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5 Essential Legal Considerations for Purchasing Commercial Real Estate

Real estate is a complex and nuanced industry, and there are many facets to a successful real estate investment. One of these includes the legal considerations that all real estate investors should be aware of before venturing into a market or deciding on a property. This is especially true for commercial real estate, as there are many laws and regulations that govern property procurement, development, and management both locally and on the international scene.

While this does make your job as an investor a bit more difficult, it doesn’t mean that you should refrain from investing in the increasingly lucrative commercial sector, as opportunities continue to arise across the globe due to rapid urbanization and modernization – particularly in emerging economies. Before you make any financial moves, it’s important that you research these laws and regulations, sometimes with the help of specialists and experts in the field. Let’s break this all down and go over the essential legal considerations for purchasing commercial real estate.

Research the sector you’re investing in

First things first, you have to settle on a sector of commercial real estate, in order for your legal counsel to provide guidance and information you need to make a successful investment. Keep in mind that there will be different rules and regulations pertaining to different types you should focus on. What’s more, settling on one commercial real estate sector will allow you to conduct the due diligence needed to make your investment project feasible, and even viable.

Within the commercial real estate industry, you will find different types of assets, such as retail properties, offices, multifamily properties, industrial, or mixed-use. Depending on the market, whether you’ve investing locally, nationally, or internationally, you might even need to switch to legal counsel that specializes in that particular region.

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Legal negotiations

Consider the environmental legal regulations

The environmental cause has become a burning topic across the globe in recent years, and simply put, you won’t be able to develop or buy a commercial property if your investment project does not follow the country’s environmental laws and regulations. You can expect these regulations to be much stricter for commercial real estate, as governments around the world are increasingly depending on the business sector to take the lead in fighting climate change, pollution, and global warming. This means that you need to alleviate environmental liability as much as possible.

Some states and countries will have more rigorous environmental laws than others, which not only means that you will need to invest time in proper research, but that you will have to weigh the pros and cons of investing in green commercial real estate. In the long run, developing more sustainable commercial properties might prove to be a lucrative prospect, as you will not only gain credibility in the local market, but you will also avoid the need to remodel and renovate a property should the government adopt new environmental laws down the road. What’s more, sustainable properties can produce higher long-term financial savings, which will positively affect your ROI potential.

Get in touch with local experts

If you are looking to expand your portfolio to international commercial real estate, you need to remember that the laws pertaining to property acquisition can vary greatly from country to country. In some countries, you can’t buy property as a foreign investor, while in others, you might need to go through an extensive legal process to obtain the right to invest. All of this can be quite confusing, it can drain your resources, and it might even make you skip out on a lucrative opportunity.

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This is why international investors are increasingly relying on the help of an experienced top real estate investment firm with the legal knowledge and expertise needed to guide them on their buying journey, handle contracts, and even solicit the advice of local legal representatives if need be. Keep in mind that investing in international real estate can be a complex legal task, but that doesn’t mean that you should abandon your goal, rather, be sure to get in touch with local experts to make this a smooth investment project.

Get a structural engineer on board

There are many key actors in the property development and acquisition processes, of which the structural engineer will have numerous roles to play. Aside from the obvious fact that you need a structural engineer to ensure the structural integrity of your investment from the ground up, you also need this specialist to ensure that your property complies with the building and property ownership codes of the local market.

The engineer will conduct the necessary surveys and inspections to assess the integrity of the asset, and give you the preliminary reports you need in order to make timely changes and get the property up to code. This will also help you avoid any costly fines down the road.

Obtain property insurance

Finally, you mustn’t leave anything to chance once the property finally hits the market. Insurance is non-negotiable, as you need adequate and comprehensive coverage that will safeguard your investment against every scenario. The typical types of commercial insurance include property, liability, and workers’ compensation.

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Additionally, you can include machinery insurance, debris removal, builder’s risk insurance, glass insurance, business interruption insurance, tenant’s insurance, crime insurance, and many more coverage options to suit your needs. Be sure to research all available insurance options, and create a policy that will safeguard your investment on every front.

Wrapping up

Legal issues are among the prevailing causes of failed investments, particularly in the commercial real estate industry. Don’t allow these common challenges to deter you from making an investment of a lifetime, rather, take these considerations to heart when you’re exploring lucrative investment opportunities locally and abroad.

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