Unearthing commercial real estate encumbrances
There is no such thing as a minor commercial real estate transaction. The amount of money involved coupled with the deal’s impact on the future of your business mean the stakes are quite high. It is vital the property you hope to acquire is usable in precisely the manner for which you envision it.
An existing encumbrance, hiding far out of sight until late in the process, can threaten all of this.
Types of encumbrances
An encumbrance is, as its definition implies, a restrictive nuisance. In real estate, this is frequently a claim another party has on the property in question, despite the fact they do not own it. Some common types of encumbrances include:
- A judgment lien on the property due to a previous owner’s unpaid debts
- An easement that allows another party use of or access to a portion of the land
- Atypical municipal codes and restrictions
- A boundary dispute, such as encroachment with another property
- A pre-existing restrictive covenant that limits how the property might be used or altered
Some of these may be minor and have little, if any, impact. Others might intrude on your plans for the property and require legal action to sort out, if possible.
The right support to do due diligence
Encumbrances are frequently difficult to unearth. They may be tucked away in a long-forgotten written agreement, for example, or exist solely in legal records kept in a courthouse. If you overlook one of these restrictions during a property deal, it may cause significant problems down the line. While title insurance can provide a financial safety net, you can never get your time back.
It is important in any real estate transaction to have the right legal backing. That means enlisting the help of knowledgeable professionals who know how to find – and then address, if need be – these potential hurdles through effective legal action.