By: Jayson Schwarz LLM
It is rare that a commercial property transaction ever closes without some issue or many issues arising to stand in the way of business. Even the most seasoned veterans tell tales of surprises, problems and frustration. Here are some tips and tricks to help you anticipate and avoid some of those problems, save you time, money and frustration.
The Deposit
Many problems occur around control of the deposit moneys. In most cases a realtor will maintain the deposit funds in his or her trust account, with clear conditions in the contract of purchase and sale outlining when and how such moneys may be retained by the seller or refunded to the buyer.
The lawyer’s insight: The realtor will almost never release the funds without the consent of both parties, no matter what the contract says, and no matter how obvious it is as to who is right or wrong. The realtor will be afraid of making a mistake and getting sued and so takes the position of an innocent holder. In order to get the funds released you will need to have your lawyer sue the other party and the realtor and the realtor will then pay the money into Court and be out of the law suit.
What am I Really Buying?
Sometimes an up-to-date survey is not available for the land, and so the parties must either pay to have one created, accept Title Insurance or have a war over what the purchaser thought he was selling and buyer thinks she is buying. Problems arise where the parties decide to use an old survey that does not show all current boundaries and structures or do without a survey
The lawyer’s insight: A survey is valuable for both the buyer and the seller, because it can help avoid future law suits where encroachments, illegal structures are on the property, boundaries come into question, easements appear or other problems are discovered. The buyer wants to make sure that he gets what he’s paying for, while the seller wants to make sure that once the property is sold, the buyer will have no remedy or complaints after the sale. If the parties cannot agree on who should pay for the survey, it is recommended that you just split the cost rather than avoiding it altogether. The cost of litigation to resolve such disputes will likely eclipse the cost of the survey, so think of it as a proactive measure. Lawyers know how to look at surveys and we can determine whether problems are there and how to correct them in the fastest and most inexpensive way.
The Agreement
Many commercial real estate agents rely on standard form agreements that have been produced by their local or provincial boards. This often leads to difficulties as it fails to address the particularities of a given situation.
The lawyer’s insight: Have a lawyer draft your agreement in a commercial situation. As an example we would generally add pages to the agreement used by the agents to buy a business. A commercial land purchase agreement could be 20 pages long. Avoid the issues by doing it properly at the beginning.
The above presents but a few examples highlighting the importance of having a solicitor involved in your transaction from the beginning. The costs involved in having a lawyer represent you are well worth it and will save you time and expense in the long run.