Buying commercial real estate differs significantly from personal property purchases, so it’svital that entrepreneurs seek legal advice early, Toronto real estate lawyer Lisa Laredo tells AdvocateDaily.com.
“There are a number of advantages to buying your own commercial property,” says Laredo, principal of Laredo Law. “But make sure you’re working with a team of people who can explain the process so you’re not caught off guard by the numerous details involved.
“There are some major things to keep in mind when purchasing commercial property.”
For starters, financing is trickier than a residential mortgage because there are several conditions that must be met, she points out. In a residential purchase, there is a standard test to determine if the purchaser is a viable candidate for a mortgage.
“But when it comes to loans for commercial real estate, banks demand a number of additional requirements from applicants,” says Laredo.
The financing company wants to ensure there are no environmental concerns and the building is structurally sound. The property must be appraised and zoning also needs to be examined, she explains.
Buyers are required to submit detailed information about what’s in the building, including chattels and fixtures.
“The process takes so much longer for both the person or corporation trying to get financing and for the lawyer who’s taking the instructions from the bank and putting the mortgage documents together,” says Laredo. “In most cases, you’re looking at anywhere from 60 to 90 days before a closing.”
Because the actual written agreement is so complicated, she suggests getting a lawyer involved at the outset to make certain the clauses are properly worded and detail their limitations, and the buyers are getting what they bargained for.
“If it’s drafted by a real estate agent I always suggest inserting a clause that states the agreement will be subjected to a solicitor’s review,” Laredo says. “And when you choose a lawyer to act on commercial transactions you must make sure they’re experienced.”
The purchase of a commercial property includes many moving pieces, she adds. Due diligence is required to ensure the buyer is getting a viable property that the bank will agree to finance.
“If you’re going to work with an agent, make sure he or she is well-versed in commercial transactions and not just trying to get a deal done,” she says.