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Terms encountered in commercial real estate transactions

For any business owner in Alberta, negotiating for the purchase of commercial property might be one of the most important negotiations he or she will conduct. Understanding some of the terms that will be used may ease the process. Building condition assessment may be one of the first to be mentioned. This is an assessment of the building's structural components, including plumbing and electrical systems and more, and a report on needed repairs, typically done before finalizing real estate transactions.

Due diligence is a term that refers to the purchaser's review of the environmental site and building assessments, a survey, title search and an evaluation of the major expenses related to the property. This process may uncover verbal or written easement agreements, which gives the property owner the right to access or use the neighbouring property. Encroachments may also be discovered, which may include bushes, a septic tank or an overhanging roof that intrudes on the neighbour's property without his or her consent.

If there is an encumbrance on the property, the prospective buyer would want to be aware of it. This could be a mortgage claim against the property or even a tax liability. The environmental site assessment that forms part of the due diligence process typically includes evaluation of contamination, indoor air quality, hazardous building material, and any need for a clean-up. A survey of the property is a costly but optional process that details the property's dimensions, structural locations, legal address and more that can serve to prevent title issues.

A title search will reveal any matters, such as disputed ownership, encumbrances and easements, that may affect the value of the property, and it is typically also done during the due diligence process. Commercial real estate transactions are complicated issues that most Alberta business owners would prefer to do with an experienced real estate lawyer in their corners. With skilled support and guidance, the interests of the purchaser can be protected throughout negotiations all the way through to closing.

Source:, "8 purchase agreement terms you need to know before buying commercial real estate", Accessed on July 15, 2017

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