Commercial property values in California and around the country have been enjoying robust growth, but that does not mean that investing in offices, stores, warehouses or restaurants is without risk. Complex real estate deals can be stubbornly difficult to close, and there are a number of pitfalls that can either cause costly delays or derail transactions completely.
Investors should take steps to find out what commercial buildings have been used for in the past to protect themselves against ruinously expensive environmental cleanup costs. Environmental assessments are usually performed before real estate loans are approved, and soil testing may be required when buildings were once occupied by companies that worked with toxic substances. Building owners can also avoid unnecessary paperwork problems by ensuring that title issues are addressed promptly after loans have been paid off.
Ordering a preliminary title report can save both time and money. Clouds on titles such as mechanic’s liens or pending legal actions are not necessarily deal breakers, but they can be thorny problems if they are not caught early. Prudent due diligence efforts can also reveal any problems regarding the building’s owner. Commercial properties are often owned by corporations or LLCs, and conveyancing can be challenging when entities are located in different states or have been suspended for failing to file tax returns or other required paperwork.
Attorneys with experience in this area may help investors to avoid frustration and wasted time by anticipating the legal issues that could jeopardize commercial real estate transactions and taking proactive steps to avoid or tackle them. Once conveyancing has been completed and deals have been closed, attorneys could provide further assistance to building owners by drafting lease agreements that protect their interests and conducting background checks on prospective tenants.
