Contracts Needed When Buying a Commercial Property

Here’s the chronological order:
• Purchase agreement
• Commercial housing pre-sale contract
• Supplementary agreement
• Preliminary property service contract
• Homeowners’ association covenant
• Mortgage loan contract
If you’re buying a commercial shop, you may also need to sign a managed-operation agreement. The four documents mentioned above—the commercial housing pre-sale contract, supplementary agreement, preliminary property service contract, and homeowners’ association covenant—are signed together, and you’ll know when the time comes. The salesperson will go through a routine motion: flip through the entire contract, find the signature line, hand you the pen, then flip to the next place that needs signing. (Take photos of each page for your records in case you need them later.)

The purchase agreement mainly covers:
• Final transaction price
• Unit number
• Earnest money deposit
• When the formal contract will be signed
• What happens if the formal contract isn’t signed

(The clause you need to guard against most in the purchase agreement is one that claims you’ve already reviewed the formal contract even though you haven’t seen it—this cuts off your right to negotiate its terms. Since the contract content is basically non-negotiable, your best workaround is to preserve audio recordings as evidence.)

The model contract for commercial housing pre-sales.
Some people mistakenly believe that government-issued contracts can’t be altered, which is dead wrong. If you don’t change it, the developer will; once the contract is amended, that’s it, and ignoring it is your problem.
The most critical information in the commercial housing pre-sale contract is the five permit numbers. A developer who doesn’t display the five permits on site may still have valid paperwork, but if a permit isn’t listed in the contract, there’s a chance the developer hasn’t obtained it yet! This directly affects whether you’ll receive a property ownership certificate, whether the title can later be transferred, and whether your unit is considered an illegal structure.
Beyond the permit numbers, pay close attention to the unit number. The unit number on the contract and the one on the development model may not match. Some buyers only realized after taking delivery that the apartment specified in their contract wasn’t the one they’d picked at the sales office. Once that mistake is on paper, nobody can prove whether the sales office misled you or you simply bought the wrong unit—so double-check everything before signing.

The supplementary agreement to the commercial housing pre-sale contract is the section you must review carefully.

This agreement is drafted by lawyers the developer pays heavily to advise them. The developer tells the lawyer, “Draft a contract that keeps me safe from homeowner complaints down the line.” The lawyer asks, “What kinds of problems are you expecting? Can you walk me through them?” The developer then says something like, “The property is great except it’s right next to high-voltage power lines.” In that situation, the supplementary agreement will almost certainly include a clause along these lines: “Party B acknowledges that it has fully and clearly understood all potential noise pollution sources, chemical plants, waste incineration facilities, metro and rail transit lines, high-voltage power lines, and any other municipal infrastructure near Party A’s project that could affect the property, and Party B agrees with and accepts these conditions.”
You don’t have to wait until your own signing to see this agreement. You can review a fellow buyer’s copy, ask the sales staff for the contract outright, and in some developments the developer leaves supplementary agreements on display at the sales office for buyers to read. Most people won’t bother, no matter how many times the lawyer warns against it—they’d rather trust whatever the salesperson tells them.
Beyond the supplementary agreement, the property services contract deserves close attention too, since the level of service fees is tightly linked to community quality. That said, the preliminary property manager hired by the developer typically delivers average service. Buyers are better off forming a homeowners’ association as early as possible. Owners do have the opportunity to renegotiate the homeowners’ association covenant, the rules of procedure, and the property services contract later on.
Of all the contracts you sign with the developer, the most important is the bank’s written consent to sell the unit. Virtually all developer inventory is mortgaged to the bank upfront. So if the unit you’re buying doesn’t carry a mortgage lien, that should raise questions—not relief. Only after the bank agrees to release the mortgage can the unit be registered in the online filing system, making this consent document indispensable.