A Few Things to Consider BEFORE Entering into a Contract for the Purchase of Property for Commercial Use

By James Pickens, Esq.
Fri, Nov 11, 2016 at 1:30PM

A Few Things to Consider BEFORE Entering into a Contract for the Purchase of Property for Commercial Use

Commercial development has been ramping up for the last few years and so has the number of frustrated and broken deals. Unfortunately, many of the deal killing issues could have been recognized with some research and planning on the front end. Once the issues are identified, contingencies can be drafted into a contract to properly allocate the potential risks and the costs associated with addressing them. Listed below are just a few recent issues that have come up in my practice, which have saved the buyer and seller time, money (including attorney’s fees), and a lot of frustration.

  1.                When purchasing a property that involves a pre-existing business, check the zoning designation. If a current use of the property is “non-conforming” under current zoning, and if the business is going to be changed or closed for more than six (6) months, a grandfathered use exception will terminate in most Florida counties. Thus, the buyer’s intended use or development of the property will be subject to the current zoning, and losing a grandfathered “non-conforming use” exception which can have a dramatically adverse effect on the value of the property.
  2.               In this same category, if the buyer’s “intended use” requires a change in the zoning, contractual provisions can be incorporated to include cooperation on the part of the seller. The seller’s assistance in the application for rezoning process, will reassure contingencies added to the contract in the event the attempt to have the property rezoned fails. While this shifts some of the buyer’s risk onto the seller, the added risk can be balanced by increasing the security deposit and/or making different percentages non-refundable as the parties endure the rezoning process.
  3.              In general, flipping property has been very popular the last few years. A seller may be cutting the buyer a deal for one reason or another and the last thing a seller wants to witness after closing is the buyer walking into the next room and selling the same property for a nice profit; or meeting someone new at the closing because the buyer assigned the contract. It is simple enough to make the contract non-assignable, but not a lot of people think about adding a claw back provision to a contract, which requires the buyer to compensate the seller in the event the buyer resells the property within a certain period of time.
  4.              When buying or selling a portion of a larger undivided parcel, many different issues begin to pop up. For instance, the contract will need a legal description identifying the portion subject to the sale. It is important to know which party will ultimately be responsible for obtaining and paying for the survey. Also, there are likely restrictions on how much of the property is able to be developed due to such things as drainage requirements and impervious ground cover restrictions. If these are not taken into consideration in the contract, prior to the parcel being divided, the allocation of use could end up being disproportionate. For example if the developable area of the original unsubdivided parcel is restricted to 75%, then you do not want one of the parties to develop 90% of their property after the subdivision, thereby further restricting the developable area of the other parcel.
  5.             Access to property issues frequently causes problems and there are a few questions that should be asked prior to entering into a contract. For example, does the property adjoin a public road or is it landlocked? If there is a private or dirt road involved? If so, which party will be responsible for maintaining it? Is an access easement appropriate or should you consider a more limited license? Asking these types of questions can go a long way in a real estate transaction.

This is just a very small sampling of issues that can come up in the purchase and sale of property. It is in no way meant to be an exhaustive list and is intended for informational purposes only. If you are looking at purchasing or selling a piece of property an attorney should be consulted prior to entering into a contract.

For more information, call our office at (386) 252-1561, or click here to contact us via email.


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