5 Essential Things You Should Know About Commercial Real Estate Law - Diamond and Diamond Lawyers
  • Friday, 20 November 2020

5 Essential Things You Should Know About Commercial Real Estate Law

The subject of commercial real estate is an interesting one. We are surrounded by commercial buildings, such as warehouses and offices, which are bought and sold every day. These buildings and the transactions are vital to society. Without them, it would be impossible for people to do business, provide services and sell us the products that we need.

That is part of the reason there are so many specialist laws surrounding buying, selling, leasing, and the use of commercial buildings. If these rules and regulations did not exist the sector would be chaotic, which could lead to businesses not being able to find the premises they need to trade. Something that could be disastrous for the financial health of a district or area. It could also have a knock-on impact on people’s daily lives.

A significant percentage of the real estate deals we provide legal advice for are related to transactions involving commercial properties. So, it is a sector we are deeply interested in and know a lot about. If you want to know more, need to buy, or sell this kind of property, please get in touch. We are here to provide you with a free initial consultation and advise you about all aspects of commercial real estate law. You can also get an overview of the subject, below.

What is Commercial Real Estate?

First, let’s define what we mean by commercial real estate. Which properties fall into this category and which do not?

Simply put, commercial real estate (CRE) is any property that is used exclusively for business-related purposes. As a workspace of some sort. Be it for manufacturing, storage, selling or carrying out other activities that are related to running a business.

Properties that include living accommodation do not fall into this category, in Canada. However, there is an exception to this. Hotels and other forms of temporary accommodation that provide living space for tourists, visitors, contractors, do usually meet the criteria set for CRE properties.

There are four main categories of commercial real estate, here in Canada. They are:

  • Retail
  • Hotel
  • Industrial
  • Office

Examples include retail stores, factories, warehouses, workshops, garages, farms, some hotels, and other forms of temporary or rented accommodation and most leisure facilities. The majority of the other non-commercial forms of real estate will be categorized as either residential or vacant plots. 

Benefits of Commercial Real Estate

If you are looking to invest money in property, buying commercial real estate is certainly worth considering. You will still have to do your research, but typically when you buy CRE you will get access to the following potential benefits:

  • Historically low prices
  • Favourable financing rates
  • Equity appreciation
  • Cash flow opportunities
  • Tax advantages

Commercial Real Estate Laws

However, it is important to understand that the sector is heavily regulated by the government. There are a lot of laws that you need to be aware of when buying this type of property. Buyers need to understand which rules and regulations apply to the CRE you are planning to buy. Often, what you can do with that property will be restricted in some way.

Below, we list out the main groups of laws that can apply to the CRE you may be thinking of buying. For some properties, virtually all of these laws will apply in some way. While for others, only a few will be relevant.

  • Landlord-Tenant Laws
  • Disclosure Laws
  • Zoning Laws
  • Insurance Law
  • Anti-Discrimination Laws
  • Local Laws and Ordinances

As you can see, the list is quite long one. Other rules and regulations may also apply. The fact that things are potentially so complex is why we strongly advise you to seek legal advice before buying a CRE.

Looking for commercial real estate law experts? Contact Diamond & Diamond today for a free consultation!

Commercial Real Estate Law Terms

The language used in the commercial real estate world is quite different too. There is a lot of jargon that people who have only bought or used residential property in the past will usually struggle to understand. Here are just a few examples:

  • Right of Expansion
  • Option to Buy
  • Common Area Maintenance (CAM) Fees
  • Usable Square Footage
  • Rentable Square Footage
  • Parking Ratio
  • Tenant Representative
  • Landlord Representative
  • Co-Broker
  • Referral Fee
  • Rent Concessions
  • Tenant Improvements
  • Letter of Intent

We are here to help you to gain a proper understanding of what each term means. Once you have the correct information, you will be better able to correctly interpret the situation. This will enable you to make an informed decision about what you are being told and any purchase or lease agreement you are considering making.

Hiring Commercial Real Estate Lawyers

When you hire us, you will be working with a commercial real estate lawyer who can handle the wide variety of legal issues that relate to commercial real estate deals and leases. Armed with the knowledge that we share you will be able to fully understand what you are buying. This will enable you to negotiate the best deal possible.

Our team will also guide you through the legal aspects of securing a mortgage for a commercial property. In particular, the laws surrounding financing liens.

If you live outside of Canada, you will need to hire another lawyer that is more familiar with the CRE laws of your country than we are. In that situation, it is best to do the following:

  • Check that they are experienced in handling commercial real estate
  • Ask for references
  • Check out what previous clients think of them  by reading the reviews
  • Don’t be afraid to discuss costs before hiring them
  • Make sure that you connect with and can communicate with any lawyer you are planning to hire

 PRO TIP : 

“Never hesitate to seek legal advice when you have questions about commercial real estate law.” 

5 Essential Things You Should Know About Commercial Real Estate Law FAQs -

What is a “commercial property?”

Commercial property is land or buildings that are used for business, rather than residential reasons.  The list includes hotels, offices, factories, industrial units, garages, and retail outlets. As well as storage facilities such as warehouses. Property that is used to provide services, such as car parks also fall into the category of commercial property.

What to look for in commercial real estate?

When buying commercial real estate, you need to make sure that it can be used for the purpose you have in mind. It needs to have been legally built and have the correct licences in place. You have to be sure that it is in a good state of repair. If it is not, it is important to know how much it will cost to get it to the stage where you can use it or lease it out.

How is a commercial real estate building classified?

Real estate buildings are classified by the type of usage. So, shops and shopping centres would be categorized as retail. While buildings used for storage would be considered warehousing or industrial. Hotels and some other forms of temporary or leisure accommodation would be classified as non-commercial real estate (CRE). Factories and certain types of workshops would be industrial, and offices would naturally be categorized as offices.

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