A commercial real estate deal should not end in a negative experience. However, if the contract does not provide specifics, you may find yourself on the losing end of a deal.
A contract breach occurs when one party does not fulfill the obligations agreed to. Since contracts are the foundation of business and real estate, you should have an idea of the importance of the details within. Get a handle on some of the common reasons a commercial real estate contract breach occurs.
Landlord/tenant
A lease agreement sets out the amount a tenant will pay to lease a space, among other factors. A typical break in a commercial lease has to do with scheduled lease payment adjustments. In some contracts, it is common for regular bump-ups to occur, primarily if the landlord provided incentives to entice a tenant. When these raises occur, a tenant falling short of cash may try to break the lease.
Buyer/seller
Purchase and sale agreements for commercial property may become convoluted when the seller does not disclose all known conditions. If the buyer conducts due diligence and finds something, the contract terminates unless the seller fixes the problems. When a breach occurs in this fashion, financial penalties may ensue.
Developer/builder
When a tract of land needs improving, a developer enters into a contract with a builder. An issue that tends to crop up in these situations is the use of subcontractors and the overarching responsibility of the builder. When a subcontractor makes a mistake, the builder remains responsible for any fallout in the contract with the developer.
Breaking a contract may result in financial catastrophe. Ensuring remedy language exists is one way to keep this from happening.