The contract comes first, and it must be written

Missouri law (RSMo 432.010) says no one can sue on a contract to sell land, or an interest in land, unless it is in writing. It must be signed by the person you want to hold to it. If an agent signs for the owner, the agent must have written authority. A handshake on price does not bind a Missouri seller. Neither does a string of texts with a broker.

The purchase agreement is where the buyer’s protections live. It should cover:

• The price and the deposit.
• A due-diligence period, which is time to inspect and investigate, with a clear right to back out.
• Conditions for closing: title, survey, financing, zoning and environmental.
• The seller’s promises about the property.
• Who pays which closing costs.
• What happens to the deposit if either side fails to close.

Title, survey and recording

A title commitment is the title company’s list of what it will insure. More important, it lists what it will not insure. These are called exceptions. They can include easements, which are rights others have to use part of the land. They can also include deed restrictions, contractor liens, unpaid special assessments, and gaps in past ownership records. During due diligence, the buyer objects to the exceptions that matter. The seller must fix them before closing.

A current survey shows whether the building sits where the deed says. It shows whether anything crosses a property line or an easement. And it shows whether there is legal access to a public road.

Recording finishes the deal. Under Missouri law, a document affecting real estate is not valid until it is filed with the county recorder. The only exceptions are the parties themselves and people who actually know about it. Recording protects you from a later buyer or lender who did not know about your purchase.

Environmental due diligence

Under the federal Superfund law, the owner of polluted land can have to pay for the cleanup. That is true even if an earlier owner caused the pollution. There is a defense for a buyer who bought after the pollution happened and did not know, or have reason to know, about it. But the buyer must show it made “all appropriate inquiries” into past owners and uses before buying. The inquiry must follow good business practice (42 U.S.C. § 9601(35)).

In practice, that means a Phase I environmental site assessment. A qualified consultant does it during due diligence, and it is finished before closing. For old gas stations, dry cleaners, factories and many older St. Louis industrial sites, the Phase I is not optional.

Zoning, use and existing tenants

• Confirm your planned use is allowed under local zoning. Check whether you need approvals for parking, signs or occupancy.
• For rental property, get every lease, change and side letter. Require signed tenant estoppel certificates. These are statements from each tenant confirming the rent, the deposit and any defaults. The lease terms themselves are covered on commercial leases.
• Review service contracts, warranties and property tax history.
• Decide which company will own the property. Many owners hold real estate in an LLC separate from the business. See forming an LLC in Missouri.

Closing

1. Meet or waive each condition in writing before its deadline.
2. Check the settlement statement line by line against the contract.
3. Sign the deed, sworn statements, loan papers and company authority papers.
4. Confirm the deed and any deed of trust securing the loan are recorded. Confirm the owner’s title policy is issued as promised.

Harjot Singh Padda, JD, represents buyers and sellers of commercial property. He works with your broker, lender and title company. Mr. Padda reviews the purchase agreement before you sign, tracks the objection deadlines during due diligence, and reviews the closing papers. If a deal falls apart and the parties fight over the deposit or the title, see real estate litigation.

Common questions

Related reading

• Commercial leases
• Real estate litigation
• Buying or selling a business
• Business law practice