Liability for Fees After Sale of Commercial Real Estate

Purchasing commercial real estate can be a vastly different proposition from purchasing residential real estate.  For one thing, much larger amounts of money are typically involved in a commercial real estate transaction The banks and lenders who are in charge of ensuring the bank's return on the investment of this money also have much stricter standards to follow.  In addition, there are a number of fees involved in commercial real estate transactions that are different from standard residential real estate, and the determination of who is liable for paying these fees can be slightly confusing.  The liability for fees in a commercial real estate transaction can also vary depending on how the contract is written.  There are a few key points to take into consideration when purchasing commercial real estate that will help keep your costs down.

Fees and Commercial Real Estate

In many commercial real estate transactions, the banks or investors that are doing the lending and holding the mortgage on a piece of commercial property will insist that the legal fees (such as title searches and other forms of due diligence) be paid by the borrowers. 

  • Because banks need to keep a fixed amount of “net equity” in a property, they will require that the borrower pay these fees, as the loan has been calculated contingent upon keeping this net equity. 
  • When you are purchasing commercial real estate you will want to make sure that you are aware of your lender’s stand on this issue so that you do not find yourself suddenly hit with unexpected bills during the closing process.

Another consideration is that many commercial real estate transactions involve splitting the closing costs between the buyer and the seller, so if you hire a buyer’s agent, you may end up paying a portion of his or her commission, along with other fees associated with purchasing the property.  Make sure your contract clearly spells out who is responsible for these fees, as they can become expensive quite rapidly.  By determining in your contract who should pay the fees you will be protected from expensive surprises at the closing table.

Another fee that is often forgotten in a commercial real estate transaction is an environmental site assessment fee. This is typically paid for by the buyer of the property, and the site assessment fee will cover an inspection that will check how the impact of the business may affect the environment, such as with regards to storm water run off, parking concerns, and other issues.

Getting Help

Before you buy any piece of commercial real estate, you should have your lawyer look over the contract carefully. Your attorney can help you to identify any potential fees that exist and can assist you in making sure the contract stipulates who is responsible for what fees.

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