Commercial real estate law in Illinois can be a little bit tricky. Every transaction regarding commercial property has unique aspects that need to be examined. If you are having trouble making sense of commercial real estate law, our team of experienced real estate attorneys is here to help.
With years of experience in Illinois real estate law, we can work with all parties involved to ensure that your commercial real estate transactions give you the most bang for your buck. We have first-hand experience working with buyers, sellers, owners, developers, investors, borrowers, and all the various financial institutions that go into all different types of commercial real estate transactions. With our team mediating along the way, you can rest assured that you are coming out ahead when it comes to your commercial properties.
What Does Commercial Real Estate Mean?
Commercial real estate is real estate that is to be used in the context of a business. Some examples of common commercial real estate transactions include leasing out space for an office, creating a new office building, or selling off business-owned property and land. Whether or not the real estate in question is an office or a factory makes no difference; it’s all commercial real estate. If there’s a business involved, it is likely that a real estate transaction is commercial.
How Are Commercial Real Estate Exchanges Defined for Tax Purposes?
According to Illinois real estate law Code Section 1031, an exchange in which one property is sold for either investment or business wherein the funds gained are used to purchase replacement property are not subject to gains and losses taxation. While many only believe this to refer to the direct 1:1 exchange of property, the laws can actually be a bit more lenient. This is just one reason you are going to want proper legal counsel when performing commercial real estate transactions. There are many laws and loopholes such as this that can drastically affect how much money you have in your pocket by the end of the transaction.
Does It Make a Difference How a Commercial Property Is Obtained?
Yes, the method used to take ownership of a commercial property can make all the difference as far as commercial real estate transactions are concerned. Most importantly, how your business is set up before purchasing a property could make all the difference down the road.
If your business is set up in a way wherein business and personal assets/liabilities aren’t divided, you as a business owner are put at an increased commercial risk in regards to your business property. With the help of an experienced commercial real estate legal team, we can help make sure that you are taking on minimal risk with all your commercial real estate transactions.
How Do Commercial and Residential Real Estate Transactions Differ?
Although the general conceit of paying money for property is the same, the rules and regulations make it so there are some slight yet important differences between both commercial and residential real estate transactions.
For one thing, commercial real estate tends to be leased instead of sold. Businesses tend to jump around from location to location as their needs change and grow. While residential real estate also generally offer leases, the leases in commercial real estate are usually longer, around 3 to 10 years. Managing and working out a lease with the property owner can sometimes require counsel and mediation, an area our team specializes in. Oftentimes, the property owner is a real estate conglomerate that doesn’t have much time to work with the little man. With us on your side, we’ll break through the barriers and make sure you get a fair shake.
Besides this, there are also some other complications that are unique to commercial real estate regarding how the land is zoned and how it can be used. For instance, if you are planning to manufacture anything that requires the use of hazardous chemicals, you will need to make sure the land you are intending to acquire can be used for such an activity. This also entails a good deal of paperwork in order to get the correct permits.
Commercial Real Estate Contracts
The first step in acquiring commercial real estate is to express formal interest in the property’s current owner. This is typically done through a letter expressing your intent. This letter should roughly outline your intentions for the property, what property you are interested in, and how much you are looking to spend. This will then be used in creating a more official agreement between the two parties.
Where our legal counsel comes in is in the official drafting of the CRE, or Commercial Real Estate agreement. This agreement will serve as a legally-binding contract that will detail the steps the party looking to acquire the commercial property must take in order to acquire it. It will also explicitly detail exactly what property is going to be given through the transaction, whether it be just the building or the building and everything in it. Depending on what kinds of property are involved in the transactions, there may be additional paperwork needed.
Of course, all these variables can easily serve to make commercial real estate transactions overly complicated. This is the main reason that you will want a team of experienced real estate law attorneys on your side. Dealing with all parties involved to come up with the best CRE agreement can be a struggle that not everyone is prepared for. There is a lot of minutiae involved, and not being totally vigilant throughout the whole process can make it so you end up with the short end of the stick in the long-run. With the right attorneys at your side every step of the way, you are guaranteed the best outcome for your business situation.
Do Commercial Real Estate Transactions Require an Escrow?
While an escrow is not typically required by law, it is oftentimes advised for both parties. Getting an escrow company onboard alleviates a lot of the stress from both buyer and seller. An escrow company will handle a lot of the heavy processes involved in the transaction. They can help out with paperwork, details of the transactions, and dealing with the titles. As well, they can play a vital role in both record-keeping and fund-disbursement.
If I Have an Escrow Company Involved, Do I Still Need a CRE Agreement?
The reason that both are generally advised is that the CRE agreement and the escrow instructions provided by the escrow company typically serve two very different functions. The escrow instructions are intended mainly for the sake of the escrow company, to absolve their liability should things go awry.
The CRE agreement, however, is more of a personal agreement between the two main parties involved in the real estate transaction. This means that the CRE agreement is much more legally binding when it comes to overall liability. Some issues that can arise from not having a solid CRE agreement in place beforehand include:
- The true nature of the accountability of both parties involved in the commercial real estate transaction typically aren’t expressed in the escrow instructions
- The escrow instructions won’t acknowledge any side-transactions occurring alongside the main commercial real estate transaction, such as furniture or equipment
- The escrow instructions will not include any warranties and representations from either party that may play a large overall role in the given commercial real estate transaction
- Any consequences for breaking the deal generally aren’t spelled out in escrow instructions as they would be in a properly written CRE agreement
- CRE agreements can be made to include stipulations that the two parties, should a disagreement arise, will seek mediation and counsel before filing a lawsuit against the other
What Does “As Is” Mean When It Comes to Commercial Real Estate?
Of course, the term “as is” is meant to mean that the property is going to be transferred to the buyer exactly as it is, for better or for worse. This means that there are no guarantees, promises, or warranties regarding the overall quality of the property. When you see a property marked “as is”, it is generally a safe bet that the property has some fundamental flaws.
For property owners, marking your property for sale “as is” can feel like it takes some liability off of your shoulders. However, sellers should be aware that there are some instances in which simply listing a property as being for sale “as is” isn’t enough to completely cover your liability towards the new owner. This includes severely dangerous conditions such as poor electrical wiring and improperly disposed of toxic and hazardous waste. If you are attempting to sell a real estate property “as is”, you should be sure to consult with an experienced legal team beforehand.
Contact Us Today for a Free Consultation!
If you are interested in performing any type of commercial real estate transaction in Chicago or within Cook County, getting an experienced real estate legal team on board at the ground level can make all the difference. We can take a look at your situation and draft up a CRE agreement that ensures you get a fair shake in the deal. As well, we’ll guide you along every step of the way to ensure that you are doing everything by-the-book.
With us on your side, when it comes time to finally open up your shop doors, you can worry about your business and not about paper after paper of real estate jargon. We take pride in developing long-standing relationships with business clients and ensuring that every commercial real estate transaction they take part in goes as smoothly and effortlessly as possible.