Key Components of the CAR Commercial Property Purchase Agreement Explained

Key Components of the CAR Commercial Property Purchase Agreement Explained

Key Components of the CAR Commercial Property Purchase Agreement Explained


The California Association of Realtors (CAR) Commercial Property Purchase Agreement is a foundational document in commercial real estate transactions. It serves as the blueprint for the purchase of commercial properties in the state, ensuring that buyers and sellers are on the same page regarding the terms and conditions of the transaction. In this comprehensive guide, Real Estate Law Corporation will explain the key components of the CAR Commercial Property Purchase Agreement to help you navigate the complexities of commercial real estate deals with confidence.

Property Identification and Purchase Price

1.1. Property Description

The CAR Commercial Property Purchase Agreement begins with a detailed description of the commercial property in question. This section includes the property’s legal description, address, and any relevant parcel or tax identification numbers. Accurate property identification is crucial to avoid any misunderstandings during the transaction.

1.2. Purchase Price

The agreement outlines the purchase price of the commercial property. It specifies the total purchase price, any earnest money deposits made by the buyer, and the terms of payment. Additionally, it may include provisions for adjustments to the purchase price, such as prorated property taxes or rent.

1.3. Financing Terms

This section of the agreement addresses how the buyer intends to finance the acquisition. It includes details about the buyer’s financing sources, the amount to be financed, and the deadline for obtaining financing. Buyers may also include contingencies related to financing approval.

Due Diligence and Contingencies

2.1. Due Diligence Period

The CAR Commercial Property Purchase Agreement includes a due diligence period during which the buyer can conduct inspections and investigations to assess the property’s condition and suitability for their intended use. The length of this period is negotiable and should provide the buyer with ample time to complete necessary due diligence tasks.

2.2. Contingencies

Contingencies are conditions that must be met for the transaction to proceed. Common contingencies in commercial real estate agreements include property inspections, title review, and financing approval. The agreement outlines the specific contingencies applicable to the transaction and the timeline for their completion.

2.3. Seller Disclosures

Sellers are typically required to provide disclosures about the property’s condition and any known defects or issues. These disclosures help buyers make informed decisions during the due diligence period. Any material disclosures should be detailed in the agreement.

Closing Process and Timeline

3.1. Closing Date

The CAR Commercial Property Purchase Agreement specifies the anticipated closing date—the date when ownership of the property is transferred to the buyer. This date is subject to change based on various factors, including the completion of contingencies and the financing process.

3.2. Closing Costs

This section outlines how the costs associated with the transaction will be allocated between the buyer and the seller. These costs may include escrow fees, title insurance premiums, property taxes, and other expenses related to the closing process.

3.3. Prorations

Prorations are adjustments made to certain expenses, such as property taxes, rent, and utilities, to account for the portion of time each party will own the property during the calendar year. The agreement details how prorations will be calculated and applied.

Responsibilities and Default Provisions

4.1. Responsibilities of the Parties

The CAR Commercial Property Purchase Agreement defines the responsibilities of both the buyer and the seller throughout the transaction. It outlines the actions each party must take to fulfill their obligations, including the delivery of documents, inspections, and approvals.

4.2. Default Provisions

In the event that either party fails to meet their obligations or violates the terms of the agreement, default provisions come into play. These provisions outline the consequences of default, which may include termination of the agreement, forfeiture of deposits, or legal remedies.

4.3. Mediation and Arbitration

The agreement may include provisions for resolving disputes through mediation or arbitration rather than litigation. These alternative dispute resolution methods can help parties resolve conflicts more efficiently and cost-effectively.

Customization and Legal Review

5.1. Customization

One of the strengths of the CAR Commercial Property Purchase Agreement is its flexibility. Parties can negotiate and customize various aspects of the agreement to suit their specific needs and preferences. Customization may involve adjusting timelines, contingencies, and the allocation of responsibilities.

5.2. Legal Review

Before finalizing the agreement, it is advisable to have it reviewed by legal counsel with expertise in commercial real estate transactions. Legal professionals can ensure that the document is structured to protect your interests and is compliant with relevant California real estate laws and regulations.


The CAR Commercial Property Purchase Agreement is a comprehensive and versatile document that forms the basis of commercial real estate transactions in California. Understanding its key components is essential for both buyers and sellers to navigate the complexities of these deals successfully. Whether you are embarking on a new commercial real estate venture or engaging in a property transaction, a well-drafted and carefully negotiated CAR Commercial Property Purchase Agreement is crucial to protecting your interests and facilitating a smooth transaction process.

Whether you’re a property owner, investor, or business owner, Real Estate Law Corporation™ is your trusted partner on the path to legal success. Contact us today to embark on a journey of exceptional legal support. Our team of seasoned attorneys brings decades of experience to every case, demonstrating a profound understanding of real estate law, transactions, litigation, business intricacies, and estate planning. With a proven record of success, our portfolio is adorned with numerous landmark cases that stand as a testament to our dedication, expertise, and commitment to achieving favorable outcomes for our clients.