Commercial Real Estate 101
5 commercial real estate terms you need to know during a transaction.
3 min read
Picture this: you have just started your career as a commercial real estate agent. Your countless hours of studying the industry, prospecting and cold calling have finally landed you your first potential deal. You and your client are in the negotiation stage of the transaction. You look down at the purchase agreement and are unsure of what the terminology used means. Now what?
Suppose this sounds like you, not to fret. Understanding commonly used terminology in commercial real estate is vital to securing the deal without a hitch. That is why we're sharing the five most frequently used terms in a purchase agreement that will help you stay ahead of the game and secure the deal.
Due Diligence
The due diligence process involves the purchaser reviewing the property before the transaction being completed. This process is typically outlined in the buyer's purchase agreement terms. It can include anything from a building condition assessment, a title search, a survey, any significant expenditures on the property and other related records.
Title Search
A title search is the review and analysis of documents relating to a property. It is typically conducted during the due diligence stage to identify issues with the property that could affect its value before closing the deal. It is essential to do a title search to ensure the buyer is aware of all conditions associated with the property.
Building Condition Assessment
A building code assessment can significantly affect a commercial real estate agreement. This process is typically done during the due diligence phase and before the purchase being finalized. A building condition assessment evaluates the site and grounds, structural systems, the building envelope, mechanical systems, interior building components and regulatory compliance.
Environmental Site Assessment
Before closing the deal, it is essential to request an environmental site assessment of the property. This inspection is conducted during the due diligence phase to identify key environmental factors relating to the property, including the scope of soil or groundwater contamination and the presence of harmful building products such as asbestos or mould. If not done, this can affect the value of the property.
Encumbrance
Encumbrance refers to a standing claim against a property by a non-title holder. If not lifted, an encumbrance can affect the transferability of the property and may result in the deal falling through.
Now that you understand the commonly used terms and requests in the commercial real estate industry, you are one step closer to getting the deal done.
Reference
8 purchase agreement terms you need to know before buying commercial real estate [Web log post]. (n.d.). Retrieved May 07, 2021, from https://www.bdc.ca/en/articles-tools/money-finance/buy-lease-commercial-real-estate/8-purchase-agreement-terms-you-need-to-know-before-buying-commercial-real-estate
About Royal LePage Commercial Westhaven
Our commercial real estate industry and segment expertise coupled with Royal LePage’s national platform and integrated systems provides best-in-class real estate strategies and a competitive advantage that can’t be beat.
We help businesses identify opportunities and maximize their return on investment with actionable goals, centralized support services and a strong commitment to customer success. Our national partnerships help us establish, guide and execute successful business investments.
We offer commercial real estate agents a professional environment, focused 100% on commercial real estate. Agents can expect unlimited market boundaries to build their business without the interference of a heavy corporate structure. In addition, agents will be able to access Royal LePage’s national referral network of over 18,000 agents to develop more business in their target markets with incoming leads generated daily. The brokerage provides agents a suite of services including marketing, promotional, networking and professional development needs.
Innovation and service excellence have developed and propelled the Royal LePage brand since 1913. When you join Royal LePage Commercial Westhaven brokerage, you have the backing of one of the most powerful commercial real estate services company in Canada—Bridgemarq Real Estate Services Inc. (formally Brookfield Real Estate Services Inc.). Bridgemarq is a leading provider of services to real estate brokers and agents. They are an affiliate of Brookfield Business Partners, a business services and industrials company focused on owning and operating high-quality businesses and is listed on the New York and Toronto stock exchanges.