Buying Commercial Property: The Legal Steps Nobody Explains Up Front

Buying commercial property follows a legal path with six recognizable stages: the letter of intent, the purchase and sale agreement, the due diligence period, financing, the closing itself, and the transition to ownership. Every deal I have closed in more than 22 years of real estate practice has moved through some version of those six stages, and nearly every problem I have been hired to fix traces back to a stage that got rushed or skipped. This article walks the path in order, so you know what happens next before it happens to you.

My practice at AEGIS Law covers commercial and residential transactions across Missouri, Illinois, Florida, and California, representing investors, developers, landlords, tenants, and the businesses that occupy the space. I have also sat on the industry side, serving as counsel to a board of REALTORS, which taught me how deals look from the brokerage chair. This series draws on all of it.

What happens between handshake and contract?

Most commercial deals begin with a letter of intent, a short document that sketches price, timing, and the major business terms before anyone spends real money on lawyers or inspections. The LOI matters more than its casual tone suggests, because it sets the anchor points the contract will be drafted around, and because parts of it can be binding even when the document says it is not. Exclusivity provisions, confidentiality terms, and the obligation to negotiate in good faith frequently survive. I devote a full article later in this series to LOIs, because the trap in between binding and non-binding catches sophisticated people every year.

From the LOI, the deal moves to the purchase and sale agreement, and this is where the leverage lives. The PSA allocates every risk in the transaction: who bears the cost if the title is clouded, what happens if the property fails inspection, how the earnest money behaves, what the seller actually promises about the property’s condition, and what remedies each side holds if the other walks. Form contracts exist, and in smaller deals they get used, but a form allocates risk the way its drafter preferred. Reading the PSA as a risk map rather than paperwork is the single biggest mindset shift I coach new investors through.

What is the due diligence period really for?

The due diligence period is your paid-for window to discover what you are actually buying, and it deserves a plan rather than a vibe. The core workstreams run in parallel: a title commitment and survey to confirm what you are buying and what encumbers it, environmental assessment where the property’s history calls for it, zoning verification to confirm your intended use is actually permitted, physical inspection of the building’s systems, and, for income property, a hard review of the leases and the numbers behind them.

The legal significance of the period is the exit it gives you. A well-drafted inspection contingency lets the buyer terminate and recover the earnest money for any reason or no reason before the deadline, which converts the diligence period into your cheapest option on the property. The corollary is discipline: the deadline is real, extensions are negotiated rather than assumed, and the day it passes, your earnest money typically goes hard, meaning it is at risk if you fail to close. Calendar management is risk management in this business, and I say that as someone whose files are organized around those dates.

How do financing and closing actually come together?

Commercial financing runs on its own track with its own timeline, and the PSA needs to respect it. Lenders will order their own appraisal, require their own title and survey review, and paper the loan with covenants and, in many deals, personal guarantees from the principals. The guarantee conversation deserves more attention than buyers give it, and a later article in this series covers what lenders require and what borrowers can actually negotiate.

Closing itself is choreography run through a title company or escrow, depending on the state. Deeds, loan documents, assignments of leases and contracts, closing statements, and the transfer of security deposits and prorated rents all land at once. The buyer’s counsel’s job in the final week is reconciliation: making sure the numbers on the settlement statement match the contract, the title policy matches the commitment with the objectionable exceptions removed, and every document the deal promised actually exists and is signed. Deals rarely fail at closing. They limp into closing carrying problems that should have been caught two stages earlier.

What separates smooth deals from painful ones?

Three habits, in my experience. First, sequencing: the buyers who engage counsel at the LOI stage spend less in total legal fees than the ones who arrive with a signed contract, because the expensive problems get prevented instead of renegotiated. Second, honest calendaring: every contingency deadline, extension right, and notice requirement goes on a calendar the day the contract is signed, with reminders that leave time to act. Third, deal-appropriate structure: how you take title, which entity signs, and how the purchase is financed all have consequences for liability, taxes, and your next deal, and they are cheap to get right at the start.

Over the coming weeks, this series walks through each stage in depth: due diligence, entity structuring, LOIs, leases from both sides of the table, financing, syndications, development and zoning, residential investment, broken deals, and the long-game questions of portfolio structure and exit. The through line is the same conviction my whole practice is built on: real estate rewards people who respect the mechanics, and the mechanics are learnable.

Frequently asked questions

Do I need an attorney to buy commercial property?

In some states attorneys are customary at every closing and in others title companies run the process, but commercial deals justify counsel everywhere, because the PSA, title review, and lease diligence carry risks a title company is not engaged to protect you from. The earlier counsel joins, the more value the fee returns.

How long does a commercial purchase take from LOI to closing?

A simple deal with conventional financing commonly runs 60 to 90 days. Deals with environmental issues, zoning approvals, or lender complications run longer. The diligence and financing periods in the contract, not anyone’s enthusiasm, set the true pace.

How much earnest money is typical, and when is it at risk?

Commercial earnest money commonly runs one to three percent of the price, though it varies by market and leverage. It is generally refundable during the diligence period if the contract is drafted well, and at risk after the contingencies expire. The contract language, not custom, controls.

Talk with Lori

If you’re buying, selling, or leasing commercial property, the mechanics decide the outcome, and I’ve spent my career on them. I practice real estate, finance, and corporate law at AEGIS Law, licensed in Missouri, Illinois, Florida, and California. Reach me at ldacosse@aegislaw.com.

By Lori DaCosse, Real Estate, Finance & Corporate Attorney, AEGIS Law

This article is for general information only and is not legal advice. Reading it does not create an attorney-client relationship with AEGIS Law.