If you are buying or selling commercial property, you need to have a well-written purchase agreement that covers all of the essential terms of the transaction. A purchase agreement is a legal contract that specifies the rights, obligations and liabilities of both parties, as well as the steps required to close the deal. Here are some important clauses that you should include in your Phoenix, Arizona, purchase agreement to protect your interests.
Due diligence period
A due diligence period is a time frame during which the buyer can inspect the property and verify its condition, value, title, zoning, environmental issues and any other relevant factors. The buyer can also use this time to secure financing, obtain permits, appraisals and surveys and review any leases or contracts affecting the property.
The due diligence period gives the buyer an opportunity to back out of the deal if they find any problems or risks that they are not willing to accept. The length of the due diligence period depends on the complexity of the transaction and the type of property, but it usually ranges from 30 to 90 days.
The closing date should be realistic and achievable, taking into account the due diligence period, financing contingencies and any other conditions that need to be met before closing. The closing date can also be adjusted by mutual agreement of both parties if there are any delays or unforeseen circumstances. The purchase agreement should specify what happens if either party fails to close on time, such as whether there are any penalties, extensions or termination rights.
Representations and warranties
Representations and warranties are statements made by both parties about the property and their respective situations. For example, the seller may represent and warrant that they have a good and marketable title to the property, there are no liens or encumbrances on the property, no pending or threatened lawsuits or claims affecting the property, they have complied with all laws and regulations regarding the property and that they have disclosed all material facts about the property.
The buyer may represent and warrant that they have sufficient funds to complete the purchase, they have obtained all necessary approvals and consents for the purchase and that they are not in breach of any other contracts or obligations. Representations and warranties provide assurance and protection to both parties, as they can sue for damages or rescind the contract if they discover that any of these statements are false or inaccurate.