Key Terms in a Commercial Real Estate Purchase Agreement

Once the parties agree on the business terms in a letter of intent, the purchase agreement turns those points into enforceable obligations and allocates the risks the LOI never mentioned, such as defective title, a tenant dispute, or a lender that backs out.

Below are the key terms in a commercial real estate purchase agreement and the main differences between Virginia and North Carolina practice.

How should price and deposit terms be structured?

The price section should state the amount and how it is paid, including any seller financing or assumed debt. The deposit section should state the amount, escrow agent, delivery deadline, and the events that make it refundable or nonrefundable.

Many contracts stage the deposit, with an additional amount due after due diligence ends. Buyers should confirm the deposit is returned if the seller defaults, a contingency fails, or title is unacceptable. Sellers want it to go hard early, because it is their main protection if the buyer walks away.

What happens during the due diligence or examination period?

The due diligence period (in North Carolina’s standard commercial form, the “Examination Period”) is the window in which the buyer investigates the property. A buyer-friendly contract allows termination for any reason before the period ends, with a full refund; a seller-friendly one limits termination to specific findings.

The contract should also set a deadline for the seller to deliver leases, rent rolls, service contracts, prior surveys, title policies, and environmental reports, with a day-for-day extension if delivery is late. Our commercial real estate due diligence checklist lists the items most buyers review.

How do title and survey objections work?

Most commercial contracts give the buyer a deadline to review a title commitment and survey and send written objections. The seller then decides whether to cure. If it declines, the buyer typically may accept title as is or terminate and recover the deposit. Many contracts also require the seller to remove monetary liens at closing whether or not the buyer objects.

The survey matters as much as the title commitment. ALTA/NSPS Land Title Surveys are now governed by the 2026 Minimum Standard Detail Requirements, effective February 23, 2026, and optional Table A items (such as flood zone, zoning, and utilities) must be specifically selected. Our article on title insurance and ALTA surveys explains how the survey supports endorsements and objections.

What seller representations should a buyer ask for?

Commercial buyers start from a buyer-beware position. Virginia’s Residential Property Disclosure Act applies only to residential property with 1 to 4 units (Va. Code § 55.1-701), and North Carolina’s Residential Property Disclosure Act (G.S. Chapter 47E) has the same limit. Neither state requires a statutory disclosure form for commercial property. Concealment of a material fact can still support a fraud claim in Virginia, but buyers should not rely on a lawsuit as their protection plan.

Instead, buyers typically negotiate representations about the seller’s authority, pending litigation or condemnation, environmental notices, code violations, the accuracy of the rent roll and leases, and undisclosed service contracts. The contract should state how long representations survive closing and whether claims are capped. Sellers often push for “as is” language, and the balance depends on price, property type, and bargaining power.

Why do estoppels and SNDAs matter for leased property?

If the property has tenants, the buyer is buying the leases along with the building. An estoppel certificate is a tenant’s signed statement confirming the lease terms, rent, deposit, and any defaults or disputes, so the buyer does not learn after closing about a claimed rent credit or unrecorded option. Contracts often require estoppels from major tenants, or from tenants occupying a set percentage of the space, as a closing condition.

An SNDA (subordination, non-disturbance and attornment agreement) is usually a lender requirement. It subordinates the lease to the new loan while protecting the tenant’s possession after a foreclosure. A financing buyer should require the seller to request SNDAs in the lender’s form.

How are closing costs usually allocated?

Closing costs are negotiable, but custom and standard forms set expectations. The table summarizes typical allocations; the contract controls.

The closing agent typically handles 1099-S reporting. If the seller is a foreign person, FIRPTA generally requires the buyer to withhold 15 percent of the amount realized (not the gain) unless an exception applies (26 U.S.C. § 1445), so the contract should require a non-foreign certification or other required documents.

What default remedies and liquidated damages should the contract include?

Commercial contracts usually treat buyer and seller defaults differently. For a buyer default, the seller’s remedy is often limited to keeping the deposit as liquidated damages, which gives the buyer a known maximum exposure. For a seller default, the buyer typically may choose between a refund of the deposit (sometimes with reimbursement of out-of-pocket costs up to a cap) and specific performance, a court order requiring the seller to convey the property.

Buyers should watch for refund-only remedies, which can leave a seller free to walk away for a better offer. Notice and cure periods and the effect of a casualty or condemnation before closing should also be addressed. Our contracts practice handles these provisions regularly.

Can the buyer assign the contract, and what about 1031 and SBA terms?

Many buyers take title in a new single-purpose LLC, so the contract should expressly allow assignment to an affiliate without seller consent. Sellers often agree if the original buyer stays liable until closing.

If either party is doing a 1031 exchange, a cooperation clause should require the other party to sign customary exchange documents at no cost or liability. The exchanging party’s deadlines are fixed: replacement property must be identified within 45 days and received by the earlier of 180 days or the due date (with extensions) of the tax return for the year of transfer (IRC § 1031(a)(3)). See 1031 exchange legal issues before setting the closing date.

A buyer using SBA 7(a) or 504 financing for an owner-occupied property must occupy at least 51 percent of an existing building, or at least 60 percent for new construction (13 CFR 120.131). If the property is held by a separate real estate entity that leases the whole building to the operating business, the operating company must meet the occupancy test. The financing contingency should allow time to meet lender requirements.

How do Virginia and North Carolina purchase agreements differ?

Transfer taxes. Virginia imposes a state recordation tax of $0.25 per $100 of consideration or assessed value, whichever is greater (Va. Code § 58.1-801), and localities may add a local recordation tax equal to one-third of the state tax (§ 58.1-814). The grantor tax is $0.50 per $500, excluding liens that remain on the property, and is paid by the grantor unless the parties arrange for the grantee to pay all or part (§ 58.1-802). Additional grantor fees apply in Northern Virginia (§§ 58.1-802.3, 58.1-802.4) and in the Hampton Roads transportation district cities, including Norfolk, Virginia Beach, and Chesapeake (§ 58.1-802.5). North Carolina’s excise tax is $1 per $500 of consideration or value, paid by the seller before recording (G.S. 105-228.30). Seven counties, including Currituck and Dare, are authorized by local acts to levy a land transfer tax of up to 1 percent, which the acts place on the seller; this matters for Outer Banks deals. Confirm the current rate with the county and allocate the cost in the contract.

Form 580-T mechanics. North Carolina commercial deals often use Form 580-T. Earnest money is due within 5 days of the contract date, there is no due diligence fee, and the buyer may terminate for any reason before the Examination Period ends and recover the earnest money. After that, the earnest money generally becomes nonrefundable; on a buyer default the seller keeps it as liquidated damages, its sole remedy for that default. If the seller defaults, the buyer may recover the deposit and keeps its other remedies. The Virginia Code does not prescribe a statewide commercial purchase form, so these terms vary more from contract to contract and must be negotiated deliberately.

Recording. Under Va. Code § 55.1-407, an unrecorded deed or contract is void against purchasers for value without notice and lien creditors until recorded, commonly described as a race-notice rule. North Carolina’s Connor Act (G.S. 47-18) is stricter. Courts describe it as a pure race statute: a purchaser who records first generally wins, even with actual notice of an earlier unrecorded deed, subject to limited exceptions. The statute covers contracts to convey, options, and leases of more than three years, so NC buyers should ask counsel whether recording is advisable during a long contract period. For state-specific steps, see our guides to closing in Virginia and North Carolina.

Frequently Asked Questions

Is a commercial real estate purchase agreement different from a residential contract?

Yes. Commercial contracts carry no statutory seller disclosures and usually include negotiated representations, estoppel requirements, and remedy limits that residential forms do not address.

Can I get my deposit back after the due diligence period ends?

Usually only if the seller defaults or a remaining contingency fails. Under Form 580-T, the earnest money generally becomes nonrefundable after the Examination Period ends.

Who pays transfer taxes in a commercial sale?

In Virginia, the grantor tax is paid by the seller unless the parties agree otherwise, and by custom the buyer pays the recordation tax on the deed. Regional grantor fees may also apply in some localities. In North Carolina, the seller pays the excise tax. Both allocations can be negotiated.

Related Articles in This Guide

• The Legal Guide to Commercial Real Estate in Virginia and North Carolina
• Commercial Real Estate Letters of Intent: What to Negotiate Before the Contract
• Commercial Real Estate Due Diligence Checklist
• Title Insurance and ALTA Surveys in Commercial Real Estate
• Zoning and Land Use Due Diligence for Commercial Property
• Negotiating a Commercial Lease: What Tenants Should Know
• CAM Charges and Triple Net Leases: How Operating Expenses Really Work
• Personal Guaranties in Commercial Leases: Limiting Your Exposure
• Should You Hold Commercial Real Estate in an LLC?
• 1031 Exchanges: Legal Issues, Deadlines, and Common Mistakes
• Buying or Selling Commercial Real Estate in Virginia
• Buying or Selling Commercial Real Estate in North Carolina

This article provides general information only. It is not legal, tax, or financial advice and does not create an attorney-client relationship. Laws differ by state and change over time. Our attorneys are licensed in Virginia and North Carolina. We assist clients with business transactions involving multiple states. For matters involving the law of a state where we are not licensed, we associate with appropriately licensed counsel or otherwise proceed only as permitted by applicable law.