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Breach of commercial real estate contracts

On Behalf of | Mar 8, 2023 | Commercial Real Estate

In California, breaches of commercial real estate agreements occur after the official paperwork has been signed when one party wants to avoid fulfilling their end of the deal. When a breach occurs, there are two things that a court can order the breaching party to do. Since buyers usually have more options if the contract is breached than sellers, the commercial real estate contract must include terms indicating what happens if the contract is breached.

Common reasons for breaching commercial real estate contracts

Buyers and sellers breach commercial real estate contracts for a variety of reasons. In some cases, there is damage to the property, so it was not as described. In other cases, someone else owns part of the property, but the seller failed to disclose that to the buyer. In others, there is an issue with the property’s deed.

Court-ordered fulfillment of contract

The first thing that a judge can do is order that the parties fulfill the terms of the agreement as written. Even if one party or the other seemed to get a better deal, they both had agreed to the terms of the deal.

Monetary remedies

The second thing a judge can do is award monetary damages to the one not breaching the contract. These damages are usually the difference between the purchase price and the property’s value. The judge may also award monetary damages for loss of profits.

Terms often included in commercial real estate contracts

A variety of terms may be listed in commercial real estate contracts to try to prevent a breach from occurring. One of the most common is that the buyer agrees to give a set percentage of the sale’s price to the seller if they breach the agreement. The contract often awards court and lawyer fees to the losing party if the case goes to court.

Breaches occur after commercial real estate contracts are signed, often resulting in a judge awarding monetary damages or ordering the arrangement’s fulfillment.