Watch Your Language: The Importance of Purchase Agreements

The most important document in any transaction is the purchase agreement. The purchase agreement spells out the terms and conditions of the deal. When a disagreement occurs, the first thing everyone does is read the contract.

The time for good legal hygiene is before a contract is signed. In the words of Benjamin Franklin, "An ounce of prevention is worth a pound of cure."

Read through your purchase agreement and other contracts. Make sure that you understand them. Know what terms are in each contract, and why.

As you read your "form" contracts, consider the following:

Fill in all blanks. Many people rush through the contract, without properly completing the form.
Remember, it is only a form, a starting point. If the form does not fit your deal, prepare an addendum which does.
Include all important terms and conditions. Make sure the contract covers everything which is important to you, and does so with favorable contract language.
Include an arbitration provision. Chances are, any dispute will be resolved more quickly, with more knowledgeable decision makers, through arbitration, than litigation.
Make sure that the contract meets all applicable legal requirements. If you don't, then expect the attorney for the other side to point out any legal deficiencies, in the event of a dispute.
Get it in writing. Any agreement relating to the sale of real estate must be in a signed document. If it is not in writing, then it is not enforceable. All change orders, contract amendments, and the like, should be in writing, dated and signed by everyone.
Make sure the contract is written in plain English. Anyone who reads it should be able to understand it. If the contract is written in legalese, and you don't understand it, then, chances are, it might be interpreted against you, in the event of a dispute.

Purchase agreements are an important part of your business. Your contracts should be clear, comprehensive, well written, and properly protect you. If you have any questions about your contracts, or contract language, you should consult with an experienced real estate attorney.

Appeared in Building Business & Apartment Management, August 2005. Reprinted with permission.

NOTICE TO PERSONS SUBJECT TO UNITED STATES TAXATION: DISCLOSURE UNDER TREASURY CIRCULAR 230: The United States Federal tax advice, if any, contained in this document and its attachments may not be used or referred to in the promoting, marketing or recommending of any entity, investment plan or arrangement, nor is such advice intended or written to be used, and may not be used, by a taxpayer for the purpose of avoiding Federal tax penalties.