Commercial or residential real estate transactions are stressful. All real estate contracts are complex documents, and each transaction is unique which adds to the complexity. Commercial real estate contracts, including those for office, retail, industrial, or multi-family properties and premises, are even more complex than residential. Whether you are buying, selling, or leasing a commercial property it is important to engage an attorney that specializes in real estate to draft or review your documents. Real estate lawyers have specialized knowledge that attorneys in other practices may not. Reviewing documents can be as simple as identifying issues or as involved as completely rewriting the contracts. Your real estate attorney can identify any issues up front to avoid problems with completing your commercial purchase or lease and can identify any issues that may arise after the contract is in force. Your attorney can work with you to establish a budget for representation that balances the cost and potential issues in the contract.
The Difference Between Commercial and Residential Real Estate Purchases
Commercial and residential real estate transactions are different. All real estate transactions may take months to complete and require specialists such as real estate agents, title attorneys and mortgage brokers. In a commercial transaction you may think your interests are protected by all these specialists, but you would be wrong. You must ensure your own interests by engaging an attorney that specializes in real estate transactions. Commercial agreements may include types of property rights that are less common like leases, water rights, licenses, warranties, and zoning which may be essential to conducting your business at the property. Each of these must be conveyed through their own legal instruments to protect the value of your investment. If the property being purchased has tenants, the transaction is even more complicated. The buyer may need to re-negotiate clauses pertaining to the leases, notices will need to be given to the tenants, tenants will need to verify that there are no lease defaults, and tax returns will be needed to verify rental incomes. This process can take months and can be stopped dead by any of the issues mentioned or by many others. The advice of a good real estate attorney can help you avoid these issues and make the process less stressful.
A Lease Negotiation Disaster
Take for example the following true story (shared with permission) about a business owner’s first commercial lease. He and his wife were serial entrepreneurs. They always had a new business venture that they thought would make them millionaires. The latest idea was that they would become indoor plant wholesalers. They had a friend in Florida that grew beautiful tropical plants. They decided that they could wholesale these plants to florists, supermarkets, etc., all they needed was a truck and a plant warehouse. For months they looked for the perfect location to house their plants. Finally, they found the perfect place in a secluded quarry. It was an old tractor repair warehouse covered in thick grease which had not been used in years. They contacted the lessor and inquired about leasing the warehouse. The price was right, and they wanted to proceed. They knew they needed an attorney, but they were on a shoestring budget and needed the money for renovations. So, they asked their friend who was an attorney focusing on family law if he would help them. He was more than happy to help. The lease was negotiated, reviewed, and signed. The business owners got to work cleaning up the warehouse and preparing to receive the plants. They invested over $30,000 to clean up and renovate the warehouse. They were so happy with their beautiful warehouse and opened for business. Occasionally a local would come up to check out what was going on up in the old quarry and perhaps purchase a plant or two. The wholesale portion was taking off nicely and for a little over a year everything was proceeding as planned.
One day they got a notice in the mail from the zoning board saying that they were in violation of zoning and that they would be fined $500 per day until they complied with the zoning regulation. They quickly contacted their attorney friend who was absolutely mortified because after reviewing the lease he realized he had made a mistake their business was, in fact, in violation of zoning. They contacted the lessor to see if they could get out of their lease, but the lessor said that the contract was negotiated in good faith and that they were liable for the lease. At this point they had no choice but to secure the services of a real estate attorney, but the damage was already done.
During this stressful process they continued to operate business as usual. Then something fortunate happened that saved them from extended legal battles. The property they were leasing got bought by a developer and they were let out of their lease. Now they had nowhere to house their plants and had incurred thousands of dollars in legal fees. The result was that their friendship with their family law attorney friend was ruined and they were bankrupt. It was a hard lesson to learn but when they went into their next venture, the first thing they did was hire an experienced real estate attorney to negotiate their leases.
Hire an Attorney That Works for You
This story is just one example of how complex commercial real estate transactions are, and how unique each transaction can be. This is not a DIY area. Contact Saxton Law, a law firm focusing on commercial real estate. Bryan Saxton can negotiate your lease or purchase transaction, help you avoid any unnecessary stress, and ensure you experience the full value of your commercial real estate decision.