A Personal Approach To Even The Most Complex Cases

Red flags in a commercial real estate purchase contract

On Behalf of | Jun 6, 2024 | Real Estate |

Commercial real estate purchase contracts have several financial implications. For this reason, it’s important to scrutinize the details and make sure you know what you’re getting into. Identifying red flags in contracts is key to safeguarding your investment and avoiding costly mistakes.

Ambiguous diligence period

Beware of unclear or insufficient due diligence periods. The contract should state the duration and scope of the due diligence period, allowing ample time for inspections, financial reviews, and risk assessments.

Lack of contingencies

The absence of contingencies can indicate trouble. Contingencies (such as obtaining financing or passing inspections) are crucial to enforcing the contract. Be cautious of contracts that lack clear parameters or those with vague language, as they can expose you to unanticipated risks.

Unclear title and survey issues

Well-written commercial real estate contracts include crystal clear title and survey review clauses. The contract should mandate a comprehensive title search to reveal any liens, encumbrances, or easements that may affect the property.

No environmental hazard disclosures

In Utah, failure to disclose environmental hazards is a serious red flag. State law requires sellers to inform buyers of any known environmental risks associated with the property. A contract that lacks these disclosures or provides insufficient information should raise immediate concerns.

Other considerations under Utah law

Utah water and mineral rights are complex, especially as the state grapples with a burgeoning population. As such, it’s important to ensure the contract outlines any rights associated with the property, as well as their transferability.

Finally, make sure the contract complies with local zoning ordinances. Utah’s zoning laws vary by municipality, and non-compliance can cause legal disputes and restrictions on property use.

A little vigilance can go a long way when it comes to commercial real estate contracts. By keeping an eye out for these red flags, you can address issues and protect your interests.