Acquiring Commercial Real Estate with Current Tenants

Downtown Oakland Commercial Property

Experienced Oakland Business Attorney’s Recommendations

Purchasing occupied commercial real estate provides you with an immediate source of income, but the inherited tenants can also cause headaches. Disputes with such tenants can lead to messy negotiations or even costly litigation if you fail to handle the situation properly. Prevent problems by:

1. Reviewing all leases.

Before you purchase any property, ask a commercial real estate attorney to review the terms of the current lease agreements. Don’t close the sale if you aren’t comfortable with the terms in these contracts, and be sure to ask a lot of probing questions to identify risks to you and your investors.

2. Understand the tenants’ rights.

When reviewing leases, a commercial leasing attorney will pay special attention to sections regarding termination of the lease, rent rebates, maintenance and any other requirement that will affect you as the landlord or owner.

3. Understand your own rights.

Leasing agreements will also define tenant responsibilities, such as timely rent payments. As the landlord or owner, you have the right to take action if tenants don’t uphold their end of the agreement. If you’re confused about your rights, consult a landlord tenant attorney.

4. Get to know the tenants.

Don’t sign on the dotted line until you have met each of the tenants in person, especially if you’re inheriting business tenants. Some questions that will help you become familiar with them include:

  • What do they do?
  • Who are their customers?
  • What are the hours of operation?
  • Do they need to dispose of hazardous waste or use loud machinery?

Most importantly, are they current with their rent payments and what has been their rent payment history.

Additionally, ask them to express any complaints or concerns they have about their occupancy in the building as well as any expectations they have for you. Require commercial tenants to sign estoppel certificates as a condition precedent to closing the transaction confirming that the commercial landlord is not in default and that they have no defenses to enforcement of the commercial lease. If you suspect problems with the current tenants, reconsider the sale.

Consult with a Seasoned Real Property Attorney

Like any good business investment, the purchase of commercial real estate needs to be analyzed with the help of professionals. Furthermore, purchasing commercial real property already occupied with tenants adds another level of analysis and due diligence requiring the help of an attorney experienced in commercial real estate and landlord-tenant matters. With offices in Oakland, Pleasanton, and Castro Valley to serve you, our legal team can help you assess the terms of contracts and agreements while protecting your rights as a commercial landlord. Please call (510) 881-8700 today to schedule an appointment.