Vacancy in Commercial Real Estate

The Legalities Surrounding Vacant Commercial Property Sales

Commercial property sales come with a long list of unique challenges that those who work in residential real estate do not have to think about. However, when you’re buying or selling a piece of vacant commercial real estate, there are even more issues to consider. Vacant property can attract all sorts of attention, and it’s generally not the type of attention you want. Both the buyer and seller have to do extensive research to protect themselves during and after the purchase.

Issues Regarding the Sale of Vacant Buildings

A number of issues can make it very difficult to sell a vacant building safely. First, you have to consider the types of visitors obviously vacant buildings attract. These buildings may draw in squatters, homeless individuals, and teenagers looking for their next viral video. There are entire TikTok channels devoted to exploring “abandoned”—AKA vacant—buildings. 

Buyers don’t want to buy a property that has a small homeless encampment living inside, nor do they want one that has become a hangout spot for the area’s troubled teens. In more serious cases, vacant properties can become hot spots for criminal activity.

There are also potential issues with maintenance and wildlife. Even if a building starts off up to code, it doesn’t take long to fall into disrepair if there aren’t tenants there every single day noticing and addressing small issues before they snowball. This puts vacant properties at serious danger of flooding, fires, and other hazards that are generally identified and stomped out quickly in busy buildings.

Wildlife has a bad habit of taking up residence in vacant commercial buildings. Not only can they leave droppings everywhere and build nests, they can cause significant damage to your property. Animals may chew through wires, plug up ventilation, and cause permanent damage.

Due Diligence Requirements

Buyers are expected to do their due diligence before moving forward with a real estate purchase and often takes a fair amount of time when the property has sat vacant for a while. Buyers limit their exposure to risk by performing their due diligence, and when they have fully vetted the risks, sellers can enjoy some freedom from liability. During this period, buyers may look into zoning matters, financial issues with the property, litigation affecting the property, their ability to retain insurance for the property, the physical stability and well-being of the property, and their ability to secure the property.

Buyers shoulder most of the burden when it comes to due diligence. It is on them to think of everything that could potentially go wrong with a piece of property and then research those risks. Should they find anything that raises a red flag, they can back out.

Seller Liability Concerns

Liability is a significant concern for those who are selling vacant commercial real estate. Buyers of commercial real estate do not have the same consumer protections as those purchasing residential real estate. As noted earlier, due diligence is the responsibility of the buyer. The seller, however, may still be liable if they make any false representations to the buyer. 

For example, if they certify that they have never had to call the police out for squatters and the buyer later finds out that squatters were a constant issue for the seller, that is a liability issue. Sellers cannot intentionally and knowingly misrepresent the property simply to sell it. Buyers often ask sellers to make specific disclosures before they agree to move forward with a purchase. Any falsehoods made at this point can be held against the seller if the buyer later finds out that they were not true.

Protecting Those on Both Sides of a Sale

As is the case with any real estate transaction, it’s recommended that both sides consult a real estate attorney to assist with the buying process. This is particularly important with a commercial purchase; these properties tend to come with high price tags and massive upkeep needs, and it is crucial that everyone involved protect their best interests. An attorney can help a buyer spot potential issues and ask for necessary disclosures. On the seller’s side, an attorney may help the seller limit their liability regarding any known issues.