If you’re purchasing your first commercial property, you’re likely wondering how similar the closing process is to closing on a home. In fact, there are a lot of differences. They both have their share of regulatory requirements, but not the same ones.
Transactions involving residential properties have to adhere to the Real Estate Settlement Procedures Act (RESPA). Although RESPA doesn’t cover commercial closings, that doesn’t mean that buyers and sellers don’t have plenty of regulatory issues to worry about, like zoning and environmental requirements, just to name two. Both sides need attorneys involved in the transaction. There needs to be a good deal of due diligence.
Commercial purchase and sales agreements (PSAs) aren’t as standardized as residential sales contracts are. They are drawn up based on the kind of business structures and the interests of the parties involved.
Who is involved in a commercial real estate closing?
That’s another key difference. There are typically many more parties involved in a commercial real estate closing than a residential one. These include:
- The buyer and their attorney
- The seller and their attorney
- The title/escrow company
- The lender
There may also be corporate officers, members of the board and others who are involved in the purchase or sale who participate in the closing in some way.
The type and location of the commercial property and its intended use will affect the types of filings and reports that need to be in order for the closing to take place. It’s essential to have an experienced commercial real estate attorney to guide you through the process and help you avoid any potential legal or financial issues down the road.