Commercial real estate closings in Miami are complex transactions involving substantial financial commitments, extensive due diligence, and numerous parties including buyers, sellers, lenders, title companies, and attorneys. Unlike residential closings, commercial transactions require sophisticated analysis of property conditions, lease agreements, zoning compliance, and financial performance.
Understanding the commercial closing process helps buyers and sellers anticipate requirements, avoid delays, and identify potential issues before they become problems. This guide walks through each phase of typical Miami commercial real estate transactions from contract execution through closing and post-closing matters.
Commercial Closing Overview
Commercial real estate closings differ significantly from residential transactions in complexity, timeline, and legal considerations. These differences reflect the higher stakes and more sophisticated nature of commercial deals.
Timeline Expectations
Typical commercial closings in Miami take 60-90 days from contract execution to closing, though timeline varies based on several factors:
- Financing requirements: Cash transactions close faster than financed deals
- Due diligence complexity: Properties with tenant leases, environmental issues, or zoning complications require extended review
- Title issues: Unexpected title defects can delay closings while they're resolved
- Property type: Simple warehouse purchases close faster than complex multi-tenant office buildings
- Negotiation dynamics: Contentious negotiations over inspection findings extend timelines
Key Parties in Commercial Closings
Multiple professionals participate in commercial transactions:
- Buyer and seller: Principals in the transaction
- Real estate brokers: Represent buyers and sellers (commission typically 6% split between listing and selling brokers)
- Attorneys: Represent buyers and sellers, review contracts, coordinate due diligence, negotiate terms
- Title company: Examines title, issues title insurance, often serves as closing agent
- Lenders: Provide financing and impose closing requirements
- Inspectors and engineers: Conduct property inspections
- Environmental consultants: Perform Phase I and Phase II environmental assessments
- Surveyors: Prepare boundary surveys and identify encroachments
"Commercial closings involve substantial complexity that most buyers and sellers don't fully appreciate until they're in the middle of the transaction. A seemingly straightforward office building purchase can involve reviewing dozens of leases, resolving title defects that have existed for decades, negotiating environmental assessment findings, and coordinating multiple closing documents. Having experienced counsel from the beginning prevents issues from derailing deals at the last minute."
The Purchase Contract
Commercial real estate transactions begin with a purchase and sale agreement that establishes basic transaction terms and creates the framework for everything that follows.
Essential Contract Terms
Unlike residential contracts where standard forms are common, commercial purchase agreements are heavily negotiated and customized. Key provisions include:
Purchase Price and Deposit
Contract specifies total purchase price and earnest money deposit structure. Deposits typically range from 5-10% of purchase price and are held in escrow by title company or attorney.
Deposit timing: Initial deposit due at contract execution (often 5%), with additional deposits due after due diligence period completion.
Deposit treatment: Contracts specify whether deposits are refundable during due diligence, what conditions allow buyer to terminate and recover deposit, and when deposits become non-refundable.
Due Diligence Period
Contract establishes inspection period (typically 30-60 days) during which buyer investigates property condition, reviews documents, and determines whether to proceed.
Buyer's rights: Buyer can typically terminate for any reason during due diligence and recover deposit.
Seller's obligations: Seller must provide access for inspections and deliver due diligence materials including leases, service contracts, financial statements, and property documents.
Contingencies and Conditions
Commercial contracts include contingencies that must be satisfied before closing:
- Financing contingency: Buyer's obligation conditioned on obtaining financing on specified terms
- Title contingency: Buyer can terminate if title defects aren't cured
- Zoning contingency: Transaction conditioned on property being zoned for intended use
- Lease contingency: For investment properties, closing conditioned on specified occupancy levels or tenant approvals
- Due diligence contingency: Buyer satisfaction with property condition and documents
Each contingency has notice deadlines and procedures for satisfaction or waiver. Missing contingency deadlines can result in losing termination rights.
Due Diligence Period
The due diligence period is the buyer's opportunity to thoroughly investigate the property and review all relevant documents before committing to purchase. This is the most critical phase of commercial transactions.
Property Inspection Components
Comprehensive due diligence includes multiple specialized inspections:
- General property inspection: Overall building condition, systems functionality, deferred maintenance
- Roof inspection: Condition, remaining useful life, leak history
- Structural inspection: Foundation, structural elements, building envelope
- Mechanical systems: HVAC, electrical, plumbing systems condition and capacity
- Environmental assessment: Phase I environmental site assessment (discussed in detail below)
- Survey: Boundary survey identifying encroachments and easements (discussed in detail below)
Document Review
Buyers must review extensive documentation provided by seller:
Tenant Leases and Rent Roll
For investment properties, lease review is essential to understanding property value and future income. Key items to examine:
- Rent roll showing current tenants, lease terms, rental rates, and security deposits
- Actual lease agreements for all tenants
- Lease amendments and modifications
- Tenant estoppel certificates confirming lease terms
- Analysis of lease expiration dates and renewal options
- Review of tenant obligations for expenses (triple net vs gross leases)
- Assessment of below-market leases that will affect future income
Financial Records
Understanding property financial performance is critical to valuation. Buyers should review:
- Operating statements for past 3 years
- Current year-to-date financial statements
- Property tax statements and assessments
- Utility bills and operating expense history
- Capital improvement records
- Service contract costs (landscaping, security, janitorial, etc.)
Zoning and Land Use Verification
Buyers must verify that property is properly zoned for intended use and complies with applicable regulations. This includes:
- Confirming current zoning designation with Miami-Dade County or municipal zoning department
- Reviewing zoning compliance for existing use
- Identifying any special exceptions or variances affecting the property
- Determining whether intended use is permitted or requires additional approvals
- Reviewing building code compliance and certificate of occupancy
The Miami-Dade County Building Department and local municipal building departments maintain zoning and permitting records.
Title Examination and Insurance
Title examination determines whether the seller can deliver clear ownership and identifies any liens, easements, or restrictions affecting the property. Title insurance protects buyers and lenders against title defects.
The Title Examination Process
Title companies conduct searches of public records to identify title issues:
- Chain of title: Verifying ownership history and proper conveyance through recorded deeds
- Liens and encumbrances: Identifying mortgages, tax liens, judgment liens, mechanics liens
- Easements: Rights of others to use portions of the property (utility easements, access easements, etc.)
- Restrictions: Covenants and restrictions limiting property use
- Pending litigation: Lawsuits affecting property ownership or use
Title examination results are provided in a title commitment which lists title exceptions (items not covered by title insurance) and requirements for issuing the policy.
Common Title Issues
Title examinations frequently reveal issues requiring resolution before closing:
- Outstanding mortgages: Seller's existing financing must be paid off at closing
- Judgment liens: Court judgments against seller or prior owners create liens that must be satisfied
- Tax liens: Unpaid property taxes or federal/state tax liens
- Mechanics liens: Claims by contractors for unpaid construction work
- Boundary disputes: Competing ownership claims or uncertainty about property boundaries
- Missing heirs: For properties held in estates, all heirs must join in conveyance
Contracts typically require sellers to cure title defects or allow buyers to terminate if defects cannot be cured.
Title Insurance
Title insurance protects buyers and lenders from title defects. Florida uses promulgated title insurance rates regulated by the Florida Department of Insurance, so premiums are the same regardless of which title company issues the policy.
Two types of title insurance policies are issued:
- Owner's policy: Protects buyer for policy amount (typically purchase price), coverage continues as long as buyer or heirs own the property
- Lender's policy: Protects lender's mortgage for loan amount, required by all lenders, coverage decreases as loan is paid down
In Miami-Dade County, it's customary for sellers to pay for owner's title insurance, though this is negotiable. Buyers typically pay for lender's policies.
Survey Review and Requirements
Surveys provide detailed measurements and depictions of property boundaries, improvements, easements, and encroachments. Lenders typically require current surveys for commercial transactions.
Types of Surveys
Different survey types serve different purposes and vary significantly in cost:
| Survey Type | Scope | Typical Cost |
|---|---|---|
| Boundary Survey | Shows property boundaries and improvements | $2,000-$5,000 |
| ALTA Survey | Comprehensive survey meeting ALTA standards, includes detailed improvements and encumbrances | $5,000-$15,000+ |
| Topographic Survey | Shows elevation changes and topography | $3,000-$10,000 |
| As-Built Survey | Documents actual construction vs plans | $5,000-$20,000+ |
Most commercial lenders require ALTA surveys meeting American Land Title Association standards. ALTA surveys include detailed information about improvements, utilities, easements, and potential encroachments.
Survey Issues to Watch For
Survey review often reveals issues requiring attention:
- Encroachments: Building or improvements extending beyond property boundaries or into setback areas
- Easements: Utility or access easements that may restrict building locations or property use
- Boundary disputes: Discrepancies between legal description and actual boundary markers
- Zoning violations: Improvements not complying with setback or coverage requirements
- Access issues: Lack of legal access to public roads
Significant survey issues should be addressed before closing through boundary line adjustments, easement agreements, or title insurance endorsements.
Environmental Assessment
Environmental due diligence protects buyers from liability for contamination and helps identify cleanup costs. All commercial property purchases should include at minimum a Phase I Environmental Site Assessment.
Phase I Environmental Site Assessment
Phase I ESAs are non-invasive assessments that identify potential environmental concerns through:
- Site inspection and visual observations
- Review of historical property uses and aerial photographs
- Review of government environmental databases
- Interviews with property owners and occupants
- Review of prior environmental reports
- Assessment of surrounding properties for contamination sources
Phase I assessments typically cost $2,000-$5,000 for straightforward properties, with higher costs for large or complex sites. Phase I reports that meet ASTM standards provide liability protection under federal environmental laws.
Phase II Environmental Site Assessment
If Phase I identifies recognized environmental conditions (RECs), Phase II assessment is recommended. Phase II involves invasive testing:
- Soil sampling and analysis
- Groundwater monitoring and testing
- Building material sampling (asbestos, lead paint)
- Underground storage tank investigation
Phase II costs vary widely ($5,000-$50,000+) based on number of samples and analysis required.
Environmental Liability Under Florida Law
Florida's Brownfield Redevelopment Act and federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) can impose liability on property owners for contamination even if they didn't cause it.
Conducting proper environmental due diligence and obtaining Phase I ESAs provides defenses against environmental liability. Buyers discovering contamination have several options: negotiate purchase price reduction reflecting cleanup costs, require seller to remediate before closing, terminate the transaction, or obtain environmental insurance.
Financing Contingencies
Most commercial real estate purchases involve financing. Purchase contracts typically condition buyer's obligations on obtaining financing on specified terms.
Commercial Loan Process
Commercial financing differs substantially from residential mortgages:
- Application requirements: Extensive financial documentation including business financials, personal financials, property operating statements
- Underwriting focus: Property cash flow and debt service coverage ratio are primary considerations
- Personal guarantees: Most commercial loans require personal guarantees from borrowers
- Down payment: Typically 20-30% required, higher than residential financing
- Interest rates: Generally higher than residential rates and often structured as adjustable rates
- Terms: Often shorter than residential mortgages (5-20 years) with balloon payments
Lender Requirements
Commercial lenders impose specific closing requirements:
- Current ALTA survey meeting lender specifications
- Phase I environmental assessment acceptable to lender
- Property appraisal by lender-approved appraiser
- Title insurance lender's policy
- Property insurance with lender as loss payee
- Assignment of leases and rents
- Subordination of other liens and interests
Lender requirements often drive closing timeline. Obtaining financing typically takes 45-60 days for straightforward transactions.
Closing Documents
Commercial closings involve extensive documentation. Key closing documents include:
Core Transaction Documents
Warranty Deed
Deed transferring title from seller to buyer. In Florida, warranty deeds include seller's warranties that they own the property and will defend title against claims. Special warranty deeds (common in commercial transactions) limit warranties to seller's period of ownership.
Deeds must be properly executed, notarized, and recorded in public records to transfer legal title.
Bill of Sale
Transfers personal property included with real estate (furniture, equipment, fixtures not attached to realty). Bill of sale should specifically identify transferred items and confirm they're free of liens.
Assignment and Assumption of Leases
For income-producing properties, this document assigns all tenant leases to buyer and requires buyer to assume landlord obligations. Must be accompanied by tenant estoppel certificates confirming lease terms.
Lender Documents
If buyer is financing, additional lender documents include:
- Promissory note: Borrower's promise to repay loan with interest
- Mortgage: Creates security interest in property securing repayment
- Assignment of leases and rents: Gives lender rights to collect rents if borrower defaults
- Loan agreement: Establishes loan terms, covenants, default provisions
- Personal guarantee: Makes individual guarantors personally liable for loan
- Environmental indemnity: Borrower indemnifies lender for environmental liabilities
Closing Statements
Settlement statements detail all financial aspects of the transaction including:
- Purchase price and deposit credits
- Prorations for property taxes, rents, and operating expenses
- Closing costs allocated to buyer and seller
- Loan payoffs and new financing amounts
- Final amount due from buyer or due to seller
Both parties should carefully review settlement statements before closing to verify all charges and credits are accurate. For guidance on commercial lease terms that may affect closing, see our resource on Miami commercial lease negotiation.
Closing Costs in Miami
Commercial real estate closing costs in Miami typically range from 2-5% of purchase price, though actual costs vary based on transaction specifics and negotiated cost allocations.
Typical Closing Cost Breakdown
| Cost Item | Typical Amount | Usually Paid By |
|---|---|---|
| Title Insurance (Owner's) | Varies by property value (regulated rates) | Seller (Miami custom) |
| Title Insurance (Lender's) | Discounted from owner's policy rate | Buyer |
| Documentary Stamps on Deed | $0.70 per $100 of purchase price | Seller |
| Intangible Tax on Mortgage | $0.20 per $100 of loan amount | Buyer |
| Survey | $2,000-$15,000+ | Negotiable (often buyer) |
| Environmental Report | $2,000-$15,000+ | Buyer |
| Attorney Fees | $5,000-$25,000+ per party | Each party pays own |
| Recording Fees | $10-$50 per document | Varies by document |
Prorations
Certain recurring expenses are prorated between buyer and seller based on closing date:
- Property taxes: Miami-Dade property taxes are billed annually in arrears (November billing for prior year). Taxes are prorated as of closing date with seller credited for period before closing.
- Rent: Prepaid rent is prorated and credited to buyer. Seller retains rent collected for period before closing.
- Security deposits: Transferred to buyer who assumes obligation to return to tenants at lease end
- Utilities and operating expenses: Prorated based on most recent bills
Closing Day Procedures
Commercial closings in Florida typically occur at title company offices, though parties may attend remotely with documents transmitted electronically or by courier.
Pre-Closing Requirements
Several items must be completed before closing can occur:
- Final title search update confirming no new liens or encumbrances
- Lender funding approval and wire instructions
- Final walk-through inspection (if required by contract)
- All closing documents fully executed
- Buyer funds wired to title company
- Seller's lender payoff statements and release documents
Closing Sequence
Typical closing day progression:
- Parties review and execute closing documents at title company
- Title company verifies buyer funds and lender funds are received
- Title company obtains seller's lender payoff
- Deed and mortgage are recorded in county public records
- Title company issues title insurance policies
- Title company disburses funds to seller and pays closing costs
- Seller delivers keys and property access
- Buyer obtains possession
Remote Closings
Many commercial closings involve parties in different locations. Remote closings are accomplished through:
- Electronic document execution with remote notarization
- Courier delivery of original documents for execution
- Wire transfer of funds
- Email or overnight delivery of closing packages
Post-Closing Matters
Several important items require attention after closing:
Immediate Post-Closing Tasks
- Notify tenants: Send notice of ownership change and new address for rent payments
- Transfer utilities: Change utility accounts to buyer's name
- Update insurance: Confirm property insurance is in effect
- Change locks: Re-key building for security
- Service contracts: Review and transfer or terminate property service contracts
- Property tax: Notify tax assessor of ownership change
Recording and Documentation
Title companies handle recording of deed and mortgage in Miami-Dade County public records. After recording, parties receive:
- Recorded deed with recording information
- Title insurance policies (issued 30-60 days after closing)
- Final settlement statements
- Copies of all executed closing documents
Buyers should maintain complete closing files including all due diligence materials, as these documents may be needed for future refinancing, property sales, or dispute resolution.
Tax Considerations
Both buyers and sellers face tax implications from commercial real estate transactions:
- Sellers: Capital gains tax on sale proceeds (potentially reduced through 1031 exchange)
- Buyers: Property tax reassessment based on purchase price
- Both parties: Potential Form 1099-S reporting requirements
Consult with tax advisors regarding tax planning strategies for commercial real estate transactions.
Working With a Real Estate Attorney
While Florida law doesn't require attorneys for commercial real estate transactions, the complexity and financial stakes make legal representation essential for protecting your interests.
What a Real Estate Attorney Provides
Experienced commercial real estate attorneys offer:
- Contract negotiation: Reviewing and negotiating purchase agreements to protect your interests
- Due diligence coordination: Managing inspection processes, reviewing reports, identifying legal issues
- Title review: Examining title commitments, identifying defects, negotiating title insurance exceptions
- Document review: Analyzing leases, service contracts, and property documents
- Closing coordination: Preparing closing documents, reviewing settlement statements, coordinating with other parties
- Issue resolution: Addressing problems that arise during due diligence or closing process
- Risk identification: Spotting legal and practical issues non-lawyers miss
When to Engage an Attorney
Engage commercial real estate counsel:
- Before signing purchase contracts (attorney review of contracts before execution prevents problems)
- For all commercial property acquisitions regardless of size
- When leasehold issues are complex or problematic
- If environmental concerns exist
- When title issues appear
- For development projects or properties requiring zoning changes
- When seller is in distress or foreclosure
How Jaffe Law Approaches Commercial Real Estate Closings
Connor structures real estate transaction representation with focus on three priorities:
Front-end contract negotiation: Engaging before contracts are signed allows negotiation of favorable terms and protection mechanisms. Trying to fix unfavorable contract terms after execution is much harder than negotiating them properly initially.
Comprehensive due diligence: Coordinating thorough property investigation including title review, survey analysis, environmental assessment, lease review, and zoning verification to identify issues before closing rather than discovering them afterward.
Transaction management: Actively managing closing timeline, coordinating with lenders and title companies, addressing issues as they arise, and ensuring closing happens on schedule with proper documentation.
Real estate transaction representation is typically structured on flat fee or hourly basis depending on transaction complexity. Fees are discussed transparently during initial consultation before engagement.
Schedule a consultation to discuss your commercial real estate transaction and develop an approach that protects your investment while facilitating efficient closing.