Commercial Real Estate Purchase Agreement
The principal contract governing the sale of commercial real property in Texas. Distinct from residential transactions in that it is typically heavily negotiated rather than form-driven, with bespoke provisions on due diligence, financing contingencies, environmental representations, title objections, and closing conditions. Statute of frauds requires writing.
A commercial real estate purchase agreement is the principal contract governing the sale of commercial real property in Texas, including office buildings, retail centers, industrial properties, raw land, and multifamily projects. Unlike residential transactions (which typically use TREC promulgated forms), commercial transactions are generally heavily negotiated through bespoke agreements drafted by counsel for each side. The contract structure follows a predictable framework but the substantive terms vary widely based on property type, deal size, and negotiating leverage.
Core deal terms
Standard provisions include (1) parties and property, exact legal description, including any improvements and personal property; (2) purchase price and earnest money, typically 1%-3% deposited with a title company as escrow agent; (3) due diligence (feasibility) period, typically 30-90 days during which the buyer may terminate without penalty; (4) title and survey objection process; (5) representations and warranties, environmental, leases, contracts, litigation, taxes; (6) closing conditions, title insurability, third-party consents, no material adverse change; (7) closing mechanics, date, place, deliverables; (8) default remedies, typically liquidated damages (earnest money) for buyer default; specific performance for seller default.
Due diligence period
The due diligence period is the most important risk-allocation provision in commercial real estate. During this window the buyer typically obtains physical inspections, environmental assessments (Phase I and, if warranted, Phase II), zoning verification, lease reviews, financial review of operating statements, and title and survey objections. The buyer typically has the right to terminate for any reason or no reason during this period, with full earnest money refund. After expiration, the buyer's outs narrow significantly to specific failed conditions.
Title and survey
Title is delivered through a Texas-form title insurance policy (typically T-1 Owner's Policy). The seller's obligation is usually framed as delivery of "marketable title insurable at standard rates," subject to "permitted exceptions" itemized in the contract. The buyer's title objection process is choreographed: title commitment delivered within X days; objection period of Y days; cure or waive; if not cured, buyer's election to terminate or close subject to the uncured objection.
Earnest money handling
Earnest money is typically held by the title company as escrow agent. The contract specifies whether the deposit is "refundable" (during due diligence) or "non-refundable" (after due diligence expiration, typically applied to purchase price at closing). Texas escrow law and Real Estate Commission rules govern the handling of the deposit. Disputes over earnest money release are common and frequently require interpleader if buyer and seller cannot agree.
Common drafting failures
Texas-specific issues that disproportionately surface in litigation: (1) ambiguous mineral rights reservations; (2) ambiguous personal property lists; (3) failure to address rollback taxes (agricultural-to-non-agricultural use); (4) overlooked tenant estoppels for leased property; (5) unclear allocation of property tax prorations; (6) absent or weak environmental indemnities; (7) ambiguity over whether the contract is assignable.
Commercial real estate transactions in Texas frequently use letters of intent (LOIs) before the definitive agreement, capturing the major commercial points before counsel begins extensive drafting. The LOI should make clear which provisions are binding (typically confidentiality, exclusivity, earnest money) and which are non-binding business terms. Sloppy LOIs that fail this binding/non-binding distinction can themselves become the subject of litigation when one party seeks to enforce purported agreement.