A Commercial Real Estate Non-Disclosure Agreement is also known as Commercial Real Estate NDA, is a legal agreement that allows the commercial real estate owner to disclosure financial, confidential, and proprietary information to potential buyers, tenants, or agents when selling or leasing the property. In other words, the agreement allows sensitive, private, and confidential information to be accessed by every party that is involved in such transactions. Once accessed to such information, the parties will be obliged to maintain the privacy and confidentiality of the information provided. Therefore, if you are a landlord, tenant, buyer or agent willing to engage in commercial real estate business, it is significant that you approach the business in a formal manner by signing a Commercial Real Estate Non-Disclosure Agreement. This will help reduce any damages that might be associated with unauthorized disclosure of such vital and confidential information to the public.
Oftentimes, most Commercial Real Estate owners find a difficult time explaining to their potential buyers or sometimes agents the need to sign the Commercial Real Estate NDA. Well, some people might be a bit apprehensive about signing the agreement. Perhaps, it may not be their fault. Maybe they don’t know the repercussions that might be facing them should they continue with their transaction minus the Commercial Real Estate NDA. However, if you find your clients apprehensive, here is how to go about convincing them.
First, start by explaining to them that it is a common practice in the commercial real estate business. Make them understand that the Commercial Real Estate NDA is usually signed before anyone is shown around the property. Also, make them understand that this contract comes with other benefits, such as maintaining the privacy of the transaction.
The other thing you could say is that the Commercial Real Estate NDA isn’t a lifetime agreement. They should realize that the agreement is only valid when the two parties are still involved in active business. At the same time, the confidentiality clause is only effective when there is some significant information that shouldn’t be shared with the general public.
Lastly, inform your clients and any other party involved in the transaction that the Commercial Real Estate NDA is only meant to keep the classified information confidential—and that there is no legal obligation to buy the property. If they decide not to buy or lease the property, it will be fine with the owner. After all, the Commercial Real Estate NDA is just similar to keeping a secret from a friend only that this case involves commercial real estate.
How to write a Commercial Real Estate NDA
If you are planning to write a Commercial Real Estate NDA, below are some of the clauses you need to include.
First and foremost, you should start your Commercial Real Estate NDA with a brief introduction. Mention the names of persons/parties involved in the commercial real estate transactions, i.e., the landlord/owner, the tenant, prospect buyer, or agent. Also, make sure you include the date with which the agreement will officiate.
Here, you need to provide details about the commercial property in question. Amongst the details that should be indicated includes the address.
This clause clearly explains what information should be kept confidential. The confidential information can either be presented in the documentation or spoken. When spoken, make sure you announce its confidentiality in advance.
Here, you need to make it clear what trade secrets the receiving party should keep secret from disclosure. These may include financial documents, construction methods, and techniques, among others.
Return of materials
In this section, the receiving party promises to return the confidential materials after a specific duration or under specific conditions such as if the buyer decides not to buy the property. Usually, the agreement can give the receiving party up to one month to return the materials. However, this period can always be amended should need to arise.
This clause provides further directions on anything not covered by the agreement, such as court decisions and state laws, among others.
This section describes the period by which the Commercial Real Estate NDA should take before its expiry. Usually, the agreement remains in effect as long as it is needed. The most common period ranges from 2 to 5 years.
No rights granted
Here, the receiving parties are reminded that there is no right of ownership granted by signing the agreement.
This includes any other miscellaneous information that is related to the Commercial Real Estate NDA. They include relationships, severability, attorney fee, waiver, and injunctive relief, among others.
Download our Free Templates
While creating a Commercial Real Estate NDA from scratch may be tiresome, we have a better and easier option of getting it done. We have a well written Commercial Real Estate NDA template that is easy to fill. Plus, the templates can be edited to include your preferences hence convenient.
Frequently Asked Questions
If you break the contract as agreed in the Commercial Real Estate NDA, you may face various consequences, which include but not limited to legal actions.
Yes. Sometimes you can negotiate the terms and conditions of a Commercial Real Estate NDA. If asked to sign the agreement, make sure you go through it, and request for modification if necessary. However, bear in mind that the property owner may or may not be receptive to your suggestions/modifications.
Not all information will always be covered in a Commercial Real Estate NDA. Information that is a matter of public record, or that is common knowledge may not be covered. Also, information that the receiving party had prior knowledge of May not be included in the NDA.