Extra Considerations in Commercial Real Estate Closings

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By Rochford Law Posted on November 9, 2020 at 7:00 AM

There are many steps to the process of purchasing real estate. Everything from the initial viewing of properties to putting in an offer can already seem like a lot. However, the real work comes between the day an offer is accepted and when the final signature is put on the last closing document.

Finding and securing all the necessary documents for closing on a real estate transaction is a lot of work. Buying a home takes a lot of effort and attention. But closing on a commercial property takes this idea a step further.

Commercial properties can have a wide variety of uses. And because of this, there are more factors that affect the steps included in the closing process.

But what are these differences? What effects will they have on the closing process?

Here are some of the ways the closing process differs between commercial and residential transactions:

  • More Involved Parties
  • Regulations
  • Extended Contract
  • Land Survey
  • Due Diligence
  • Complex Title Insurance Policies

More Involved Parties

A residential real estate deal is generally a transaction between one person and another person — two people if either party is married. The involvement of individuals usually makes the transaction much more straightforward when it comes to making decisions and signing legal documents.

Commercial real estate, on the other hand, will usually come with a much larger price tag. These properties often involve multiple units which will drive up the price. This factor usually necessitates the involvement of investors or business partners in order to secure the proper amount of financing.

A currently-functioning commercial space will often have existing tenants. Purchasing the property might require a renegotiation of the current leases before closing.


Commercial real estate is held to different standards than residential properties. Residential properties must adhere to the Real Estate Settlement Procedures Act (RESPA). And while commercial real estate transactions aren’t judged by the standards of RESPA, they must meet a series of other regulations in order to function.

For example, commercial properties must sometimes complete seismic risk assessments to ensure they are capable of withstanding an earthquake — even in Tennessee. 

This assessment is done because commercial properties have the potential to contain large amounts of people. It is the duty of the establishment to shield these people from preventable harm. Regulations are put in place to work toward this effort.

Extended Contract

These extra considerations are going to be reflected in the contract each party will sign on closing day. The extra stipulations will need to be enumerated, proven, and documented.

Adding extra aspects and requirements is going to make the final contract much longer, more intricate, and detailed.

Residential purchase contracts are thorough and essential. Commercial contracts take this another step further to account for all of the additional considerations.

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Land Survey

Some contracts will require a land survey for a commercial property transaction. But even those contracts that don’t require a land survey the buyer can benefit from purchasing one.

A survey can provide a lot of important information for the buyer, including some warnings if there are unknown encumbrances or easements associated with the property.

The environmental aspects of a property can also sometimes be assessed through a land survey, as can the exact property boundaries.

Knowledge regarding the specifics of the purchased land can provide long-term benefits for the buyer. It can also add to the pre-closing processes that need to be addressed.

Due Diligence

Due diligence refers to the process of looking into precise details associated with a variety of aspects of the transaction. This process takes place for the purpose of reducing the likelihood of late-stage complications.

Consider this the process of dotting your i’s and crossing your t’s.

The property, financing, and seller themselves will be investigated for any potential deficiencies or vulnerabilities. Potential repairs will be assessed. Legal liabilities will be analyzed.

This is a very important aspect of the closing process that the buyers will likely take upon themselves. Due diligence isn’t a required aspect of closing on a commercial property, but it’s highly recommended to do so.

Complex Title Insurance Policies

The issuance of residential title insurance policies require sorting through a wide range of documents to verify information, sort out small mistakes, and find previously-unknown information. And while this is by no means a simple process, it’s still fairly straightforward.

Commercial properties involve a wider range of individuals or businesses, are used for different purposes, and are generally larger. These factors mean there is more information to find and a variety of types of information available.

These complications are reflected in a more complex title insurance policy for commercial real estate closings.

Call Rochford Law & Real Estate Title for Help With Commercial Real Estate Closings

These transactions can be difficult, but very rewarding. The guidance of a professional real estate attorney can make these processes as smooth as possible, covering your bases so you don’t find yourself with a headache down the road.

Rochford Law & Real Estate Title has been guiding people and businesses through the commercial closing process in the Nashville area for years.

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PHONE: 615.269.7676

Topics: Commercial Real Estate, Commercial Real Estate Law, Nashville Real Estate, Nashville Real Estate Attorney, Nashville Real Estate Law, Real Estate Lawyer, Closing Process