The United States commercial real estate market was valued at approximately $22.5 trillion as of the last quarter of 2023. This amount makes commercial real estate the fourth-largest asset class in the country, trailing behind stocks, residential real estate, and treasury securities.
Getting into a commercial real estate deal can be exciting. Before opening a new shop, renting office space, or purchasing a building, business owners must take into account various legal considerations.
These considerations include lease agreements, local real estate policies, and legal paperwork. Complying with these requirements or regulations may seem unimportant, but they can cause serious legal problems if you are not careful.
A Fort Mill commercial real estate lawyer says it is critical to have an understanding of your legal rights and obligations if you are planning to buy or lease commercial real estate. An attorney can help you handle the process of leasing or purchasing commercial property.
This article will provide an overview of the factors you need to think about when making commercial real estate deals to avoid legal issues and problems.
Understanding Lease Agreements
An understanding of lease agreements is necessary when dealing with commercial real estate. A lease agreement is a contract where you and your tenant or landlord set out the terms and conditions for renting a property.
Among the variety of leases you will encounter are gross, net, and percentage leases. Each of these types of leases carries different responsibilities. Carefully check the terms of the lease and pay particular attention to the duration, possible rent escalations, and renewal options.
Maintenance obligations and restrictions on use should be well defined. A special use permit in real estate is necessary when you intend to use land for purposes that are not authorized by standard zoning regulations.
Familiarize yourself with security deposits and termination clauses. Knowing these concepts and how to use them to your advantage can help protect your interests.
Read the entire agreement and consult an attorney if you have questions and concerns. Effectively negotiating lease agreements is important to the success of a commercial real estate deal.
Understanding Zoning Laws
Dealing with zoning laws is just as important as understanding lease agreements.
Zoning laws dictate the use of a property. A clear grasp of zoning laws is required when handling commercial real estate deals. These laws can restrict how high you can build a property or what type of business you can establish in certain areas.
Before entering any deals, conduct a check on the zoning classification of the property, and approach your local officials or zoning attorney for advice. Taking these steps helps you avoid unexpected financial problems in the future.
If the property use change is approved, you may need a zoning variance or special approval. Understanding zoning laws will help your investment follow established local standards.
Assessing Environmental Regulations
Awareness of environmental regulations is critical for avoiding pitfalls and liabilities. Know the various local, state, and federal environmental laws likely to be invoked when dealing with the property.
A phase I environmental site assessment can help determine whether contamination exists on the property and identify other potential liabilities. Laws such as the Clean Water Act and the Resource Conservation and Recovery Act regulate waste management and water quality.
Check out other local regulations regarding hazardous waste or use of land. Being proactive protects your investment and keeps you legally compliant.
Financing and Loan Agreements
Financial and lending variables are important to closing commercial real estate investment deals. Business financing should include bank loans, private lending, and crowdfunding. Each financing option has benefits and drawbacks that you should be aware of.
After finding a lender whose repayment terms meet your needs, carefully inspect and read all the agreements detailing the interest rates and repayment schedules. Pay close attention to prepayment penalties or covenants that could affect your investment returns.
Consulting a real estate attorney helps you learn all your rights and obligations associated with commercial real estate.
Due Diligence and Title Searches
Due diligence and title searching should not be taken lightly during commercial real estate transactions. Legal status, zoning regulations, and existing liens or encumbrances all need verification. Conducting due diligence and a proper title search will expose possible issues about the real estate investment.
Hire the right professionals, such as real estate attorneys or title companies, to get accurate findings on your commercial real estate properties.
Do not forget to check the history, ownership, and any existing litigation before making a purchase. These details could inform you of potential issues with the property.
Confirm that the seller has the right to sell the property and that all necessary permissions are in place.
