The Most Common Legal issues Surrounding Commercial Property

Commercial property is real estate that is owned or used by businesses. Most states, including Georgia, enforce a number of laws that deal specifically with commercial property issues. Commercial real estate law establishes legal standards for commercial leases and for the purchase and sale of commercial real estate. This is an introduction to the most common legal issues surrounding commercial property, but anyone in Georgia with specific concerns regarding commercial real estate or anyone involved in a legal dispute involving commercial real estate should discuss the matter in detail with an experienced Atlanta commercial real estate attorney.

HOW DO RESIDENTIAL AND COMMERCIAL REAL ESTATE DIFFER?

What are the core legal differences between residential real estate and commercial real estate? Unlike residential real estate, commercial real estate must comply with special commercial property insurance rules. There is also the matter of conduct: some types of conduct are allowed only in residential areas and zones, while other kinds of behaviors are allowed exclusively in commercially-zoned districts. Commercial real estate is also usually associated with distinct legal issues which may include:

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  • Zoning and Land Use: Typically, commercial activities may only be conducted in commercial zones and on commercial properties. Zoning by local governments determines how owners may use commercial properties and what they can build there.
  • Leasing Issues: There are a number of types of commercial leases, each with advantages and disadvantages for owners and lessees. A “fixed” lease is comparable to a residential lease – parties agree to a specific amount of rent for a fixed time period. Parties in a “step” lease agree to annual rent increases. In a “gross” lease, a tenant pays a set periodic or fixed-term rent, and the landlord pays some or all the operating costs of the business.
  • Property Taxes: Taxes on commercial real estate are usually higher than taxes on residential properties, and taxes may also differ depending on the type of business conducted on the property.
  • Insurance Coverage: Commercial property insurance disputes are a common source of legal aggravation for far too many businesses and commercial property owners. Usually, commercial property insurance covers most real property as well as the items or fixtures associated with conducting routine business. In most cases, disputes can be avoided by having an attorney thoroughly review a commercial property insurance contract.
  • Ownership Disputes: Many businesses and commercial real estate owners deal almost constantly with title, ownership, boundary, and/or leasing disputes.
  • Boundary Disputes: Some commercial real estate disputes are boundary disputes over the physical boundaries of a property. Title and boundary disputes are less common today due to better record-keeping, but disputes can still arise when records are old or when the property description in a deed lacks the needed specificity.

WHAT CAN AFFECT POSSESSION AND TITLE OF COMMERCIAL PROPERTY?

Because a number of legal issues will inevitably come into play, anyone who becomes involved in the leasing, sale, or purchase of commercial real estate in Georgia will need to obtain the insights of an experienced Atlanta real estate attorney. Anyone who decides to purchase commercial real estate in Georgia should also be aware of several factors that will affect possession and title. Those factors include:

  • The seller’s awareness of material defects: Most states, including Georgia, require a seller who is aware of a problem with a commercial property to disclose the problem to the buyer.
  • Actively concealed material defects: Generally, it is illegal for a seller to hide a defect actively in order to make a sale of a commercial property.
  • The buyer’s obligation to inspect: Prior to purchasing a commercial property, a buyer must have it inspected for defects by a licensed or certified property inspector. Generally, a seller is not liable for a problem with the property if the seller did not know about the problem and did not actively conceal it.
  • Encumbrances: An encumbrance may limit the rights of a property owner. Encumbrances can include deed restrictions, liens, easements, and encroachments. An encumbrance is any claim or liability against a commercial property that affects the title to the property.
  • Environmental and zoning issues: Environmental and zoning issues affect almost every commercial property. The specifics will depend on the real estate’s location and on the type of business conducted there. Most local governments create separate districts for residential, business, and industrial properties. If an owner’s land use or proposed use does not conform to the current zoning, the owner can usually apply for a variance.

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WHAT SHOULD YOU KNOW WHEN LEASING COMMERCIAL PROPERTY?

Anyone who is leasing commercial real estate should also be aware of some additional concerns. Most commercial leases, for example, are not covered by most of the consumer protection laws that govern residential leases. There are no caps on security deposits, and it is not easy to break or change a commercial lease. Before you sign any commercial real estate lease, have it reviewed by a trustworthy real estate lawyer.

And before signing any commercial lease agreement, you’ll also want to make sure that the lease meets your business needs. Consider the rent payment and make sure that you will be able to handle it. A short-term lease with renewal options is usually best. Also, consider the physical layout. If your business requires changes to the space, make certain that you or the landlord can and will make the modifications.

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WHAT DOES THE AMERICANS WITH DISABILITIES ACT REQUIRE?

The Americans with Disabilities Act (ADA) requires all businesses in the United States that are open to the public or that employ more than fifteen people to make the premises accessible to disabled people. Make certain if you lease commercial property for a business that you and your landlord are in agreement about who will pay for any modifications that may be needed to be in compliance with the ADA.

Speak with an experienced real estate attorney prior to buying, selling, or leasing any commercial property. Because commercial real estate is usually linked with business uses and business contracts, the legal issues regarding any specific commercial property will invariably involve a mountain of documentation and paperwork. If you are involved in any legal issue or dispute regarding a commercial property, compile all of the documents and pertinent legal papers that are related to the property and discuss the issue or dispute with an experienced real estate lawyer.

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