Many businesses benefit from owning property, but there still may be challenges to overcome. One major concern is the potential for litigation, which can be both time-consuming and costly.
According to the Pew Research Center, 3.7 million businesses own property in America. Understanding which issues to look out for can help you find the right property for your company.
1. Title search and due diligence
Before finalizing any commercial property purchase, conduct a comprehensive title search. This involves thoroughly examining the property’s history to identify any existing liens, claims or legal issues. Due diligence is important to uncover potential problems and make informed decisions about the property’s viability.
2. Zoning regulations
Understanding local zoning regulations is important. Each municipality has its own rules governing land use, and violating these regulations can lead to legal complications. Ensure the property is compliant with zoning laws and obtain any necessary permits before proceeding with the purchase.
3. Environmental compliance
Environmental issues can pose significant legal risks. Investigate the property’s environmental history and ensure it complies with all environmental regulations. Contamination or hazardous materials on the premises could result in legal liabilities, so it is important to address and rectify any potential environmental concerns.
4. Lease agreements and tenant relationships
If the commercial property has existing tenants, thoroughly review their lease agreements. Understand the terms, conditions and potential legal obligations of these agreements. Building positive relationships with tenants can also mitigate the risk of future disputes, reducing the likelihood of legal action.
5. Property inspections
Do not overlook the importance of thorough property inspections. Hire qualified professionals to assess the structural integrity, electrical systems, plumbing and other important components. Identifying and addressing any issues upfront can prevent legal disputes down the line.
6. Financing arrangements
Carefully review the terms of your financing arrangement. Clear communication with lenders is important to avoid misunderstandings and potential legal disputes. Ensure that all financial agreements are transparent, and be aware of any potential legal consequences in case of default.
A well-informed approach to buying commercial property can significantly reduce the risk of litigation. By addressing potential issues, investors can navigate the commercial real estate market with confidence and minimize legal risks.