Chicago Commercial Real Estate Lawyer for Leases, Acquisitions and Closings

A commercial lease or purchase rarely fails over price. It fails because the property cannot be used the way the business needs, because a review deadline passed without anyone noticing, or because the buyer inherited a title, zoning or contamination problem that the contract quietly assigned to it. Our work as a Chicago commercial real estate lawyer is to match the documents to the business that will actually occupy, finance, buy or sell the property, and to do it while the money and the deadlines are still negotiable.

Commercial lease negotiation and renewal

Many commercial leases begin with a letter of intent. In Illinois, a contract for an interest in land for a term longer than one year is enforceable only if it, or a memorandum of it, is in writing and signed by the party to be charged (740 ILCS 80/2, the Frauds Act). We recommend that the letter of intent say plainly which terms bind the parties now, such as confidentiality or exclusivity, and which wait for the signed lease.

In the lease itself, the terms that usually decide whether the space works for the business are these:

• The use clause, drafted for the tenant’s actual operations and tied to what the zoning allows.
• Delivery and buildout: who builds, from which plans, by what date, and what happens if delivery is late.
• Operating expenses, taxes and insurance passed through to the tenant, with a right to review the reconciliations.
• Assignment, subletting and change of control, which decide whether the business can be sold with the lease.
• Personal guaranties, capped by amount or time where the landlord will agree.
• Renewal and expansion options, with the exact form and deadline of the notice that exercises them.

Renewals deserve their own calendar. An option that requires written notice months in advance can be lost outright if the notice is late or goes to the wrong address. We recommend recording the notice deadline and the landlord’s notice address on the day the lease is signed, and opening renewal talks early enough that relocating remains a real alternative.

Purchases and sales: the contract and its deadlines

In a commercial purchase, the purchase and sale agreement sets the order of everything else: the due diligence period, the dates for title and survey objections, the financing contingency, the seller’s representations, the closing conditions, and what happens to the deposit if the buyer walks away. For a seller, the same agreement defines how much risk survives the closing and for how long.

We recommend setting the diligence plan before signing, because title, survey, zoning and environmental reports take weeks and diligence periods tend to be short. If a report will not arrive in time, the moment to negotiate an extension is before signing, not on the last day of the period.

Title and survey review

The title commitment shows who holds title, what requirements must be satisfied before the policy issues, and which exceptions the policy will not cover. The exceptions are what matter: easements, restrictive covenants, liens and recorded agreements that can limit use, access or parking. We read each recorded document listed as an exception, not just its one-line description.

The survey shows what title cannot: encroachments, boundary lines, access, and where the easements actually sit on the ground. In commercial deals, lenders and title companies commonly ask for a survey prepared to the ALTA/NSPS minimum standard detail requirements, which are an industry professional standard rather than law, with the optional Table A items the buyer and lender select. We recommend choosing those items around the business’s real questions, such as parking or zoning, and settling the list with the lender at the start.

Zoning review in Chicago

The zoning question is whether the planned use is allowed in that district and in that building. When an existing use was lawful but no longer fits the code, the Chicago Zoning Ordinance treats it as nonconforming. It may continue if it was lawfully established, but the rights are lost if the use is discontinued for 18 continuous months or more (six months for certain uses), and it may not be re-established after the owner intentionally damages the structure that houses it (Chicago Mun. Code 17-15-0301, 17-15-0304). Expanding a nonconforming use requires the Zoning Administrator’s approval (17-15-0303).

This matters when buying a vacant building or a going concern. A space that has been empty for more than 18 months may have lost the use that justified the price. And Chicago’s certificate of zoning compliance requirement, found in the transfer tax chapter, applies to certain smaller residential properties (Chicago Mun. Code 3-33-045), so a commercial purchase does not come with an automatic zoning check. That review falls to the buyer.

Environmental due diligence: CERCLA and the Illinois Site Remediation Program

Under the federal CERCLA statute, the current owner of contaminated property can be liable for cleanup even if it did not cause the contamination. A buyer that acquired after January 11, 2002 can be protected as a bona fide prospective purchaser if it shows, among other things, that all disposal of hazardous substances occurred before the purchase and that it carried out all appropriate inquiries (42 U.S.C. 9601(40)). Tenants can qualify in limited circumstances the statute defines.

All appropriate inquiries have timing rules. They must be conducted within one year before the acquisition, and the interviews, the environmental cleanup lien search, the government records review, the visual inspection and the environmental professional’s declaration must be completed or updated within 180 days before it (40 C.F.R. 312.20). The rule accepts a Phase I environmental site assessment under ASTM E1527-21 (40 C.F.R. 312.11) and requires the buyer to consider whether a lower price reflects contamination (40 C.F.R. 312.29).

The protection does not end at closing. The buyer must give legally required notices, take reasonable steps about any release, cooperate with those performing response actions, and comply with land use restrictions (42 U.S.C. 9601(40)(B)). If a cleanup funded by the government raises the property’s value, the government may place a lien up to that increase (42 U.S.C. 9607(r)).

In Illinois, a site may have gone through the voluntary Site Remediation Program (415 ILCS 5/58.1). A No Further Remediation letter takes effect only when recorded (415 ILCS 5/58.8), runs with the land, and can be voided if its land use limitations or controls are not followed (415 ILCS 5/58.10). When title shows an NFR letter, we read its conditions against the planned use. A letter limited to industrial or commercial use may not allow what the buyer or tenant has in mind.

Transfer taxes, declarations and broker liens at closing

Illinois taxes the privilege of transferring title to, or a beneficial interest in, real property (35 ILCS 200/31-10). The Department of Revenue explains that the lessee’s interest in a ground lease of 30 years or more, counting renewal options, can be a taxable beneficial interest, and that transfer declarations, including Form PTAX-203 and the City of Chicago’s Form 7551, are filed through MyDec. Chicago imposes its own transfer tax, payable mainly by the buyer, with a supplemental Chicago Transit Authority portion paid by the seller, and both parties are jointly and severally liable if the tax goes unpaid (Chicago Mun. Code 3-33-030). We recommend that the contract allocate each tax and each filing expressly.

Commercial brokers have their own lien rights. A broker entitled to a commission may record a notice of lien before the conveyance and, for a lease, generally within 90 days after the tenant takes possession, with a shorter deadline if the broker was served advance notice of the signing (770 ILCS 15/10). If a recorded lien would prevent closing, the statute requires an escrow from the sale proceeds large enough to release it (770 ILCS 15/20). We review the commission agreements before closing so a claim does not hold up the funds.

Healthcare practices and cannabis operators as tenants and buyers

Two kinds of clients need more than a standard commercial lease. A healthcare practice needs space for equipment, plumbing and patient privacy, and a lease that allows the practice to be sold later. Our healthcare lease red-flag checklist covers those points. A cannabis operator needs a site that can be licensed and locally approved before it makes a nonrefundable commitment, which our cannabis leasing and zoning resources below address. Before private practice, our founding attorney served as in-house general counsel for multi-site healthcare organizations and for multi-state cannabis start-ups, so we read the property from the operator’s side.

How a commercial real estate engagement works

We start with the letter of intent or draft contract, the transaction calendar, and the names of the lender, the title company, the brokers and the other side’s counsel. We confirm in writing whom we represent, what the engagement covers and which deadlines control. Then we negotiate the documents, review diligence reports as they arrive, and tell you what to object to and when. At closing we coordinate the settlement statement, the closing documents and the title commitment requirements so that nothing is left open on signing day.

Common questions about commercial leases and purchases in Chicago

Is a letter of intent for a commercial lease binding?

It depends on how it is written. A lease longer than one year requires a writing signed by the party to be charged (740 ILCS 80/2), and a letter of intent may or may not satisfy that. We recommend that the letter state expressly which terms are binding and which are not.

Do I need a Phase I environmental assessment to buy commercial property?

The law does not require one, but without all appropriate inquiries done within the 40 C.F.R. 312.20 time limits, a buyer gives up bona fide prospective purchaser protection under CERCLA. Commercial lenders also commonly require one. We recommend ordering it at the start of the diligence period.

What if the space has been vacant for a long time?

In Chicago, a nonconforming use discontinued for 18 continuous months or more loses its rights (Chicago Mun. Code 17-15-0304). If the planned use depends on those rights, confirm them before you commit.

Who pays transfer taxes in Chicago?

The city tax falls mainly on the buyer and the Chicago Transit Authority portion on the seller, with joint and several liability if unpaid (Chicago Mun. Code 3-33-030). The state tax also applies. The contract should allocate each one expressly.

Can you represent me in renewing my current lease?

Yes. We review the renewal option, the notice deadline and form, and the terms worth renegotiating, such as rent, improvements, operating expenses and assignment, before the deadline passes.

Do you work with my lender and title company?

Yes. We coordinate the lender’s requirements, the title commitment, the survey and the closing documents with each party so the conditions are met on schedule.

Related resources

General information only; not legal advice and does not create an attorney-client relationship.