Commercial Real Estate Contracts: Choose The Right Form

If you’re buying or selling real estate, the worst thing is to get stuck in a bad deal. Under state law, the legal forms for commercial real estate contracts are relatively simple. Each purchase and sale agreement must be a written contract signed by the buyer and seller. It must specify the payment and describe the property. Beyond these basic requirements, you can add provisions to fit your deal, including conditions for closing, default, and warranties.

Washington law specifies three forms of real estate sales that we’ll explain here: the warranty deed, the bargain and sale deed, and the quitclaim deed. The difference is what the seller warrants that they know about the property, such as mortgages, liens, and other encumbrances. Other forms of property conveyance available in Washington include the gift deed and the trustee deed. While our attorneys can assist you with these forms, this page will explain the forms of statutory deeds.

It’s essential to understand the implications for the buyer and seller of the form you choose. If you choose the wrong form, you could find yourself surprised by the legal limitations and left with a commercial property that you can’t use. Instead, let our experienced real estate attorneys walk you through the form choice in commercial real estate contracts.

Three Legal Forms for Commercial Real Estate Contacts in Washington

Washington state law sets the requirements of each form and their legal effect in Chapter 64.04: Conveyances. To complete a real estate sale, you must list the names of the parties, the consideration (i.e., the purchase price), and a description of the property. This is all you need for a real estate transaction to be legal and binding. For the buyer to have legal priority over later sales, they must record the deed by filing it in the county where the property is located. However, the law recognizes three forms of conveyance. All three forms grant the buyer a “fee simple” in the property, which basically means they become the owner outright. The difference in these forms concerns the seller’s legal responsibilities to disclose liens and encumbrances on the property.

The Warranty Deed

The warranty deed offers the buyer the most protection under Washington law. In addition to granting the buyer fee simple title to the property, the seller promises three covenants, known as warranties. The seller promises that:

  • They hold title to the property and have “good right and full power to convey the same,”
  • The property is “free from all encumbrances,” and
  • They warrant “the quiet and peaceable possession” of the property and “will defend the title thereto against all persons who may lawfully claim the same.”

These three covenants assure the buyer that the seller does not owe any debts (also known as “encumbrances”) that entitle anyone else to take control of the property after the sale. The buyer can rest assured that they can take possession of the property without worrying about anyone else challenging the title. If encumbrances later arise, the buyer has legal recourse against the seller for breach of contract.

The Bargain and Sale Deed and the Special Warranty Deed

Under Washington law, the bargain and sale deed grants the buyer a fee simple title. It guarantees quiet enjoyment similar to the warranty deed. The difference is that the seller guarantees only that they are not aware of any encumbrances added during the time they owned the real estate. Although not codified in Washington law, a special warranty deed similarly guarantees that the seller did not attach encumbrances to the title. The seller is not responsible for knowing about or disclosing any financial liens or claims before their ownership. If you choose these forms, prior encumbrances could exist, but it is the buyer’s responsibility to find them, not the seller’s.

The Quitclaim Deed

The quitclaim deed has the most risk for the buyer. When a seller grants a quitclaim deed, the buyer receives only the seller’s legal rights in the property. The seller makes no guarantees or warranties about encumbrances on the title. The buyer has the responsibility to learn about any existing liens or others who may have rights in the property. When buying a property with a quitclaim deed, the buyer has no legal rights against the seller if it turns out existing claims or an encumbered title limits their ownership. Also, if it turns out that the seller did not have a legal right to sell the property, the buyer could lose out to the actual owner.

How Bolan Law Group., Can Help With Your Commercial Real Estate Contracts

As you now know, there are many factors to consider in choosing a form for your real estate contracts. An experienced real estate attorney can explain the legal implications of the form you choose. Our attorneys can help you decide which other provisions you may want to include in your contract. We have the experience to identify any unfavorable or unfair terms and conditions before you execute any commercial deal.

We can help you draft a contract containing conditions the buyer must meet before closing can happen, such as securing financing or renewing a tenant’s lease. Conditions on the seller could be to continue management or keep insurance on the property. We can include provisions to explain what constitutes a default. We’ll also help ensure any boilerplate provisions are in your favor. Having an experienced attorney to help you negotiate these terms at the contract stage will help you avoid disputes later.

Finally, one of the most critical clauses in the real estate contract is the description of the property. Our attorneys can help identify, sort through, and resolve title, easement, and boundary disputes so that the property you intend to purchase is what you get. Since 1977, Blado Kiger Bolan has assisted businesses and individuals in closing contracts and purchasing or selling commercial property. Our goal is to help you with your real estate matters, whether you are considering selling or have a contract in hand. Contact us today to have an experienced professional represent you during your real estate deal.

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