How CRE Law Differs From Handling Residential Real Estate
If you're preparing to sit down with a commercial real estate lawyer, it's a good idea to remember the work will be quite different from handling a residential property. This review will cover four key points about the differences between CRE and residential issues.
Commercial Ownership Arrangements
With a residential lot, there may be one or two owners' names on a title. Usually, this is just the person who owns the property and perhaps their spouse.
In the commercial world, it's common for companies and ownership groups to bring more parties to the game. Even a relatively simple ownership structure, such as three friends splitting the title, may include an oddity like a joint tenancy agreement.
More parties inherently mean more complexities. Each party will want a commercial property real estate attorney representing their interests. Likewise, they'll want to review the terms of any ownership agreement in a way you'll never see in the residential market.
Zoning and Regulations
CRE also comes with a tighter regulatory regime. Unless you're in a rare city where zoning laws are notably open, you will need to address government concerns about your usage of the property. If your planned usage doesn't match the current zoning, you'll have to request a variance. That means submitting supporting documentation and affirming how you'll use the location. Most people are going to want to leave that work to a commercial real estate attorney.
Financing and Title Insurance
The money side of CRE is also quite different. Large transactions may involve multiple lenders and independent investors. The money involved is almost always bigger than you'll see in the residential world, too. Consequently, acquiring title insurance won't be as simple as providing some information about the property.
Also, the loan process will be a bit different. Rather than a mortgage, most states require a deed of trust. This adds an independent third party without adding a stake in the financing arrangement to the equation. A deed of trust functions largely like a mortgage, but administration with the trustee is more complex.
Due Diligence
A commercial structure isn't like a house. You can't pay an inspector to check it out for a couple of hours and tick some boxes regarding what's right or wrong with the place. You're going to need a full-on property condition assessment. This work can stretch for weeks or even months. A commercial property real estate lawyer, though, will want this work finished as part of your due diligence.
Contact a commercial real estate lawyer to learn more.