Illinois Commercial Real Estate Contract Review: A Checklist

Commercial deals are contract-driven

A home sale in the Chicago area runs on a standard form, a seller disclosure statute and an attorney review period. A commercial purchase has none of those. The Residential Real Property Disclosure Act applies only to property with one to four dwelling units, condominiums and co-ops (765 ILCS 77/5), so a seller of an office building, a warehouse or a corner retail strip owes you no statutory disclosure form. There is no attorney review period unless the contract creates one. Whatever protection the buyer has is written into the purchase and sale agreement or does not exist.

That makes the contract the deal. This checklist covers what a commercial real estate contract review in Illinois should address: the terms a purchase and sale agreement should contain, the Cook County specifics that trip up buyers from elsewhere, and the tax points an attorney who is also a CPA checks before the earnest money goes hard. Our real estate contract review page covers the residential attorney review period; the real estate attorney hub covers the practice as a whole.

Before the contract: the letter of intent

Most commercial deals start with a letter of intent that fixes price, deposit, due diligence period and closing date and says it is non-binding. Keep it that way, but write it carefully: the business terms in the LOI are hard to reopen later, and a clause granting the buyer exclusivity during due diligence is the one term worth making binding.

Commercial contract review, clause by clause

Property, price and deposit

• Full legal description, permanent index numbers and street address, with the personal property included (fixtures, equipment, signage) listed on a schedule.
• Purchase price, deposit amount, when the deposit becomes non-refundable, and who holds it. In Illinois the deposit is normally escrowed with the title company under a written escrow agreement, not held by a broker or a party.
• Whether the price is allocated between land, building and personal property. The allocation drives depreciation for the buyer and gain character for the seller, so it should be negotiated rather than left to each side's accountant after closing.

Due diligence period

The buyer's right to investigate and walk away. The period should be long enough to finish each item below and should end with an explicit right to terminate for any reason and recover the deposit.

• Physical inspection: roof, structure, mechanical and electrical systems, parking, ADA access.
• Environmental: a Phase I environmental site assessment under ASTM E1527-21, the standard the U.S. EPA recognizes for "all appropriate inquiries" under its rule effective February 13, 2023. A Phase I that satisfies the rule is what preserves the federal bona fide prospective purchaser and innocent landowner defenses; a Phase II (sampling) follows if the Phase I flags a recognized environmental condition.
• Title and survey: a commitment for an owner's policy with extended coverage and an ALTA/NSPS land title survey under the 2021 standards, with the Table A items you need (zoning, parking count, flood zone, utilities). Our article on title commitment and survey review explains how to read both.
• Zoning: a zoning verification letter from the municipality confirming the current use is permitted, plus any certificate of occupancy history. Chicago and the suburbs each run their own ordinances, and a non-conforming use can disappear with a change of ownership or a vacancy.
• Leases: every lease, amendment and side letter; a current rent roll; tenant estoppel certificates confirming rent, term, deposits and defaults; and, where there is a lender, subordination and non-disturbance agreements.
• Service contracts, warranties, permits, licenses and the last three years of operating statements and tax bills.

Title and survey requirements

• Which deed the seller will deliver: a warranty deed, a special warranty deed (the seller warrants only its own period of ownership, the commercial norm), or a quitclaim deed (no warranty at all).
• Which exceptions the buyer must accept, which the seller must remove, and the procedure and deadline for the buyer's title and survey objections.
• The policy amount, extended coverage, and endorsements.

Representations and warranties

Statements of fact the seller makes about the property: authority to sell, no undisclosed leases or litigation, no notices of violation, no knowledge of environmental releases, rent roll accuracy. The negotiating points are how long they survive closing, whether the seller's liability is capped, and whether the buyer must waive claims it knew about before closing.

Conditions and closing deliverables

• Deed, bill of sale for personal property, assignment of leases and contracts, tenant notice letters, and keys.
• A FIRPTA affidavit that the seller is not a foreign person. If the seller is a foreign person, the buyer must withhold 15% of the amount realized and remit it to the IRS, and the buyer is liable if it fails to do so.
• The Illinois Real Estate Transfer Declaration, filed through the Illinois Department of Revenue's MyDec system (the online version of Form PTAX-203). The Cook County Clerk will not record a deed without it, and in Chicago the MyDec declaration must be completed before the deed is presented for recording.
• Transfer tax stamps, title company closing statements, and the proration schedule.

Prorations and adjustments

Rents, security deposits, utilities, service contracts and, above all, property taxes, as of the closing date. See the Cook County section below.

Default and remedies

What happens if the buyer fails to close (usually loss of the deposit as liquidated damages, and nothing more) and what happens if the seller fails (return of the deposit, reimbursement of due diligence costs, and the right to sue for specific performance). Sellers try to make liquidated damages the buyer's only remedy as well; buyers resist.

Assignment and 1031 cooperation

The right to assign the contract to a new entity before closing, and a clause obliging each party to cooperate with the other's like-kind exchange at no cost.

Cook County specifics

Property taxes are paid in arrears

Cook County bills the prior year's taxes in two installments. The first installment is 55% of the previous year's total; the second reflects the new assessment, new levies and exemptions and arrives in the second half of the year (Cook County Assessor). At closing the seller therefore owes the buyer a credit for taxes accrued but not yet billed, and the contract must say how to estimate them. Because the county reassesses one-third of its townships each year on a three-year cycle, and the reassessment shows up in the following year's second installment, a buyer closing in a reassessment year should insist on a proration above 100% of the last bill, and on a reproration clause once the real bill arrives.

Reassessment after a sale

A sale at a price well above the assessor's market value tends to be followed by a higher assessment. The appeal windows at the Assessor and the Board of Review open and close by township. Our Cook County property tax appeal page explains the levels of appeal; appeals themselves are handled through our sister company, Cook County Tax Appeals LLC.

Transfer taxes

Many suburbs impose their own transfer stamp and some require a water certification or inspection before the stamp issues. Check the municipality early; a missing stamp stops the recording. The contract can shift any of these costs by agreement, but the statutory default is the starting point.

Bulk sales notices

When a sale includes the major part of the assets of a business, which can include the real estate the business operates from, the buyer must file Form CBS-1, Notice of Sale, Purchase, or Transfer of Business Assets, with the Illinois Department of Revenue at least 10 business days before closing. If the buyer does not, it becomes personally liable for the seller's unpaid Illinois taxes up to the value of the assets acquired (CBS-1 instructions). The Illinois Department of Employment Security has a parallel rule for unpaid unemployment contributions: the buyer must withhold enough of the price to cover them until the seller produces a clearance, requested on Form UI-2600 (820 ILCS 405/2600). Both filings belong in the contract as seller obligations with the buyer's right to hold back funds.

The tax points an attorney-CPA checks

• Entity. Buy through an entity formed for the property, not personally. Our business entity selection page compares an LLC, a series LLC and a land trust for Illinois real estate.
• Price allocation. Land is not depreciable; the building is; personal property and certain improvements depreciate faster. An allocation agreed in the contract is binding on both sides and is far stronger than one invented at tax time.
• Section 1031. A seller exchanging into replacement property must identify it in writing within 45 days after closing and acquire it within 180 days or by the due date of the return, whichever is earlier, and must never touch the proceeds. The contract's exchange-cooperation clause and the qualified intermediary agreement have to be in place before closing. See our 1031 exchange attorney page.
• FIRPTA. Confirm the seller's status before closing; 15% withholding cannot be undone afterwards.
• Installment sales and seller financing. A seller taking back a note reports gain as payments arrive; a buyer should confirm the note is subordinate to its lender or that there is no lender.
• The business, not only the building. If the deal includes the operating business, it becomes an asset or stock purchase with its own allocation form and its own diligence. See buying or selling a business.

Pro-buyer and pro-seller terms

Buyers push for a longer due diligence period, broad termination rights for zoning, environmental or financing problems, representations that survive closing, and the right to specific performance. Sellers push for a short diligence period, an as-is clause, representations that end at closing or are capped at a percentage of the price, and liquidated damages as the buyer's only remedy. Neither list is unreasonable; which terms you get depends on the market and on who drafted the first version. Draft first when you can.

Frequently asked questions

Is there an attorney review period for commercial contracts in Illinois?

Not by law. The five-business-day attorney review in Chicago-area home sales is a term of the residential Multi-Board contract, not a statute, and commercial forms do not carry it. A commercial contract has whatever review and diligence period the parties write into it, which is why the letter of intent should fix that period before the contract is drafted. A buyer who signs a seller's form with no diligence period has agreed to buy the property as it is.

Does the seller of commercial property have to give disclosures in Illinois?

No statutory disclosure form applies; the Residential Real Property Disclosure Act covers only one-to-four-unit residential property, condominiums and co-ops. A commercial buyer relies on the seller's representations in the contract, its own inspections, a Phase I environmental report, and the title and survey.

Who pays transfer taxes on a commercial sale in Cook County?

By statute the seller pays the state and county taxes. In Chicago the buyer pays the $3.75 per $500 City portion and the seller pays the $1.50 per $500 CTA portion. The parties can reallocate any of these in the contract.

How are property taxes prorated in Cook County?

Taxes are billed a year behind, so the seller credits the buyer at closing for taxes accrued but not yet billed, usually estimated from the last full-year bill with a negotiated percentage increase, and the contract should provide for a true-up when the actual bill arrives.

What is a bulk sales notice?

A filing with the Illinois Department of Revenue (Form CBS-1) at least 10 business days before a sale of the major part of a business's assets. It protects the buyer from inheriting the seller's unpaid state taxes. A separate clearance from the Department of Employment Security covers unemployment contributions.

General information as of August 6, 2025, revised October 4, 2026; not legal advice; laws change; consult a lawyer about your situation.