How to Structure Offer w/Contingencies for Commercial Development

[Joseph Sahar]

I have been in discussions with the listing broker to purchase a national historically registered building. We will need to do some MEP due diligence work to better understand what the renovation costs will be. This will costs thousands of dollars so if we do that work I want to make sure we have an agreement where I can purchase the property. How should I structure this option / offer agreement?How do I draft up an option / offer to purchase with significant contingencies so I do not get stuck purchasing a property that may not pencil in once we gather more information? I currently put contingencies on the following milestones:

Contingencies (able to achieve the following milestones)

• Site Planning
  • Base Map
  • Site Plan (End of 2021)
  • Conceptual Site Plan (Beginning 2022)
• Architecture
  • Feasibility Design (End of 2021)
  • Conceptual Design (March 2022)
• Entitlements & Permits
  • Pre-Application (Beginning 2022)
  • Application (mid-late 2022)
    • **Buyer Submits Refundable Deposit
  • Building Permit and Inspections (End of 2022)
  • Final Approval to Build for purposes of a banquet hall (End of 2022)
    • **Funding Land Acquisition
• General Contractor
  • Site and Civil Work (End of 2022)
  • Certificate of Occupancy (Late 2023)

Is this the correct approach or is there a better way to structure this offer to take on the least amount of risk?

[Nik Moushon]

Originally posted by @Joseph Sahar:

Thanks for the comment! I should have mentioned that the historic commercial building has been vacant for 21 years so the owner is just happy to have any offer to get this property off his hands (he has had it for 15 years). Since the owner is open to any offer, do you have any additional input on what I can put in the offer since I have significant leverage? 

 It doesnt matter how leveraged you are, if you start getting too detailed in your offer you start limiting your ways out. You also start making the seller question your intentions. Have your offer start broad and narrow it down through negotiations. Make them feel like they have a say and try to guide them into the direction you were thinking of anyways. I dont know enough about your project to really add specifics that you should or shouldnt have. Just dont be too 'greedy' up front. 

The great things about contracts are you can right them pretty much however you want and as along as both sides agree...it works.