Commercial real estate ownership is most commonly vested in a limited liability company, or LLC. In order for an LLC to be fully operational, it must be in compliance with the law of the state in which it operates. Tax returns must be current, taxes must be paid, annual filing fees must be paid, and a state of information must be on record. If all of the requirements are not met, the entity may be suspended.
In order to borrow money to buy a building, an environmental assessment must be done as part of the loan approval process. The assessment entails a review of current and previous uses of property, as well as local and regional conditions. If the property in questions has been flagged, soil samples will be collected and tested. Your deal may be delayed or cancelled if a problem is detected.
A loan re-conveyance is a document signed by your lender formally giving up its right to your property as collateral. Once you have paid your mortgage in full, you must obtain a re-conveyance, or the loan balance will still be recorded against the property. Re-conveyances are easy tasks when done at the time that the loan is paid in full. It becomes a much more difficult process if attempted years later.
Purchasing property requires insurance. It is best to work on binding a policy early in your escrow. If you wait until you are closing the deal, everything will need to be suspended until you secure the appropriate insurance.
There is a slew of title-related issues that can prevent a seller from transferring ownership of property – mechanics liens, tax liens, “lis pendens,” to name a few. Sellers of commercial real estate may not even be aware of restrictions such as these. It is always wise to order a preliminary title report and consult with your title officer before you consider selling.
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