The list of actions when buying commercial real estate, what needs to be done and what specialists should be involved for risk assessment
Real estate relates to fixed assets of a business and its significant assets. The presence of real estate in the property is a guarantee that the office and production in the near future will not need to be transported anywhere. This is a profitable investment: in case of difficulties of the main business, you can always rent out some of the premises, in case of debts or bankruptcy of the company, pay debts not from bank cards or accounts of business owners, but by selling real estate.
Given that the purchase of commercial real estate is a very expensive undertaking, before buying it is necessary not only to inspect the object of purchase, but also, at a minimum, to analyze the real estate documents.
The analysis of documents can be carried out by a full-time or attracted lawyer, as well as a law firm. The latter option is preferable: the law firm will present a comprehensive look at a future purchase and prescribe the risks in detail.
Necessary steps before buying a commercial property
1. Negotiating with the seller. At this stage, the acquaintance, the owner’s story about the property and a preliminary discussion of the main conditions of the transaction.
2. Inspection of the property by the future buyer. This is also a preliminary action aimed at carrying out a general analysis when making a decision: the location, layout, configuration of the fence, the placement of the gate and other features of the property can affect the decision to purchase.
3. Providing the seller with a package of documents for commercial real estate for analysis of documentation by the buyer. This is a significant step in preparing for the transaction: the documentation may contain information about which the seller did not report because of their ignorance or for other reasons. Such an analysis will avoid pitfalls.
4. Making decisions on the purchase of real estate and conducting internal procedures in companies to approve the transaction. Since the cost of commercial real estate is usually high, such transactions can be large for both companies; a decision of the owners is necessary to complete such a transaction.
5. Coordination of the text of the contract of sale, its signing by the parties independently or in the presence of a notary.
6. State registration of transfer of ownership of commercial real estate. This is a prerequisite by law. Without such registration, the contract does not make sense.
A package of documents for the analysis of commercial real estate
The package for the analysis of commercial real estate may include:
1. Extract from the Unified State Register. From it you can find out who the owner of the real estate is, whether there are encumbrances, the category of permitted use (in relation to land plots), what is the area of the object, the reasons for the acquisition by the current owner, date of registration with the cadastral register, tenure of real estate and other important information.
2. Documents on the basis of which the current owner purchased the property (sales contract, bidding protocol, etc.). These documents will contain important details regarding real estate: you can find out on what terms the property was acquired by the current owner, what the property was at the time of the previous purchase, and more.
3. Contracts and documents for payments for energy and other services related to this commercial real estate: electricity, water and wastewater, gas, heat, telephony. From them you can learn about the presence or absence of arrears in payments for such services, as well as obtain technical information regarding engineering networks: capacity, boundaries of balance accessories and other important information.
4. Cadastral and technical documentation for plots, buildings, structures, structures. These documents will show which objects are cadastral and which are not; in relation to which objects cadastre was carried out, and in relation to which - not carried out; allow to draw conclusions and the risks of disputes with the owners of neighboring buildings and plots.
The participation of other specialists (other than lawyers) in the analysis of acquired commercial real estate
In addition to legal analysis when buying real estate, it is important to conduct financial and technical analysis. Technical experts will examine the property for its compliance with the documentation from a technical point of view, determine whether the energy resources are sufficient for the future owner of the property, and also reveal its hidden shortcomings.
Financial experts will verify the validity of the price of the contract for the purchase of commercial real estate and its relationship with the market price. Before buying, in addition to legal and technical analysis, an independent assessment of real estate is often carried out.
Conclusion
The acquisition of commercial real estate is an expensive financial investment that must be made with minimal legal and financial risks with full confidence regarding the sufficiency of energy resources, the convenience of planning and location, the compliance of the permitted land use with the purpose of such real estate, and the absence of encumbrances (arrest, pledge, etc.) .d.) and hidden shortcomings (or their insignificance).
In the event that your litigation or other dispute, contractual work or any other form of activity concerns the issues discussed in this or our other material, we recommend checking and making sure that your legal position complies with the latest changes in practice and legislation.
We will be happy to provide you with legal assistance regarding the minimization of legal risks and the opportunities available. We will try to find a solution that is suitable for you.
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Elena Mironova, legal analyst. Blonde. I love pink. Like pop music. I prefer bankruptcy litigation and loans.
