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How do party walls affect commercial real estate deals?

On Behalf of | Feb 23, 2023 | Real Estate |

When it comes to commercial real estate, there is a seemingly endless number of possibilities. Indeed, you might purchase an empty lot, a standalone building or even a unit in a complex. If your property connects to another one, though, there is a decent chance you have at least one party wall.

According to the International Risk Management Institute, a party wall is a partition between two or more independently owned properties. Because these walls tend to straddle property lines, they often have more than one owner. That is, you own your side of the party wall, and your neighbor owns the other side.

Your pre-closing due diligence

If you are in the market for commercial real estate, a party wall increases the pre-closing due diligence you must perform. That is, it is advisable to schedule an inspection of the property wall to ensure it is in good condition. Moreover, because the party wall might restrict what you can do with your property, you also should ensure the property meets your needs.

The party wall agreement

Commercial properties with existing party walls often also have existing party wall agreements. These agreements inform all owners about their rights and responsibilities. They also typically have dispute resolution provisions that limit the way owners can deal with disagreements. Consequently, before you close, you should obtain and read through any existing party wall agreements that attach to your parcel.

Ultimately, if you object to a provision in an existing party wall agreement, you should try to resolve the issue before continuing with your purchase.

Founding Partners Damaso W. Saavedra and Allyson D. Goodwin