Real Estate

Ending a Commercial Real Estate Deal

A commercial real estate deal is much like a residential property deal. Both involve contracts between the buyer and the seller or, if the deal is a lease, between the landlord and renter. If either party decides to end the deal, the terms of the contract will spell out how this can happen. At times, it is possible to negotiate a mutually acceptable alternative way to end the deal.

The Contingency Clause

Depending on how far you are into your commercial real estate deal, you might be able to end it by using a contingency clause in the contract. Contingency clauses let the buyer or the seller out of the deal if something happens that changes the terms of the contract. For example, your business might not be able to obtain the mortgage you'd planned on.

Alternatively, your contract might be contingent on the property having clear title, which means there are no liens against it. If it does have liens, you can back out of the contract.

You Might Be Sued

If a contingency clause doesn't provide an escape route, getting out of the deal won't be easy. If you signed a contract for sale, it's binding. If you back out, the other party can usually take you to court. If you are the seller, the buyer can sue you for "specific performance."

The court might order you to sell the property. If you are the buyer, you'll probably lose any deposit money you put down on the real estate. You might have to reimburse the seller for any money spent on a deal that didn't go through.

Negotiate a Settlement

Lawsuits can be expensive, so if you think the other party might sue you, consult with a lawyer. A lawyer can help you negotiate a solution that is acceptable to both parties. If you are the buyer and changing your mind, you might still lose your deposit. Sellers who end a deal must return the deposit and attempt to recoup certain expenditures.

Many Ways to End a Lease

If your commercial real estate deal is a lease, there are several ways to end it. Your lease might include terms that allow you to void the agreement if your business fails or your landlord fails to make agreed-upon repairs to the property.

You might even be able to sublet the commercial property to another tenant. A new tenant can move in and pay the rent. But if the new tenant causes damage to the property or doesn't pay rent as required, you might still be legally responsible.

A Commercial Real Estate Lawyer Can Help

The law surrounding the unwinding of a commercial real estate is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact a commercial real estate lawyer.

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