Promulgated forms in Commercial Real Estate Transactions

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It is extremely important to avoid the use of promulgated forms in a commercial real estate transaction if you are selling a commercial property. These forms, promulgated by the likes of the North Texas Commercial Association of Realtors or the Texas Association of Realtors are insufficient in protecting sellers from future liability.

Why you may ask? Because neither of these forms are “as is” contracts. They are instead, present condition contracts. And such contracts lack the magic language that the Texas Supreme Court requires for a contract to be truly “as is.”

The logic behind these forms does make sense. They were designed to strike a middle ground between a buyer and a seller. They are, in theory, designed to get a deal done by striking such a middle ground. But, unlike in a residential deal, a commercial deal is usually much more complex, with significantly longer due diligence periods. If you are selling 300 acres, are you, the seller, absolutely certain that some unscrupulous individual didn’t dump a potential environmental hazard on to your property 5 years before you even owned it? If you are selling an apartment building, are you absolutely certain drugs aren’t being manufactured by a tenant? And if the buyer has any concerns about items like that, they can investigate that themselves, rather than trying to turn a purchase and sale agreement into a purchase, sale, and insurance agreement, with the seller holding potentially holding the bag.

That is why it is extremely important to have a very strong “as is” provision in the sales agreement. Because you don’t know. And if you are giving a buyer 30, 90, even 120 days to do their own due diligence, you, the seller, shouldn’t remain on the hook for any problems that may be discovered after the sale.