Guide · Real Estate · Commercial Transactions

Commercial Real Estate Counsel in Chicago: From LOI Through Closing

A commercial purchase or lease is a sequence of legal decision gates: preliminary terms, definitive documents, diligence, title, zoning and environmental review, financing, closing conditions, and recording. The useful question at each gate is what right or deadline disappears next.

By Lincoln Square Law · 8-minute read

Draft the LOI to say what is and is not binding

A letter of intent can be commercially useful because it lets parties align on economics before spending heavily on documentation, but the document should not rely on the label “nonbinding” as if the label answers every question. Illinois courts analyze objective manifestations of intent and the language and circumstances of preliminary writings. Quake Construction is a leading Illinois Supreme Court authority on whether preliminary documents can reflect an intent to be bound.

State which provisions are nonbinding and which are intended to survive immediately, such as confidentiality, exclusivity, access for diligence, broker provisions, cost allocation, governing law, or no-shop obligations. Avoid language that simultaneously says no agreement exists while requiring the parties to “close” on fully specified terms. If the parties do not intend to be bound until a purchase agreement is signed, say that clearly and make internal communications match the document.

Move from business terms to a written real-estate contract deliberately

Illinois’s Frauds Act requires a signed writing for contracts for the sale of land or an interest in land as the statute provides. That makes the definitive agreement more than a polished version of the LOI. It should identify the parties, property, price or rent structure, deposit, closing date, representations, covenants, conditions, remedies, and the documents or schedules incorporated into the deal.

Confirm the legal buyer and seller entities and signature authority before execution. If the buyer expects to assign to a new entity, obtain financing through an affiliate, or use a 1031 exchange structure, address the mechanics rather than assuming they can be added later without consent. Commercial real-estate disputes often begin with a mismatch between the entity that signed and the entity expected to perform.

Make diligence rights usable, not ornamental

A diligence provision should define when the period starts, when it ends, what documents the seller must provide, property-access rights, restoration obligations, confidentiality, and the buyer’s termination or objection rights. The buyer should know whether the clock starts at contract execution, receipt of a document package, delivery of title, or another event. If access depends on seller scheduling, the period should not expire while essential inspections are still unavailable.

Create a diligence matrix for title, survey, leases, rent roll, service contracts, zoning, permits, utilities, structural condition, environmental matters, taxes, insurance loss history, litigation, and any operating licenses tied to the property. Each issue should have an owner, requested document, deadline, and disposition. “Due diligence completed” is not useful unless the file shows what was actually reviewed.

Coordinate title, survey, zoning, and intended use

Title and survey review should answer the buyer’s intended-use questions, not merely list exceptions. Identify access, easements, encroachments, restrictions, mortgages, liens, rights of first refusal, parking rights, utility corridors, and matters that appear on the survey but not in the title commitment. Then compare those items to the planned use and financing requirements.

Zoning review should confirm the current classification and whether the intended operation is permitted, conditional, special, or nonconforming. If the deal depends on a zoning change, special use, liquor license, cannabis approval, healthcare use, signage, or buildout permit, make the approval a contract condition with a realistic process and outside date. A property can be physically suitable and legally unusable for the buyer’s purpose.

Treat environmental review as a transaction decision

Commercial buyers should identify whether a Phase I environmental site assessment or other environmental diligence is appropriate based on the property, lender, use, and risk. The contract should allocate access, testing, confidentiality, restoration, and termination rights. If a Phase I recommends further investigation, the buyer needs enough time to decide whether to proceed, negotiate remediation or indemnity, or terminate.

Do not let environmental findings sit in a consultant report disconnected from the contract. Record whether the issue affects financing, insurance, planned construction, price, or closing conditions. Where federal or state environmental liability defenses are important, counsel should coordinate the legal requirements with qualified environmental professionals rather than treating a standard report as a complete legal conclusion.

Make financing conditions match the lender’s actual process

A financing contingency should identify the financing the buyer actually needs and the evidence required to preserve the contingency. Commercial financing can depend on appraisal, leases, tenant estoppels, environmental review, entity documents, guaranties, debt-service metrics, and lender counsel. A clause that expires before those materials can reasonably be completed gives the buyer a financing “out” on paper but not in practice.

Track lender conditions alongside contract deadlines. If the buyer waives diligence while the lender still has an open appraisal or environmental issue, the buyer may become obligated to close without committed funds. The contract, lender checklist, and equity-funding plan should use the same closing assumptions.

Build the closing checklist backward from conditions precedent

A commercial closing should not begin with signature pages. Start with every condition that must be true before money moves: title clearance, payoff letters, tenant estoppels, organizational authority, lender approval, insurance, prorations, transfer declarations, certificates, assignment documents, possession, and any regulatory or zoning condition. Assign each item to buyer, seller, lender, title company, or third party and identify when it becomes final.

Illinois imposes a real-estate transfer tax framework and transfer-declaration requirements, and instruments affecting title are recorded under the Conveyances Act. Closing counsel should coordinate deed form, tax declarations, recording, payoff, title-policy issuance, and possession so the transaction record reflects what the parties agreed. The recorder is not the place to discover that a name, legal description, or authority document is wrong.

Preserve a post-closing record of what survived

After closing, collect the final signed agreement, amendments, deed, title policy, survey, settlement statement, transfer declarations, loan documents, assignments, tenant notices, estoppels, insurance evidence, permits, and any escrow agreement. Record post-closing obligations such as final true-ups, repair escrows, tenant security-deposit transfers, earnouts, indemnity notices, or document-delivery deadlines.

A clean closing binder matters because commercial real estate does not end at recording. Lease administration, tax appeals, construction, refinancing, insurance claims, and eventual sale may depend on documents created at acquisition. Preserve the final versions and a short index explaining what remains open.

Treat entity authority and guaranties as separate closing conditions

Commercial transactions often involve an SPE buyer, parent guaranty, member consent, board resolution, or lender-required authority certificate. Confirm the governing documents and approval path before the week of closing. A signature block does not prove that the person signing can bind the entity, and a guaranty should not be treated as a routine attachment to the purchase agreement.

Build organizational authority into the closing checklist: good standing, operating agreement or bylaws, incumbency, resolutions, borrowing authority, guaranty approval, and any required foreign qualification. That file supports both enforceability and lender/title diligence. Confirm who will retain the final authority resolutions after closing and whether any lender or title-company form must be updated if the signers change before funding.

This article is general information, not legal advice, and does not create an attorney-client relationship. Legal citations should be verified against the primary source before you rely on them.