It's finally happening - you've perfected the business plan, secured investors and found the right site for your commercial enterprise. Businesses and their properties need legal protection, from purchase to management, to make sure the goal of this hard work is secure.
Escrow helps solve any issues of trust or mutual understanding between the buying and selling parties. A third party to the transaction will hold deposits or payments until an agreement has been satisfied or one of the parties ends their participation in accordance with the agreement.
Escrow processes may be informal in small purchases, such as by-owner sales of residences, but business sales and commercial property transfers may be large or complex enough to have more formalized escrow arrangements. These are executed by the escrow agent, who is often the title agent for real estate purchases.
Due diligence is vital to ensure your interests in commercial real estate transactions, as they are often less regulated than buying other types of real estate. Finding problems or misunderstandings in the terms and clauses of a contract will save time and money throughout the process.
Large and more complicated purchases often carry large risks, or liabilities, to purchasers. This can be compounded if there are multiple stakeholders who invested in the purchase price. Owners may limit their personal risk with a limited liability partnership (LLP) or corporation (LLC).
Some commercial real estate investors chose to create a limited-liability entity to shield their personal assets from a possible future lawsuit against a company they own. Legal assistance with the process of forming a company often helps clarify roles and expectations to owners.
Source: PropertyMetrics.com, "Definitive Guide to the Commercial Real Estate Closing Process," J. McBride, accessed July 31, 2017