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How a seller could misrepresent tenants in a commercial property

How a seller could misrepresent tenants in a commercial property

| Nov 13, 2020 | Uncategorized |

Buying a commercial property as an investment can be a very smart move. Commercial rent is usually substantially higher than residential rent for a space of the same size. Additionally, commercial leases tend to last for multiple years, ensuring a steady stream of revenue for a long time after you complete your purchase.

Unfortunately, the person selling the property could misrepresent their relationship with tenants in a way that has financial implications for you as the buyer.

The seller may not disclose unfavorable lease terms

Did the previous owner waive the obligation to pay common area maintenance costs, allow month-to-month rentals or accept all maintenance obligations for specific units? If they did, you may have to worry about those contract terms once you assume ownership of the property. Verifying the terms of each individual lease will help protect you from this kind of problem.

The seller may not inform you of issues with their tenants

Maybe the owners of two adjacent businesses are in a fight and threatening to terminate their leases. Perhaps one tenant engages in illegal business activities that the former landlord made no effort to stop. It’s also possible that a tenant has fallen behind in rent or cause damage to their unit trauma resulting in the previous owner laying claim to their security deposit.

Verifying when tenants pay their rent and whether or not they have a history of complaints or defaults is important when evaluating a commercial property for investment purposes. If you believe that a seller misrepresented a property and thereby defrauded you, you may need to speak with an attorney familiar with the unique considerations of commercial real estate law.