Wednesday, September 28, 2022
Home Real Estate Investing in Commercial Real Estate? Key Legal Terms to Know

Investing in Commercial Real Estate? Key Legal Terms to Know

 Investing in commercial real estate is both pleasant and rewarding. 

If you’re a new investor, you may be foreseeing a brighter financial future thanks to the high returns from your investments. But, wait a minute! Have you taken time to learn the basic legal terms? These can be intimidating, but you have to understand them anyway. In the course of your investment journey, you’ll come across phrases like lease clause, net operating income, and more. And understanding their meaning will go a long way.

Check out key legal terms that you should know:

1. Abstract of title

This is a chronological description of the contact in a title deed relating to a real estate property. You can use it to investigate the ownership or history of a particular property. A commercial lease lawyer uses this to determine any legal or ownership tussles on the property. And this helps avoid issues for the new buyer. Moreover, the abstract of title records any outstanding liens on the property. It also shows the taxes owed and any unresolved violations.

2. Abuttals

Abuttals refer to boundaries of a property or plot of land against other properties. Abuttals show other lands, highways, rivers, and other places neighboring the property. When buying a commercial property, the attorney will use this to help you understand the size and dimensions of your property.

3. Administrator

 A property administrator helps organize or supervise the functions of an organization. As an administrator, your manage rental or investment property on behalf of the owner or owners. To become a property administrator, you need at least a degree from an accredited institution.

4. Option to buy

When leasing a single-tenant property, the lessee may want to buy the property at the end of the term. The contact may include an “ option to buy.” If this happens, you, as the seller, will outline the terms under which the lessee can buy the property. These may include the expected price, and a commercial lease lawyer Toronto will help you draft the agreement.

5. Common Area maintenance fees

In some leases, the tenant takes care of most of the property’s expenses. These are well elaborated on the contract, and a perfect example is common area maintenance. The fees include maintenance of shared areas like elevators, hallways, lobbies, staircases, sidewalks, and more. 

As the property owner, you should know how to calculate this if multiple tenants are sharing the building. Again, you should help the tenant understand how the fees will affect their lease contacts.

6. Usable square footage

Usable square footage refers to the amount of leased space. It determines the lease space reserved for the tenant and will help you ascertain whether you have adequate space for all your tenants. If you have limited square footage, a retail lease lawyer Toronto will advise you to lease to fewer tenants.

Conclusion

 There are different terms used in commercial real estate investments. Not understanding them can bring about misunderstandings leading to lawsuits. If unsure of the legal terms relating to your property, discuss this with your attorney to learn more.

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