Texas prides itself on its friendliness to business owners and entrepreneurs. According to the Texas Economic Development & Tourism Office, “Texas offers companies of all sizes and all industries one of the best business climates in the nation, with a fair, transparent tax and regulatory structure designed for businesses to succeed.” Given this positive environment, many companies and individuals have invested in commercial real estate opportunities throughout the state of Texas. While investing in commercial real estate can be highly rewarding and profitable, there are several inherent risks that are worth identifying before moving forward with a transaction. Unfortunately, even seemingly minor missteps can wind up costing investors considerable time and money. If you are thinking about buying commercial property in Texas, it’s important to recognize the most common mistakes that investors make so that you can avoid these pitfalls and proceed with greater clarity and confidence.
Although completing a real estate sale or purchase can be done without retaining legal counsel, seeking the guidance and support of an experienced Texas commercial real estate attorney is highly recommended. With a dedicated legal advocate by your side, you can trust that your best interests will be protected as much as possible and that every document you sign will minimize the potential for costly legal battles or other disputes to arise in the future. Let’s take a closer look at some of the most common commercial real estate investing mistakes that investors can make and how enlisting the services of a trusted and highly qualified Texas commercial real estate lawyer is the best way to safeguard your investment.
Mistake #1: Skipping Commercial Property Due Diligence
Even if everything about the commercial property seems in order, it’s essential that you conduct thorough due diligence before you sign any legal documents. In the legal world, due diligence is a systematic way to analyze and mitigate risk from a business or investment decision. When you are serious about purchasing commercial real estate in Texas, you will need to go through a thorough investigation of the property’s financial, legal, physical aspects and history to identify any structural issues or legal risks that could affect its value. A robust commercial property due diligence checklist should include items such as property inspection, environmental assessment, financial records review, title search, zoning and permit uses, municipal records, and other relevant documents.
Mistake #2: Not Reviewing Lease Agreements
If you are thinking about purchasing a commercial property that has multiple tenants, you should carefully review the lease agreements to familiarize yourself with the specific details of each agreement. The last thing you want is to discover unfavorable terms in the existing lease agreements after the commercial real estate purchase has been completed. You can enlist the services of your highly skilled Texas real estate attorney to review the lease agreements and address matters like rent rolls, terms and conditions, renewal rights, and hidden liabilities to minimize potential disputes and promote transparency among all parties.
Mistake #3: Poorly Drafted Purchase Agreements
Many commercial real estate investors are eager to finalize the transaction quickly so that they can add this asset to their investment portfolio. However, rushing through this process can lead to major oversights that create legal headaches and costly disputes later on. For instance, relying on poorly drafted or overly vague purchase agreements can leave you vulnerable to legal issues and unnecessary liabilities. It’s best to work with your Texas commercial real estate lawyer to draft and review the terms of the purchase agreement before you move forward with the transaction.
Mistake #4: Ignoring Property Use Restrictions
The commercial property that you buy may be affected by property use restrictions, which could impact the space’s operating hours, the types of businesses allowed in the building, and the parking opportunities for customers. As you perform your due diligence, pay attention to any covenants running with the land, deed restrictions, or zoning limitations that affect the commercial real estate property. If you have questions about interpreting these property use restrictions or you are interested in learning more about your rights and obligations as a commercial property owner, reach out to a dedicated and trusted Texas commercial real estate lawyer for the personalized guidance you need and deserve.
Mistake #5: Not Using a Texas Commercial Real Estate Attorney
While you are not required to hire a Texas commercial real estate attorney in order to purchase a commercial property, skipping this step carries significant risks—some of which may be disastrous down the road. For instance, without the trained eyes of an experienced real estate attorney to scrutinize the purchase agreement, you may miss a red flag that later erupts into a costly legal dispute with a tenant or other entity. While you may be hesitant to justify the time and cost of hiring an attorney to help you navigate the commercial real estate purchase process, this initial expense can save you considerable money in the long run. Additionally, knowing that a skilled commercial real estate professional approves of this transaction can give you the peace of mind you need to proceed with confidence. Do not delay in bringing the skilled assistance on board for this most important decision and transaction.
Frequently Asked Questions About Purchasing Commercial Property in Texas
What Legal Documents Should be Reviewed Before I Buy a Commercial Building in Texas?
There are several legal documents that need to be reviewed carefully before signing. Purchase agreements, covenants, deed restrictions, zoning and property use limitations, title history, existing leases or letters of intent and other relevant documents should be reviewed to ensure that your best interests are sufficiently protected.
How Do I Find Legal Issues With a Property Before Closing?
Conducting a title search allows you to identify potential legal issues with the property’s ownership (i.e., previous mortgages, unpaid property taxes, or legal claims that could affect the title). You can also perform a professional inspection of the property to uncover any structural or mechanical problems before you move forward with the purchase.
Get Started With a Trusted Texas Commercial Real Estate Lawyer Today
As you contemplate investing in commercial property in Texas, it’s worth familiarizing yourself with the potential risks and pitfalls so that you can maximize your chances of success. The dedicated legal team of commercial real estate attorneys at Sewell Sewell Beard LLC are ready to guide you through every step of the transaction with the attention and care you deserve. Please reach out to our Prosper, Texas office at (972) 777-5390 or our Jasper, Alabama office at (205) 544-2350 today to get started with a highly qualified commercial real estate lawyer.