3 Common Legal Issues With Commercial Property Investments

When you are investing in real estate, you need to decide whether to invest in a commercial or residential property. They both have their own pros and cons, but commercial property can be more lucrative in most circumstances.

However, it does bring a lot of specific challenges along with it and it’s important that you are prepared for that before purchasing a property. One of the main things that people get caught out by is the potential legal issues around the commercial property.

If you are considering a commercial property investment, make sure that you are aware of these common legal problems.

 

Assumption Of Liability

When you purchase a commercial property, you may assume some liability from the previous owners. This usually happens if there are legal violations as a result of environmental hazards that were left by the previous owner.

These could be things to do with waste management, faulty electrics or any number of other health and safety hazards. As soon as you purchase the building, you assume that liability and you could find yourself in legal trouble.

The best way around this is to have a thorough inspection carried out on the property beforehand. Then, seek the advice of a real estate attorney to help you negotiate the purchase agreement.

You need to make sure that the seller agrees to fix all of these issues before you purchase the property so you do not assume liability. Alternatively, you can negotiate a reduction in the price to cover the cost of making the changes yourself.

 

Insurance Issues

Disputes about commercial property insurance are incredibly common because insurance companies always want to pay the minimum amount possible. This leads to disputes about exactly what is covered.

Disagreements about the value of an item are common and insurers will often pay the market value, including depreciation, rather than the cost of replacing the item.

For example, if an office fire destroys some computers that are 3 years old, the insurance company are only likely to give you a small amount of money which is nowhere near enough to cover brand new computers.

There may also be disputes about what counts as a fixture in the building and whether they are covered by insurance or not. It’s important that you shop around for the best insurance coverage and have a legal professional review the policy before you sign it.

 

Contract Issues

There is a wide range of potential contract issues with a commercial property, which is why you need a good broker to help you navigate them.

You may have issues with zoning or land use regulations on a property if you want to change the building in any way or use it for another purpose.

It’s important that you check for these clauses to ensure that you can actually use the investment in the way that you want to. In older buildings, there may be inaccuracies in the titles and deeds which can cause legal issues.

It’s important that you seek the advice of a real estate attorney if you are investing in commercial property because there are a lot of potential legal issues to deal with.

Are you considering commerical property investments?