What to know before buying an older commercial property
Older commercial properties offer low costs and character but carry major environmental, safety, and zoning liabilities. Buyers must conduct thorough pre-purchase inspections to avoid costly unexpected expenses.
Older commercial property can be a worthwhile purchase for many reasons, among them being lower cost per square foot, pre-established locations, and historical character that new construction simply can’t emulate. However, they also have real estate risks that a standard property walkthrough probably won’t reveal.
Environmental History and Hidden Liability Under CERCLA (Superfund)
Under CERCLA, the federal law known as Superfund, a property owner can be held responsible for contamination they didn’t cause. If you buy a contaminated site, you could end up being forced to pay for the cleanup even if the other owner caused it.
Thankfully, there’s one effective way out. If you investigate the property’s environmental history before you close the deal, you might be eligible for legal protections known as landowner liability protection. To get it, you need to hire an environmental consultant for Phase 1 ESA. This typically takes a couple of weeks to complete and will cost a few thousand dollars.
Hazardous Waste Materials
The environmental report won’t catch this on its own. If a building went up before the 1980s, you can safely assume it has asbestos and lead paint somewhere, and you should hold that assumption until an inspector proves otherwise. The following spots are likely to contain these:
- Old floor tile
- Pipe insulation
- Layers of paint
It’s not dangerous when it’s undisturbed, but when you start renovations, you expose yourself and others to incredibly dangerous particulates.
Accessibility Rules Still Apply
Being old doesn’t exempt a building from the law. Any business open to the public must be accessible for people with physical disabilities. For some older buildings, there are significant barriers in place, and businesses are only exempt from disability requirements if the modifications would be unreasonably expensive.
Otherwise, commercial building owners have a legal responsibility to abide by ADA rules and to make their buildings disabled-friendly. If you’re not expecting these expenses, the cost can catch you off guard, so make sure that you do a walkthrough with a qualified accessibility consultant who understands the local requirements.
Confirm the Building’s Legal Use Matches Its Actual Use
Before you buy any commercial property, make sure how the building is used matches what current zoning laws allow. An older building may operate under a use that current zoning wouldn’t permit today, which is legal only as a grandfathered exception, but that status can sometimes be lost if the building is left vacant or if serious damages require extensive renovations.
The Risks of Older Commercial Property
Buying commercial real estate always requires due diligence, but this is especially important when dealing with an older building. We take our building regulations for granted, but those weren’t always in place. While buying an older property, the new owner is often on the hook for all kinds of unavoidable expenses, such as making the building disability accessible and addressing building condition and safety problems.
To make matters worse, in buildings before the 1980s, there’s always the possibility of asbestos and lead paint. An older commercial property offers unbeatable character for your business, but let’s make sure that charm doesn’t come at a cost you can’t afford.
If you’re interested in reading similar content, see our other blog posts for more.
