Commercial Real Estate - An Overview

Commercial real estate covers a number of property types including industrial sites, retail outlets, and apartment complexes. The primary element that distinguishes commercial real estate from private real estate is the activity that occurs on the property. On a commercial property, the activity is generally financial or commercial in nature.

Commercial real-estate transactions are mainly governed by state law. However, federal law often becomes important in areas that affect interstate commerce, environmental regulations, and discrimination issues. Other issues such as contracts, mortgages, and zoning rules are mostly regulated by state law.

Commercial real estate encompasses more than just the land apportioned for commercial use. Buildings and other items attached to the land could come under the heading of commercial real estate. If you are faced with commercial real-estate issues, it is best to consult an attorney for detailed information. A real estate lawyer is an excellent resource for commercial real-estate matters.

When considering a commercial real-estate purchase, the following must be considered:

General Legal Guidelines and Financing

The general law of contracts governs real-estate purchases. There are some essential requirements. The first is that a real-estate purchase has to be written. A commercial real-estate purchase must also follow land-use restrictions covering such items as construction method and size of allowed structures.

Purchases of commercial real-estate are most commonly financed by mortgages. The mortgage involves a mortgagee and a mortgagor. The mortgagor is the purchasing party acquiring an interest in real estate and the mortgagee is the party lending the money for the transfer.

Clear Title

When a party buys real estate, he or she generally wants to buy the property with a clear title, meaning that there are no liens or encumbrances on the title and the purchaser can take the real estate in total. Ordinarily, a title company is employed to search for any discrepancies on the title. Title insurance can be purchased in the event that a lien or the like was not found by the title search.

Zoning and Land-Use Issues

Zoning is a method by which the government sets guidelines for the use of land. This can include what type of industry can occupy the land or whether the land can function as a residential district. Zoning covers land-use restrictions, which are regulations that control the size and dimension of structures within a particular area, as well as their use. Potential buyers should also consider the future use of a land purchase because environmental zoning could prevent certain types of development. In order to overcome restrictions, a business owner may have to apply for a variance. A variance permits the land to be used in such a way that is ordinarily forbidden. To gain a variance the owner must usually go through a local government process that includes fees, application, and public discussion.

Encumbrances

An encumbrance is a condition of use attached to a parcel of real estate. An encumbrance can include an easement. An easement is a right to use another's property, including the use of another's property to gain access to one's own property. Easements are most often required when a piece of real estate is completely confined within neighboring properties.

Eminent Domain

The state and federal governments have the power, under the Fifth Amendment, to take private property for public use in exchange for fair compensation. Eminent domain is the expression of this power and is seen as a benefit to the general public. Eminent domain can include taking land for the use of power lines or even parks that will be used by the public. The process of taking under eminent domain is called condemnation.

Leaseholds

Leasing real estate means that the lessee pays a lessor a certain amount of money for the use of property over a period of time. There are different ways in which a party can lease real estate. For example, a month-to-month lease would be a periodic tenancy and, depending on the state, does not have to be in writing. A definite-term lease is one for a set period of time. This type of lease generally must be in writing if it is to be for a year or more.

Conclusion

Commercial real estate has many complex legal and business issues. For professional guidance, an attorney experienced in the field can be an important resource.

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