Buying commercial real estate: features, procedures and recommendations

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Buying commercial real estate requires an extremely responsible approach. Just one mistake or incorrectness can lead to serious negative consequences. Regardless of the complexity of the transaction, the purchase of commercial real estate in Moscow requires special care and strict adherence to certain rules and an algorithm of actions.

How to buy an office?

The most profitable method of investing in commercial real estate in our country today is the acquisition of objects in the capital and the nearby region. The property owner wins. He can get a stable profit from the delivery of the object under the lease agreement. In addition, on the market today you can find a large number of successful companies that are willing to purchase office space. They are mainly interested in non-residential properties that are suitable for commercial activities.

Finding the right office space can take a long time. However, if you have finally found a suitable object, new questions arise. How is it carried outbuying commercial property? How to draw up a contract? What features should be taken into account when making a deal? This and much more will be discussed in this article.

Legal Niceties: Ownership

Fortunately, the times of hostile takeovers and other scenarios of illegal actions are long gone. But here are the people who specialized in such activities, work to this day. Often they are involved in solving various problems. During periods of economic crisis, the risk of fraud is higher than ever, so business owners should be careful and vigilant.

How is the purchase of commercial real estate? The pitfalls that you can expect when making a deal are very diverse. You should be especially careful if you know that the seller of the property is in a difficult financial situation. In modern legal practice, there are many examples of how the original owner of the premises, drawing up a contract for the purchase of commercial real estate, left loopholes that made it possible to retain ownership. Such dishonest sellers, after resolving financial issues through the transaction, could demand the return of the object.

Thus, we can conclude that the purchase and sale of commercial real estate will be successful only if the transaction is formalized legally. The key factors in this matter is the correctness and correctness of the drafting of the contract. Only in this case you will be able to protect yourself from the risks associated with the loss of property andpresentation of unfounded financial claims by the seller. That is why, for most buyers, the most important aspect is the acquisition of a legally clean premises.

Buying commercial real estate for an individual entrepreneur (individual entrepreneur) has many risks that can lead to lengthy litigation. As a result, you can not only waste your time and energy, but also lose your premises.

Main Buyer Risks

Purchasing commercial real estate may come with the following risks:

• the seller does not own the object;
• the rights to the premises can be challenged by third parties;
• property rights may be incorrect;
• object display;
• buying an object can be accompanied by a number of additional costs;
• appearance of third parties demanding repayment of debts or compensation for losses associated with the use of the object.

Thus, if you do not pay due attention to the transaction, such an acquisition can lead to severe financial consequences. This is especially true when a loan is taken to purchase commercial real estate. The fact is that large banks employ specially trained specialists whose task is to act in the interests of the organization. The lack of a thorough check of the sale and purchase transaction, non-compliance with basic security rules and the absence of major legal documents canlead to a raider seizure of the acquired property.

Deal processing

Development of documentation in the case when commercial real estate is purchased by an individual is carried out on the basis of standard forms. They may not take into account all the features of a particular room. Most contracts are drawn up using standard conditions and general phrases. In addition, the buyer may not think through the likely scenarios and plan of the transaction well enough. As a result, the purchase of commercial real estate may result in difficulties in obtaining ownership or litigation on any of the points described in the contract.

How to check the purity of the transaction?

This question is of interest to many property buyers today. If you do not perform a thorough check, then there is a possibility that third parties will lay claim to the property. For the buyer, this will only lead to negative consequences: he will have to prove his rights in court, which requires additional costs. In addition, if a loan was taken to purchase commercial real estate, there are more significant problems with the requirements for repayment of bank debt.

Legal status of commercial premises

In case of non-compliance with the procedure for registering a purchase and sale transaction, various conflicts with state bodies exercising control may arise. With insufficient careful study of all the details of the transaction, it is likely thatthe buyer is simply deceived. In this case, you can lose not only the property, but also the money.

To reduce the likelihood of negative consequences to zero, you need to carefully check both the object itself and the seller. Try to describe as accurately as possible all the terms of the contract, be sure to take into account the moment of the transaction and the period immediately after it. It is better to analyze all the possible consequences in advance and decide on the preferred behavior strategy.

With insufficient preparation for the transaction, its basis may be fragile from a legal point of view. In this case, the probability of failure is high. So, if you have decided to purchase a commercial property, qualified legal support should be your top priority.

Hidden risks

When purchasing commercial real estate, the buyer may not have the necessary information about the technical characteristics of the object. Sellers try not to focus on negative points. As a result, the buyer, after the completion of the transaction, may face the need for significant financial costs required to bring the property into proper condition. For example, when purchasing premises in a new building, the buyer may find some defects that were not identified as a result of the initial inspection. Sometimes there are even cases of inconsistency between the area and layout of the premises being sold and the parameters specified in the official technical documentation.

Expertise

To determine all the parameters and characteristics of the object, it is necessary to conduct a technical examination. With the opinion of the expert commission in hand, you can make well-founded demands on the developer with a request to correct certain shortcomings. In the event that the developer refuses to eliminate the flaws made during construction, the buyer can go to court and defend his rights there.

When purchasing commercial real estate in older buildings, wear and tear should be the main focus. After all, defects that seem insignificant at first glance can lead to global destruction. To determine the technical condition of the object, it is necessary to perform a thorough inspection of the structure. Developers and real estate agencies are interested in selling the property as soon as possible. It is unlikely that they will want to inform the buyer about all the features of the premises. This is understandable, because if he finds out about all the shortcomings, he will want to reduce the amount of the transaction.

In order not to be a victim of a dishonest seller, it is important not only to pay special attention to obvious shortcomings, but also to focus on even the smallest defects. You can demand from the seller either to reduce the cost of the object, or to eliminate all the shortcomings free of charge within a predetermined time frame. If any significant violations are identified regarding the quality of the commercial property, the buyer may refuse to fulfill the obligations specified incontract.

Overpriced

How is commercial property valued? A bargain purchase will require a thorough appraisal of the property.

There are three main approaches:

1. Profitable: gradual payback of the money spent over a certain period of time.
2. Comparative: The property is compared to similar properties for sale.
3. Cost: calculates the approximate amount of expenses that will need to be spent not acquiring a similar object.

This assessment is analytical in nature.

How to correctly estimate the value of an object?

The evaluation procedure can be carried out by an independent expert, a re altor or the seller himself. When real estate transactions are carried out by legal entities, an independent appraiser is required to be involved. After the work done, the specialist provides a detailed report, which will be an official document.

Re altor after real estate appraisal does not issue any document. It should also be taken into account that the majority of re altors who work in our country today are not able to provide such a high quality service. The assessment will be adequate only if you cooperate with a competent and qualified specialist.

Also, you can conduct an assessment of the property on your own. To do this, it is enough to understand the market indicators a little and analyze other offers. Here the main thing ismake an estimate based on many different sources for the purchase and sale of objects.

Main factors affecting cost

An important parameter is the location of the property. The prestige of the area has a great influence on the cost of the premises. Convenient infrastructure and transport accessibility are also important. The more accurately you determine the value of the object, the more successful the transaction will be.

If you are going to buy commercial real estate, be sure to read all the nuances before making a deal so as not to get into an unpleasant situation and not lose your money.