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In business, particularly in real estate, if a vexing situation involves a question of law, do not seek advice from your brother-in-law or your barber.
If not sure about a matter, get the name of a lawyer who specializes in real estate and agree to pay for an hour’s consultation. You will know where you stand and will also learn that no matter what the rights or wrongs are in a dispute, the parties must try to mitigate their losses. In other words, should you default on a lease, your landlord must try to find a tenant rather than just sit back and sue. Breaking a commercial lease is difficult unless it’s for good reason, or the lessee is bankrupt.
The parties to a dispute should agree on the appointment of a mediator, as it is far cheaper than taking the trial route.
When buying real estate consider the transaction to be no different than dealing for a car—let common sense prevail. You will want to include in an offer to purchase the stipulation that the vendor supply a survey. Where there is risk of soil contamination, an environmental report may be a precondition of purchase. You may also wish to state that the offer is on condition of your obtaining financing, in which case a time limit must be set.
Arranging a mortgage on an industrial/commercial property where you are the major tenant is more difficult than on residential real estate. Banks and insurance companies have been burned badly on loans to developers and others.
Therefore, one should make certain of the availability of a five year mortgage at a reasonable rate for the amount required. A commitment in writing from the existing mortgagor is your best bet. This may get a little complicated, but do not get discouraged. The existing mortgage may be at a higher, or lower, interest rate than at the time you purchase. This should not be a problem, as the lender will usually agree to come up with a blended rate of interest.
The existing mortgage may have the vendor’s personal guarantee, which he will want to be released from. If you have difficulty in checking out all the angles, a mortgage broker can be of help, but you may have to pay a fee.
Manny Drukier has been in business from manufacturing to publishing, retail to real estate, and stocks to stockpots for the past 60 years. He is the author of two books and resides in Toronto, Canada.
