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4 Things to Know About Purchasing Commercial Real Estate

Commercial real estate purchases come with a lot of pitfalls. If this is your first time purchasing non-residential properties you’re about to enter a whole new world.

And it can be a tough world to navigate if you don’t know what you’re doing.

Here are four issues to watch out for.

1) You don’t have the same protections as people who are purchasing residential real estate.

Purchasing residential properties comes with all sorts of protections.

When you purchase commercial real estate, the law of caveat emptor applies.

The reason is simple. The law assumes, rightly, that most residential purchases are conducted by people who don’t regularly conduct business transactions, or legal ones. And there are societal benefits to making sure a portion of the population, at least, can own their own property.

But commercial real estate assumes you know what you’re doing.

Furthermore, a residential buyer is just trying to make sure they don’t, say, buy a home with a bad plumbing problem they can’t afford to fix.

Meanwhile, when you purchase a commercial property you take on a whole host of liabilities homeowners don’t have to worry about. That means you could be looking at a property that’s tied up in legal action, is bound up in contracts, or is zoned in a way that’s prohibitive to the way you wish to use the property.

And those are only a few of the issues which can arise.

2) Property valuation is complicated.

There are multiple methods for doing it. And your concern isn’t just the sale price. It’s in how much return you can expect to get on your investment after purchasing the building.

There are professionals who specialize in real estate appraisal, and it’s a good idea to retain one. Otherwise, you might purchase a property that ends up becoming far more of a liability of an asset, something that can be fatal no matter what kind of business you’re running.

3) It’s important to consider environmental risks.

For starters, you’ll need a Phase I Environmental Site assessment. Otherwise, you could end up paying to clean up a massive environmental problem you didn’t cause, simply because you own the building and in many cases, as far as the law is concerned, you bought the problem when you bought the building.

There are defenses you can use, but why take the risk? You could just take advantage of deed restrictions or other legal remedies that let you work around the problem, or require the seller to handle it before you make the purchase. But you can’t do any of that if you don’t know about the problem in the first place.

4) Contracts are more complicated.

And mistakes can be fatal. Problems like limited or inaccurate property descriptions could mean finding out later that you don’t own a portion of the property you paid for.

You absolutely need a real estate attorney’s help to ensure the document is accurate, reflects the negotiation between you and the seller, and protects your interests. You also want to make sure the contract protects you in the event of a dispute.

If you’re thinking about purchasing commercial property, make sure you protect yourself. Contact the Law Office of Sami Perez for a free consultation today.