Commercial Real Estate
Attorney Sylvia Heldreth brings over 35 years experience to the effective planning and completion of complex or simple commercial real estate transactions. The firm believes strongly that attention to detail on the front end of transactions is the best defense against disputes.
Commercial real estate covers a number of property types including office buildings, apartment complexes, industrial sites, shopping centers, hotels, nursing homes, storage and warehousing facilities and raw land. The primary element that distinguishes commercial real estate from private/residential real estate is the activity that occurs on the property. On a commercial property the activity is generally financial or commercial in nature.
Leases
Many commercial real estate transactions involve the rental of industrial buildings, offices or retail space. Commercial landlords and tenants turn to this law office for experienced advice, guidance, representation and documentation.
In its most basic form, a lease is a contract to use real estate or property for a specific period of time, with terms usually revolving around the length of the lease, the price for renting the property and maintenance. The written lease provides documentary evidence of the agreement.
Commercial leases sometimes address the payment of certain items that are not generally found in a residential lease. These items include taxes, insurance and maintenance.
A double-net lease, sometimes written as “NN”, requires that the tenant pay taxes and insurance. A triple-net lease, sometimes written as “NNN”, requires that the tenant pay taxes, insurance and maintenance. In theory, double-net and triple-net leases save time and inconvenience for the landlord and tenant. If a minor repair must be done, the tenant simply has it done and pays for it. Major repairs, such as replacing a leaking roof, are sometimes specifically excluded from the tenant’s responsibility. Should taxes be increased during the term of the lease, the tenant is responsible. If the property is in an area where the taxes may increase dramatically, a prospective tenant may wish to use caution in negotiating.
Keep in mind that in some states, including Florida, landlords must pay sales tax on their commercial leases. If the landlord does not deposit these taxes with the Department of Revenue, the tenants may be required to pay them at some future date.
Shopping center leases are often a percentage-lease type, for which there is a base amount of monthly rent and a percentage of the gross sales. This percentage usually decreases as the gross volume increases. Shopping center leases also have rules and regulations about hours of operation, outside displays and employee parking.
Common area maintenance fees, CAM, is also frequently a part of a commercial lease. This requires the tenant to pay a percentage of the maintenance costs for the walkways, landscaping and public areas. The monthly fee is usually based upon the size of the store being leased, sometimes calculated as a percent of sales.
There are many factors to consider when negotiating and finalizing a commercial lease, such as, exclusive as to type of business if in a center or mall; ability to sublease or assign the lease; amount of maintenance; ability to withdraw from lease under certain circumstances; and term of lease.
Commercial leases are typically fluid and open to negotiation, allowing for greater freedom in terms than residential leases. Commercial leases can flexibly accommodate the business needs of both parties. However, the negotiation process can introduce greater complexity than a standard residential agreement. A commercial real estate attorney can help you to explore your legal options.
Financing Commercial Real Estate
Purchases of commerical real estate are most commonly financed by mortgages. A mortgage exchanges an interest or collateral in a piece of real estate for a loan to purchase the land. The lender is the mortgagee and the debtor is the mortgagor. This transaction is one that provides a secured interest to the mortgagee because if default occurs there can be foreclosure.
The mortgage is the most common means of financing the purchase of real estate. The mortgage, however, is not the only consideration that should be made when buying a piece of property. The deed and clarity of title should also be scrutinized. A buyer wants the most protection possible in an investment and there are forms of title that may be too risky. Title insurance should be considered as a added protection. If you have concerns about a potential commercial real estate transaction, it is wise to consult with an experienced attorney.
Commercial Real Estate Sales and Purchases
The general law of contracts governs real estate purchases and sales. There are some essential requirements. The first is that a real estate agreement to sell or buy must be in writing.
It is also important to buy the property with clear title, meaning that there are no liens or other encumbrances on the title. Title insurance is usually purchased to provide assurances to the buyer as to the condition of title.
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.
Commercial real estate has many complex legal and business issues. For professional guidance, an attorney experienced in the field can be an important resource.