that Seller's sole and exclusive remedy for Buyer's default is to terminate the agreement and retain the earnest money deposit as liquidated damages, representing a reasonable estimate of Seller's damages given the difficulty of calculating actual damages from a failed sale. Include specific language that the parties have agreed that the earnest money represents a reasonable pre-estimate of Seller's damages and is not a penalty, which helps enforce the liquidated damages provision against challenges that it constitutes an unenforceable penalty.

The liquidated damages amount should bear a reasonable relationship to Seller's anticipated damages, which typically include the cost of remarketing the property, the carrying costs during the period the property is off the market, and the risk that a subsequent sale will be at a lower price. For commercial transactions, earnest money deposits of one to five percent of the purchase price are generally considered reasonable liquidated damages amounts, though larger deposits may be appropriate for particularly valuable properties or extended transaction periods.

Alternatively, if the parties prefer to give Seller broader remedies, provide that Seller may elect between retaining the earnest money as liquidated damages or pursuing actual damages and specific performance, though this approach is less common in commercial transactions and may make the transaction less attractive to Buyer. If Seller has the option to pursue actual damages, specify what damages are recoverable and whether consequential damages (such as lost profits from a subsequent failed sale) are available or waived.

Address whether Seller may recover attorneys' fees and costs in addition to the earnest money, or whether the earnest money is Seller's sole recovery. Specify the procedures for releasing the earnest money to Seller upon Buyer's default, including any required notices to Buyer, waiting periods to allow Buyer to cure or dispute the default, and the escrow agent's obligations regarding disputed earnest money. Provide that if Buyer disputes Seller's right to the earnest money, the escrow agent may either interplead the funds into court and be released from liability, or continue to hold the funds pending resolution of the dispute.

GENERAL PROVISIONS AND EXECUTION

Establish comprehensive notice requirements that ensure all communications under the agreement are properly delivered and documented. Specify that all notices, demands, and communications must be in writing and delivered by one of the following methods: personal delivery with receipt acknowledged by the recipient or the recipient's authorized representative; overnight courier service such as FedEx or UPS with tracking and signature confirmation; email transmission to the designated email address with confirmation of receipt (either automated delivery receipt or reply acknowledgment); or certified mail, return receipt requested, through the United States Postal Service.

Provide the specific notice addresses for Seller and Buyer, including street addresses for personal delivery and overnight courier (not post office boxes unless the courier service accepts such addresses), email addresses for electronic delivery, and attention lines designating the appropriate contact person such as the party's representative, legal counsel, or transaction manager. Specify that notices are deemed delivered on the date of personal delivery if delivered before 5:00 p.m. in the recipient's time zone (otherwise the next business day), the next business day after deposit with an overnight courier, the date of email transmission if sent before 5:00 p.m. in the recipient's time zone (otherwise the next business day), or three business days after deposit in the mail.

Include provisions allowing parties to change their notice addresses by providing written notice to the other party in accordance with the notice provisions, and specify that such change is effective only upon receipt of the notice by the other party. Address notices to the title company or escrow agent by providing their contact information and specifying which notices should be copied to them, such as termination notices, default notices, and closing instructions.

Address assignment rights and restrictions, recognizing that commercial parties often want flexibility to assign the agreement to affiliated entities or to facilitate tax-deferred exchanges or other structuring considerations. Permit Buyer to assign its rights under the agreement to an affiliated entity, defined as an entity controlling, controlled by, or under common control with Buyer, without Seller's consent, provided that Buyer remains liable under the agreement or the assignee has equivalent financial capacity to Buyer. Specify the procedures for such assignment, including requirements that Buyer provide written notice to Seller at least a specified number of days before closing (typically ten to fifteen days), deliver a copy of the assignment agreement, and obtain any required acknowledgments from the assignee.

Address whether Buyer may assign to unaffiliated third parties, which typically requires Seller's prior written consent not to be unreasonably withheld, conditioned, or delayed. Establish criteria for evaluating such requests, such as the assignee's financial capacity, experience in owning and operating similar properties, and intended use of the property. Clarify that Seller may not assign its rights or obligations under the agreement without Buyer's consent except to facilitate a tax-deferred exchange under Section 1031 of the Internal Revenue Code, and that any permitted assignment does not release the assigning party from liability unless the non-assigning party expressly agrees to such release.

Include provisions stating that this agreement binds and benefits the parties' respective successors and permitted assigns, and that any reference to a party includes its successors and permitted assigns. Address what happens if a party undergoes a merger, consolidation, or sale of substantially all assets during the transaction period, typically providing that such transaction does not constitute an assignment requiring consent if the surviving or acquiring entity assumes all obligations under the agreement.

Specify that this agreement shall be governed by and construed in accordance with the laws of the state where the property is located, without regard to conflicts of law principles that might apply the law of another jurisdiction. This choice of law provision ensures that the law most familiar with local real estate practices, recording requirements, and title standards applies to the transaction, and provides certainty to the parties and the title company regarding which law governs interpretation and enforcement.

Address dispute resolution procedures, which may include mandatory mediation before litigation to encourage settlement and reduce costs. If including a mediation provision, specify that any dispute arising under or relating to the agreement must be submitted to mediation before either party may file litigation, establish how a mediator is selected (such as by mutual agreement or through a designated mediation service), designate the location of mediation (typically the city where the property is located), and allocate mediation costs (typically equally between the parties). Specify a timeframe for completing mediation (such as thirty to sixty days) after which either party may proceed to litigation if the dispute is not resolved.

Establish the exclusive jurisdiction and venue for any litigation, typically designating the state and federal courts located in the county where the property is situated, and include a waiver of any objections to personal jurisdiction or venue in such courts. This provision ensures that disputes are resolved in the jurisdiction most familiar with the property and local real estate law, and prevents either party from attempting to litigate in a distant or inconvenient forum.

Consider whether to include an attorneys' fees provision stating that the prevailing party in any dispute is entitled to recover reasonable attorneys' fees and costs from the non-prevailing party. Such provisions can discourage frivolous claims and defenses by creating a financial disincentive to pursue or defend against meritless positions, but they can also increase the stakes of litigation and make settlement more difficult. If including an attorneys' fees provision, specify whether it applies to all disputes or only to certain types of disputes, and whether it applies to arbitration, mediation, and appeals as well as trial court proceedings.

Address whether the parties waive any right to jury trial, which is common in commercial real estate transactions and can expedite dispute resolution by avoiding the time and expense of jury selection and trial. Include specific language that each party knowingly, voluntarily, and intentionally waives its right to trial by jury, and that this waiver applies to any action, proceeding, or counterclaim arising out of or relating to the agreement or the transaction. Some jurisdictions require that jury trial waivers be separately initialed or acknowledged to be enforceable, so consult local law and include any required formalities.

Include standard integration and amendment provisions specifying that this agreement constitutes the entire agreement between the parties regarding the subject matter and supersedes all prior negotiations, understandings, and agreements, whether written or oral. Provide that the agreement may be amended only by a written instrument signed by both parties, and that no oral modifications are effective. Address whether the agreement may be amended by email or electronic signature, or whether original signatures are required for amendments.

Specify that if any provision of the agreement is held to be invalid, illegal, or unenforceable, the remaining provisions remain in full force and effect, and the invalid provision shall be reformed to the minimum extent necessary to make it valid and enforceable while preserving the parties' intent. Include provisions regarding waiver, stating that no waiver of any provision is effective unless in writing and signed by the waiving party, and that waiver of any breach does not constitute waiver of any subsequent breach.

Address whether the agreement may be executed in counterparts, each of which constitutes an original and all of which together constitute one agreement. Specify that electronic signatures and PDF copies have the same force and effect as original signatures, which facilitates efficient execution when parties or their representatives are in different locations. Consider whether to include provisions regarding electronic delivery of notices and documents, and whether to adopt the Uniform Electronic Transactions Act or similar legislation governing electronic commerce.

Provide appropriate signature blocks for all parties that include the party's legal name exactly as it appears in organizational documents or on the current deed, signature lines for authorized signatories, printed names and titles of signatories, and dates of execution. For entity parties, include language confirming that the signatory has authority to bind the entity, such as "By: [Signature], Name: [Printed Name], Title: [Title], Date: [Date]." Ensure that the signature blocks accommodate all parties identified in the agreement header, including any guarantors or additional parties who will be bound by specific provisions.

If the agreement will be executed in counterparts or electronically, include provisions confirming that counterpart execution and electronic signatures are permitted and effective. Consider including acknowledgment blocks if the agreement will be recorded or if recording is contemplated for any reason, though purchase agreements are typically not recorded to maintain confidentiality of the transaction terms.

DRAFTING COMPLETION AND QUALITY CONTROL

When preparing this Purchase and Sale Agreement, conduct a comprehensive quality control review to ensure accuracy, consistency, and completeness. Verify that all exhibits referenced in the agreement are prepared and attached, including Exhibit A containing the complete legal description of the property, Exhibit B listing all personal property included in the sale, and any other exhibits referenced such as the form of deed, bill of sale, assignment and assumption of leases, or tenant estoppel certificate. Cross-reference each exhibit mention in the body of the agreement to ensure the exhibit exists and contains the referenced information.

Confirm that all dollar amounts are consistent throughout the document and accurately reflect the parties' agreement, including the purchase price, earnest money deposit, any additional deposits, expense reimbursement caps, and liability limitations. Verify that all dates and time periods are consistent and create a workable transaction timeline, including the effective date, due diligence period, title review period, survey review period, closing date, and any survival periods for representations and warranties. Calculate the timeline from the effective date through closing to ensure adequate time for all required activities, and identify any potential conflicts or unrealistic deadlines.

Ensure that party names are used consistently in every reference throughout the agreement, using the exact legal names established in the header. Verify that defined terms are used consistently and that all defined terms are actually defined in the agreement. Review the agreement for internal consistency, ensuring that cross-references to other sections are accurate and that provisions in different sections do not conflict with each other.

Review applicable state and local law requirements for real estate transfers in the jurisdiction where the property is located, including transfer tax implications and rates, mandatory disclosure requirements such as lead-based paint disclosures or property condition disclosures, recording requirements and fees, and any mandatory contract provisions required by state law. Verify that the agreement complies with all such requirements and includes any necessary disclosures or provisions.

Consider the specific property type and transaction structure when finalizing the agreement, recognizing that office buildings, retail centers, industrial properties, and multi-family properties each have unique considerations. For office buildings, address parking ratios, building services and operating hours, and tenant improvement standards. For retail centers, address exclusive use provisions, operating covenants, and percentage rent arrangements. For industrial properties, address environmental compliance, zoning for industrial use, and specialized equipment or systems. For multi-family properties, address rent control or rent stabilization laws, tenant notification requirements, and security deposit regulations.

Consult with the client regarding risk allocation preferences, particularly concerning the scope and survival of representations and warranties, the availability and limitations of default remedies, and any caps or limitations on liability. Ensure that the agreement reflects the client's priorities and risk tolerance while remaining commercially reasonable and likely to be acceptable to the other party.

Verify that all conditions precedent to closing are clearly identified and that the agreement provides adequate time for their satisfaction, including title review and cure, survey review and resolution of survey issues, due diligence investigations, obtaining financing if applicable, receiving tenant estoppel certificates, and obtaining any required governmental approvals or third-party consents. Establish clear procedures for determining whether conditions have been satisfied and the consequences if conditions are not satisfied by the closing date.

Coordinate with the title company to ensure the agreement accommodates their requirements and the anticipated closing timeline, including providing adequate time for title examination and commitment preparation, allowing sufficient time for recording and disbursement, and addressing any title company-specific requirements for the owner's affidavit, gap indemnity, or other closing documents. Coordinate with any lenders involved in the transaction to ensure the agreement accommodates their requirements, including timing for loan approval and documentation, required provisions in the purchase agreement, and any lender-required third-party reports or certifications.

Review the completed agreement with the client to confirm it accurately reflects the negotiated terms and addresses all material business points, and obtain the client's approval before execution. Provide the client with a summary of key terms, important deadlines, and required actions to ensure they understand their obligations and can perform them timely. After execution, establish a system for tracking deadlines and required deliveries to ensure compliance with all time-sensitive provisions and successful completion of the transaction.