Quick Tips for Your Next Commercial Real Estate Purchase

By Ridhima Pathak

Commercial real estate refers to properties used exclusively for business-related purposes, such as office buildings, retail spaces, multi-family rentals and industrial facilities. Individuals typically invest in commercial real estate because it offers the potential to generate substantial profit through capital gain or rental income. 

Tips for Purchasing Commercial Real Estate

• Confirm that the Vendor that owns the property also has corporate authority to deal with the sale.
• Ensure the property is suitable for you use. A lawyer will examine zoning regulations, the physical condition of the property, building codes, and environmental considerations.
• Understand how HST will be treated in the purchase. Commercial real estate is generally subject to HST, so it is important to consider how HST will impact the purchase price. HST can be “included in” the purchase price or sold “in addition to” the purchase price. If the buyer and the seller are both HST registrants, the Agreement of Purchase and Sale can specify that a joint election will be filed to self-assess HST. If HST is “in addition to” the purchase price, you might need to register for HST before closing.
• Determine what title searches are required. Aside from the regular building and zoning, fire file search, tax and utility certificates, commercial properties may need a Technical Standards and Safety Authority (TSSA) Search or an Electrical Safety Authority (ESA) Search.
• Review any existing lease agreements. Many commercial properties already have tenants. As a result, it is best practice to inquire whether there are current tenants and take a look at the terms of the lease agreements.
• Allow for time to obtain any financing for your purchase and set time aside to properly review the terms of the financing with a lawyer.

Once a commitment letter is signed, the lender will instruct the lawyer. When the instructions come to us, we will review the commitment, prepare the mortgage documents, and purchase documents for signing. As the purchaser’s lawyer, we rely on the seller’s lawyer to provide us with the Statement of Adjustments and await their response to any requisitions. Much of which comes together nearer to the closing date.

Overall, purchasing commercial real estate requires thorough due diligence and careful consideration of your specific plans for the property. Engaging a qualified lawyer is crucial in this process; they can assist in navigating complex legal documents, ensure compliance with regulations, and address any issues that arise. Our expertise can safeguard your investment and facilitate a smoother transaction.

For any questions, please contact our trusted real estate lawyer, Ridhima Pathak at ridhima@sorbaralaw.com.