By Peter Ewanchuk
There are many reasons why people buy commercial property in Edmonton.
For example, a business may have outgrown the rental space it was established in and more square footage is needed. Or perhaps the owner of a business may want to stop paying rent and to acquire property and accumulate equity. Alternatively, investing in commercial real estate could be as a way to generate income since commercial real estate is attractive to investors.
Whatever the incentive, people who are considering buying commercial property should always consult with a real estate lawyer before signing a purchase agreement. That is because there are many legal and regulatory issues governing the process that buyers may not be aware of and would benefit from obtaining legal advice.
What is a commercial property?
Commercial real estate is property or buildings from which a company can operate a business. This can include malls, grocery stores, offices and industrial estates. Commercial units are comparatively more expensive than residential properties due to their location, size and potential to generate income.
The laws governing the sale and purchase of commercial properties vary significantly from residential buildings. For example, commercial buildings are subject to environmental regulations and different building codes than residential units.
Municipal zoning bylaws dictate where buildings that are suitable for commercial or mixed-use purposes are located. Click here for a guide to Edmonton’s zoning bylaws, as well as information about new zones, frequently asked questions and key zoning terms. Click here to check zoning restrictions for a specific area or address in the city.
Why you need legal counsel
Due diligence is essential when purchasing a commercial property. That includes having a lawyer identify and resolve legal issues involved in the sale. As a prospective buyer you want to know about these issues before you sign a purchase agreement and waive conditions or you could face costly and unexpected expenses down the road.
No two commercial property purchases are the same in their detail or complexity, but here are some common issues a real estate lawyer can help you with:
- Is there a lien on the property and how will the lien affect your purchase? Liens usually come from either unpaid taxes, a judgment made in court or unpaid bills.
- Does your projected use of the commercial structure meet the zoning requirements?
- Is the purchase agreement properly structured?
- What assets are included in the purchase? Perhaps you are not buying just the structure but also for the equipment, furniture and inventory within. If so, those details need to be reflected in the terms of the purchase agreement.
- Do you need a business licence or permit in order to conduct business after the purchase closes? You can gain peace of mind knowing that your commercial operation is legally compliant.
- What are the potential liability risks associated with ownership? Any property owner assumes liability when it comes to the safety of those on the property. That risk expands with a commercial property where a steady stream of customers can be expected both in and around your building(s). There are various other considerations including risks associated with weather conditions such as snow and ice that need to be addressed.
- Do you have the right to rescind the purchase? Most purchase agreements come with conditions that the seller has to fulfill. If those conditions are not met, or if the seller did not reveal important information about the material facts of the property, you should be able to rescind the agreement.
- Are there any easement and encroachment issues associated with the property, either reflected on title or that may need to be? For example, the right to access part of a neighbour’s property is referred to as an easement and may be based on a verbal or written agreement. Encroachment is the use of a neighbouring property without permission which can be difficult and costly to remedy in the future should the neighbouring property demand it.
- What are the fixtures and what are the chattels? In real estate law, there is a distinction between a fixture (something affixed to land or the building that is treated as land) and a chattel (something treated as personal property). The difference between the two is not always clear without legal advice.
We can prepare the documentation you need
Any purchase of commercial property will entail paperwork and likely plenty of it. A real estate lawyer can help you manage that and ensure the proper documents are in place. They could include:
- A letter of intent. This non-binding document demonstrates the serious intent of the buyer by setting out the basic terms and conditions of an offer.
- A purchase and sale agreement. A legally binding contract clearly stating the terms and conditions of the transaction, including details about the property, the purchase price, closing date and all other relevant information.
- Title and survey reports. You want to be sure that the property you are buying is free from any ownership disputes, liens and boundary discrepancies.
- Lease agreements. If the property has existing tenants, a lawyer needs to help you understand what obligations you may owe to them, as well as any potential future liabilities.
Contact us for assistance
The purchase of a commercial property is a significant step for any business or investor but it is not without risks. The team at Demas Schaefer is here to help real estate buyers and sellers in the Edmonton area with all legal aspects of the transaction.
Contact us for a free consultation so we can help you make an informed commercial real estate decision. We serve all of northern Alberta, including Edmonton, Leduc, Wetaskiwin, Sherwood Park, Spruce Grove, St. Albert, Red Deer, Provost, Grande Prairie, Peace River, Edson, Hinton, and Cold Lake.