5 Critical Contract Errors: Real Estate
Contracts are the backbone of real estate deals, whether you’re managing lease agreements, buying properties, or overseeing construction projects. Yet, despite their importance, contracts often get overlooked until something goes wrong — and that’s when costs can spiral out of control.
In fact, according to research by the International Association for Contract & Commercial Management (IACCM), poor contract management can cost businesses up to 9% of their annual revenue.
That’s a significant amount for any real estate firm, especially considering how easy it is to address these issues.
In an industry where margins are extremely tight, any mistake in contract management can lead to missed payments, legal disputes, or costly project delays.
So, what are the most common contract mistakes in real estate, and how can you avoid them?
1. Mismanaged payment terms
One of the most common contract mistakes in real estate is ambiguous payment terms. Whether it’s confusion over instalment schedules, fees, or commissions, these misunderstandings can lead to delays, disputes, or worse — failed deals. For example, if a development project has unclear milestones tied to payments, you’re looking at frustrated stakeholders and potentially stalled progress.
Traditional, static contracts leave room for error, especially when dealing with complex projects or multiple stakeholders.
Clear and concise payment terms are a must. For those ready to take the next step, contract automation software allows you to set clear, automated payment schedules. With systems in place to trigger payments based on specific project milestones, you can eliminate guesswork and keep all parties on the same page. According to the IACCM, automated payment solutions can reduce contract management time by up to 30%, directly impacting project timelines and stakeholder satisfaction.
2. Missing critical deadlines
Missing a critical deadline, whether it’s for regulatory filings, inspections, or lease renewals, can derail your project or even void agreements. Manually tracking deadlines across multiple deals is a time-consuming process prone to errors.
An estimated 60% of businesses report missed contract deadlines, which often result in financial penalties or delayed project completions.
Automating deadline reminders and notifications is an easy way to ensure nothing slips through the cracks. Platforms like Ironclad and Conga offer features that integrate with your project management systems, sending alerts when key dates are approaching. This allows you to keep deals on track and avoid costly delays.
In fact, companies using automated contract reminders see a 50% reduction in missed deadlines, according to a report by the World Commerce & Contracting Association.
3. Ambiguity in lease clauses
If there’s one area where real estate contracts can go wrong, it’s lease clauses. Terms like “reasonable wear and tear” or unclear responsibilities for repairs are often left open to interpretation, which can quickly lead to disputes. In commercial real estate, even small misunderstandings about rent increases or maintenance obligations can escalate into costly legal battles.
Standardising lease terms and ensuring clarity in every clause is essential. By using smart contract tools, you can ensure that terms are clear, precise, and automatically updated as needed. For example, using a platform that allows for dynamic updates based on real-time property conditions or market data can help reduce disputes by ensuring all parties are on the same page from the start.
4. Failing to meet compliance standards
The real estate industry is heavily regulated, and compliance can vary across regions. Whether it’s ensuring adherence to environmental regulations, building codes, or tenant protection laws, failure to comply can result in hefty fines and project delays.
A recent survey found that nearly 70% of real estate firms struggle with maintaining up-to-date compliance in their contracts.
One effective strategy is to integrate your contract management system with real-time compliance databases. This allows your contracts to automatically adjust to new regulations or zoning changes, keeping you compliant without the manual effort. A tool like Programmatic takes this a step further by embedding a machine-readable layer into the contract itself, ensuring that the contract adapts to legal changes without any human intervention.
5. Ignoring post-signature obligations
Most real estate professionals think the heavy lifting is done once the contract is signed. Whether it’s tracking rent payments, scheduling maintenance, or managing renewals, post-signature obligations are just as important as getting the deal closed. Yet, many real estate professionals fall into the trap of thinking the hard part is over once the ink is dry, only to face penalties or strained relationships when these obligations are missed.
This is where contract automation can be a real game-changer.
Automated systems can track post-signature obligations, sending reminders or automatically executing actions like rent collection or maintenance scheduling. With dynamic contracts from tools like Programmatic, post-signature obligations are handled automatically, ensuring that nothing is missed and keeping your deals moving forward seamlessly.
The future of real estate contracts is automated and hassle-free.
The real estate industry is fast-paced, and small contract mistakes can have big financial consequences. Whether it’s missing a deadline, mismanaging payment terms, or failing to comply with regulations, these common pitfalls are entirely avoidable. By embracing contract automation, data standardisation, and real-time compliance tracking, you can mitigate risks and streamline your operations.
Platforms like DocuSign and Adobe Sign are great starting points for digitising your contracts, while more advanced platforms like Ironclad and Conga can automate key workflows and reminders. But if you’re ready to take it to the next level, Programmatic offers the full package by embedding a machine-readable layer into each contract, allowing them to self-execute, adapt to changes, and ensure compliance without the need for manual oversight.
The future of contract management in real estate isn’t just about avoiding mistakes — it’s about creating a system that works for you, so you can focus on what really matters: growing your business.
Ready to automate your contracts? You can read more about how to do it in practice on our page dedicated to the property sector or directly book a demo.
