How does an Offer work?

For many first time buyers and tenants the Offer process can seem a bit confusing. At what point am I committed past the point of no return? What are my obligations to this agreement? When is my money due and can I still get it back? Let me break down the process for you.


Buying Scenario

In the sale of commercial real estate, there are a few key turning points. The Offer is instigated by the person buying the property; and in most cases it will be met with a Counter Offer from the person selling the property. Sometimes the Offer and Counter Offer can go back and forth several times before the key terms such as price, closing date, conditions, etc. are determined.

Once an offer to purchase has been agreed upon, typically a deposit of 10 per cent will become due. The brokerage handling the paperwork on behalf of the Buyer generally holds that deposit in trust until trust conditions have been satisfied on the sale between lawyers. These are generalities I am speaking of; sometimes a deposit will come straight away with an offer or be held by a lawyer.

The deal continues to chug along in the due diligence period. Sales will often require a Phase I Environmental Report, an appraisal, review of existing contracts or condo bylaws, just to name a few. This material is collected and reviewed while other conditions such as securing financing are being completed.

Once all conditions in the due diligence have been met, the transaction becomes unconditional and proceeds to close. The deposit becomes no longer refundable after conditions have been removed. Lawyers for each side of the transaction process the final monies and release keys for possession.

Leasing Scenario

Similar to a sale, there is typically an Offer and Counter Offer to any leasing transaction. Once an accepted Offer has been reached, a deposit of two months gross rent plus GST will be called upon.

There can often be conditions, like a sale, that need to be satisfied before a lease is set in place. Perhaps a board approval or financing condition may be in play. Otherwise, the main condition is the review and acceptance of the final Lease document. This is a heady piece of work, anywhere from 30-40 pages long. Most clients will choose to get counsel to review this before proceeding.

Once the Lease is agreed upon and signed off by both the Tenant and Landlord, the Tenant can make plans to secure keys. In most cases, this involves changing utilities over to their name and securing liability insurance. . The deposit becomes no longer refundable after the Lease has been signed as it is the last condition to the Offer. Keys are released by the listing agent on or before the possession date when all of these tasks have taken place.

None of these guidelines are an absolute. Deals vary wildly in our day to day transactions. However, these steps are the very best example of what to realistically expect during your first commercial real estate transaction be it a sale or lease.

Posted by Kelly Macsymic


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