Avoiding Pitfalls in Commercial Real Estate Transactions

Avoiding Pitfalls in Commercial Real Estate Transactions

By E. Drew Nelson, Attorney

If you are considering the purchase of commercial property, there are some key things you should know before you make an offer or sign a sales agreement. Commercial real estate transactions can be significantly more complex than residential transactions. In general, the dollar amounts are also much larger.

Here are a few common pitfalls you should be aware of:

  1. Real estate law in North Carolina requires the seller to disclose any known defects with the property. That said, the seller may fail to do so, or he or she may not be aware of all issues with the property. The buyer should always have the property inspected by the appropriate professionals to ensure there are no hidden issues that would otherwise cause the buyer not to purchase the property. In residential transactions, a single home inspector is often qualified to inspect and report on the entire property; a commercial transaction may require more than one inspector (i.e., a structural engineer, electrical inspector, mold remediation specialist, etc.) It’s a good idea to make any offer to purchase contingent on the results of the inspection(s).
  2. Financing a commercial real estate purchase is also much more complex than a residential mortgage (and if you have ever signed the paperwork required by the state of North Carolina to purchase a home, that’s saying something!). Due diligence is required on the part of the buyer. I strongly recommend you have a commercial real estate attorney review any legal documents before you sign them.
  3. “Other considerations” is how I label this next category. There are a variety of outside issues that may not change your decision to purchase the commercial property but that could have far-ranging consequences. These include such things as tax consequences, zoning issues, property valuation and environmental surveys.

In short, having a commercial real estate attorney represent your interests in a purchase transaction is always a good idea. Commercial transactions are complex and buyers (and sellers) can face greater risks than those in most residential transactions. It is prudent to protect your interests.