A Guide to Buying Commercial Property in California

November 20, 2012

With the real estate market in its current condition, small business owners may want to consider something that was unthinkable in previous years: purchasing commercial property rather than leasing it. Interest rates on mortgage loans are at historic lows, meaning more business owners should investigate the possibility. After all, why throw money away in a lease if you are in a position to build equity in your own commercial property?

The best way to investigate the opportunity is to assemble a team of professionals. Among these professionals should be an accountant, a real estate agent, a mortgage broker, and, most importantly, a California business attorney. The accountant can evaluate your finances for the feasibility of the purchase. The real estate agent can find you the right space in the right location so you can bring in customers. The mortgage broker can help you obtain financing at a reasonable rate. But it is the business attorney who will actually make the transaction happen.

There are a number of legal considerations to investigate before taking the plunge. The first is zoning. It is important to consult an attorney on zoning issues because a real estate agent is typically more concerned with the sale than what comes after the sale. In the end, you want your business to be able to be profitable, and it can't be that way unless you are allowed to operate in the manner you wish in your space. You wouldn't purchase a property zoned for offices if your operation involves manufacturing or machinery. Likewise, you wouldn't operate an office out of a warehouse.

Similarly, your attorney can investigate whether your prospective property is encumbered by any limitations on the land. Sometimes when property is transferred from one person to another, the transferor sets conditions and limitations on the use of the land. In many cases, these are enforceable even in the event of the person's death. You wouldn't want to purchase property only to find out that your operations are prohibited by one of these conditions. At the same time, you wouldn't want to discover that the property surrounding yours is somehow limited or likely to undergo significant change.

Also, you will want to have a formal legal description of the property before you purchase. The street address does not suffice to explain to you exactly what land, building, and fixtures you are purchasing. For instance, will you own the adjacent parking lot? What about the advertising signage near the street? What about those shrubs and that grassy area? Where exactly is the property line? Attorneys are skilled at taking these spatial realities and putting them into words.

Finally, your attorney can be your voice in the actual negotiation of the purchase terms. The price of real estate is always negotiable, especially in this buyer's market. Similarly, your credit score does not have to be the only consideration in determining your mortgage interest rate. Hire a skilled California business lawyer to spearhead your commercial property purchase efforts and to make sure your investment has a reasonable chance to be profitable for you.