Key Issues in Arizona Commercial Purchase Agreements

Commercial real estate purchase agreements in Arizona involve significant capital and complex terms. Understanding the key provisions—and potential pitfalls—can mean the difference between a smooth closing and a deal that falls apart at the last minute.

At Camelback Law Group, we've negotiated hundreds of commercial purchase agreements across Arizona. Here are the issues that matter most.

1. Due Diligence Period: Your Window to Investigate

The due diligence period is arguably the most critical phase of any commercial real estate transaction. This is your opportunity to thoroughly investigate the property before committing to close.

Arizona courts generally enforce due diligence provisions as written, so precise drafting is essential. A vague termination right may not protect you if disputes arise.

2. Title and Survey Review

Title issues can derail a transaction or create long-term problems for property owners. Arizona's unique history—including Spanish land grants, mining claims, and water rights—can create title complications not found in other states.

Common Arizona Title Issues:

• Easements for utilities, access, or drainage
• CC&Rs and deed restrictions that limit property use
• Mechanic's lien rights (Arizona has specific notice requirements)
• Water rights and assured water supply requirements
• Mineral rights reservations

Your purchase agreement should give you adequate time to review the title commitment and survey, and clear mechanisms to object to unacceptable exceptions.

3. Representations and Warranties

Seller representations and warranties allocate risk between the parties. In Arizona commercial transactions, these provisions are heavily negotiated.

Pay careful attention to survival periods—how long after closing can you bring a claim based on a breached representation? Arizona allows parties to contract for limited survival periods, which sellers typically prefer.

4. Closing Conditions and Mechanics

The path from signed contract to closed transaction involves numerous conditions and procedural requirements.

Arizona-Specific Considerations:

• Escrow: Arizona typically uses title companies as escrow agents, not attorneys
• Affidavit of Property Value: Required for all Arizona real estate transfers
• FIRPTA: Foreign Investment in Real Property Tax Act withholding requirements
• Prorations: Property taxes, HOA dues, and rents must be properly allocated

5. Default and Remedies

What happens if one party fails to perform? Arizona law provides default rules, but purchase agreements typically modify these significantly.

6. Financing Contingencies

If you're obtaining financing, the loan contingency is crucial. This provision should address:

• The type, amount, and terms of acceptable financing
• A deadline for loan commitment
• What constitutes an acceptable commitment letter
• Buyer's obligations to pursue financing diligently
• Consequences if financing is not obtained

Sellers often push for tight financing deadlines and limited termination rights. Buyers need enough flexibility to secure appropriate financing without giving up deal certainty.

Protect Your Investment

Commercial real estate transactions involve significant risk and complexity. The purchase agreement is your primary tool for allocating that risk and protecting your investment.

Whether you're a developer acquiring land, an investor purchasing an income property, or a business owner buying your facility, experienced legal counsel can help you negotiate terms that protect your interests while keeping the deal on track.