If your business is growing and you’re ready to expand to a larger office or warehouse, there are a few things that you need to know first. Choosing a commercial property for your new business is exciting, but there are many legal and financial details to understand.
Commercial real estate acquisitions are a bit different from buying a residential property so you will need help from legal counsel. Make sure you’re thoroughly prepared. Here is a short guide to some of the legal aspects of buying business real estate.
have solid financing
In a commercial transaction, you will supply a Letter of Intent (LOI) to the seller. The purpose of an LOI is to officially declare your intent to purchase the process and start the ball rolling. It also will alert the seller that you are financially prepared to enter into a contract.
tip: If you’re not planning to purchase the property with cash, be sure to speak with a lender beforehand to better understand how commercial lending differs from residential real estate transactions.
evaluate the risks
A new property will always come with risks. You need to understand what you’re investing your money in and how much it’s going to cost you. It’s a good idea to do your due diligence on the property. Find out the current operational costs on the building and have a complete inspection to identify any deferred maintenance and repair issues.
There are different options for real estate so you need to figure out which sector you want to buy in. These include office, industrial, retail, multifamily, or mixed-use. It depends on the type of business you run as well. Speak to an expert in commercial real estate to help you understand your business needs.
Different sectors will have different requirements.
Any industrial property will need to rely on an environmental impact being evaluated. The law depends on the state but you’ll need to be able to alleviate any environmental liability. You’ll need to have an environmental impact assessment done, and this can be in either one or two phases. Read more here about environmental impact assessments.
bring in the experts
A structural engineer will be able to assess the safety and longevity of the building. It’s a legal requirement to have an engineer test the structural integrity of the building, and go over any necessary surveys and inspections. They will need to check several features including plumbing, electrics, fire exits, and so on. Once the engineer is ready to give you the good to go they will issue a complete property condition assessment report.