In commercial real estate deals, moving from simple discussions to a signed, legally binding contract typically has involved a lot of pain in the form of endless paperwork. However, stacks upon stacks of documents are disappearing from desktops everywhere and moving into the electronic realm. In a rapidly growing trend, more deals are being completed over the Internet, with equal, if not greater, security and compliance of paper-bound contracts.

This is especially beneficial for commercial deals, which share a lot of pains with residential real estate deals. Both share the difficulty of getting contracts finalized and signed by all parties. Both markets find themselves winding down a paper trail, which often hurts (or outright kills) a deal.

All of that paperwork is necessary, however. It exists to protect the interests of all parties involved and to keep the entire process legally above-board. That means a system of executing and recording the documents is absolutely critical, which is where online contract execution services enter the picture. For parties involved in a commercial real estate transaction, online contract execution has several unique advantages:

• The longer lease times in commercial deals mean more paperwork to maintain. This timeline changes the nature of the documents involved and requires stipulations that aren’t recognized in traditional residential contracts, which are typically a year or shorter. As the tenancy moves through the years, the paperwork will need to be referenced or audited many times. Providing secure, online, on-demand storage makes referencing and searching through them simple, and the documents are easily accessible by interested parties regardless of physical location. They also are secure from damage risks such as a fire or flood.

• Often, a potential lessee is looking to get started in their new location as soon as possible. They’ve discovered the location they desire and want to set up shop, but the negotiation and contract period bogs down the process. Online contract execution reduces the need for “wet” signatures, which, because of divergent schedules, can add many days on to a closure process. The online solution keeps all relevant documents in a central location, reducing the need for travel (as well as eliminating the costs.)

• Background checks are critical, but tough to manage. They include credit checks and criminal background checks, both of which take time and require extensive loopholes to acquire. They are time-consuming and sometimes overlooked by someone whose primary goal is simply closing the deal. Some online services now automate this process, ensuring required processes are followed and potentially bad tenants are screened out.

The uniting force behind the benefits is a shorter turnaround time. The online system dramatically reduces time waste, which allows the seller means more time to focus on getting customers and gives the buyer a sooner move-in date.

Reaping Rewards

Adoption of online contract execution is still in its early stages but the real estate market is beginning to take notice. The benefits already have spread through several other industries, including financial services, health care and insurance. Anyone who has to deal with multiple parties on contracts that must stay compliant and enforceable must at least consider moving to an online solution.

One of the newest and best benefits of the technology is the ability to obtain a legal, binding, enforceable signature to seal the deal. Complicated meetings with marathon signings are a thing of the past, as the parties can attach digital signatures to the documents that are just as enforceable as a handwritten signature.

Of course the obvious reaction is to question the validity of a digital signature. Common knowledge urges one to think, “If it is not on paper, then I can’t know if what I received is valid.” Current technology being used by companies such as ContractPal, an Orem, Utah-based developer of contract closure solutions, contains authorization and security features that remove all doubt as to the validity of the signature. Federal legislation known as the ESIGN act make a digital signature legally binding in the majority of instances.

When considering an online contract solution, there are eight critical elements to look for:

• Enforceability: The solution must include the features that keep your contract valid and enforceable. This includes following all rules for compliance and disclosure. It also goes beyond the contract itself to include outside agreements, such as a letter of intent.

• Automation: Any solution should be able to automate the process of moving data in and out of documents and databases, as well as the interactions between different users on the documents.

• System Integration: The solution should be able to integrate with existing systems, including front-end data collection, database, workflow and document storage into the contract creation and management process.

• Portability: Regardless of geographic location, computing platform or company boundary, the system should enable uninterrupted contract execution, workflow processes and status-tracking of the contract.

• Security/Authentication: A solution should be able to limit certain viewers from viewing portions of the documents.

• Privacy: You should be able to control exactly who has access to your documents and keep all confidential information truly confidential. Besides being a good business practice, this may be a requirement in keeping some documents enforceable.

• Assurance: The solution should have a full auditing feature that can show the contract administrators exactly who has accessed what and when. If something goes wrong with the document, the enforceability of it may be jeopardized.

• Risk Management: One aspect many may not consider when looking at a digital contract management system is a feature only a few offer – variable levels of risk management as well as a flexible, real-time legal compliance framework that implements and monitors risk-management policies and procedures for a contract. This can help cut down on legal fees and other future costs.

This shift from traditional paper contracts and document processing to automated online solutions is catching on quickly, especially in the commercial real estate market. Besides saving a lot of time and money, the best benefit of an online contract execution service is the amount of time it saves for everyone involved.