How to avoid problems with commercial realty

REAL ESTATE MAILBAG

March 19, 1995|By Michael Gisriel

Q: I recently have been looking at several commercial properties as possible investments. One property is a small off-street retail shopping center. The other is land that we might be able to subdivide into building lots. Are there certain rules or guidelines that you would suggest when buying commercial or investment real estate?

$ John Rudd, Baltimore

A: Many unexpected issues and problems arise when a buyer is anticipating the purchase of commercial or investment real estate. A carefully drafted contract or purchase agreement that describes all the elements of the sale and is signed by both the seller and the buyer is essential if problems with the purchase are to be avoided. Some suggestions:

* Include as many details and answer as many questions as possible in the first paper you sign, whether it is called a letter of intent, receipt for deposit or purchase agreement. It's not a good idea to sign a preliminary paper with the idea that details can be supplied later. Preliminary papers accompanied by a deposit often are legally binding contracts.

Whatever it's called, the first document you sign should at the minimum answer these questions: What is the purchase price? When is it payable? What property (real estate, fixtures and personal property, if any) is being purchased? What type of deed will you receive and what title exceptions, if any, are acceptable to you? Under what circumstances can you withdraw from the purchase and get back your deposit? When can you take possession? To what extent does the seller represent or guarantee the condition of the land and/or buildings? How and when will the taxes, license fees, utility bills and security deposits be prorated or allocated between you and the seller?

* Watch out for the "standard" preprinted or filled-in contract. There's no such thing as a standard real estate contract since virtually every word in a real estate purchase agreement is negotiable. It is important that a real estate contract be prepared or reviewed by a knowledgeable real estate lawyer before it is signed.

* Consider alternatives to an outright purchase -- for example, you might pay the seller a modest sum for an option, or lease the property for a short term for an option to purchase.

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