Let’s get familiarized with some of the basics of commercial real estate law. Keep in mind that the following information is no substitute for qualified legal representation, but as an investor it is in your interest to be as educated as possible about the legal aspects of investing in commercial real estate. Real estate transactions are governed by an enormous range of federal statutes and state statutory and common law. State requirements differ significantly from one state to another.

Real estate brokers are employed as the agent of the seller in order to obtain a buyer for their property. The contract between the broker and seller is called a listing agreement. The agreement may be an open agreement whereby the broker earns a commission only if he or she finds a buyer. A listing is exclusive if the broker is the only agent entitled to a commission for finding a buyer. Under an exclusive arrangement a broker may be entitled to a payment even if the seller finds the buyer without the brokers aid. Real estate brokers and salesperson are licensed and regulated by local state laws. The Federal Fair Housing Act prohibits discrimination in real estate transactions on account of race, color, religion, sex,or national origin and Real estate brokers are specifically prohibited from discriminating by the act.
The agreement to sell between a buyer and seller of real estate is governed by the general principles of contract law. The Statute of Frauds requires that contracts for real property be in writing. It is commonly required in real estate contracts that the title to the property sold be marketable. This requires that the seller have proof of title to all the property he or she is selling and that third parties not have undisclosed interests in the title. A title insurance company or an attorney is often employed by the buyer to investigate whether the title is, indeed, marketable. Title insurance companies also insure the buyer against losses caused by the title being invalid.

In order to pass title, a deed with a proper description of the land must be executed and delivered. Some states require that the deed be officially recorded to establish ownership of the property and/or provide notice of its transfer to subsequent purchasers.
Constructing any kind of real estate building or property is a project that can cost millions of dollars. Construction laws regulate the construction of real estate properties and also include the contracts and agreements between the owners and the builder of the property. Under these laws, a builder is not bound by his estimate to complete a project; as an estimate is considered just that – an approximate figure and not a final one.

Land use laws control the way land may be used and developed for real estate. Zoning is a type of land use regulation. Zoning requirements are laid down by municipal corporations so that they can regulate the development of real estate in their jurisdiction. Different areas and municipalities may have different zoning rules but typically these rules are made to separate residential, commercial, and industrial zones from one another. The real estate developments within each zone are also according to the zoning of that district. So typically a residential zone may have only residential property whereas a commercial zone can have recreational and commercial establishments.

Real estate laws also govern the relationship of landlords and their tenants. Issues such as tenant rights, landlord rights and duties, fair housing, lease agreements, repairs and maintenance, eviction, security deposits, and lease termination are all discussed under real estate laws. Non-compliance of any duties on the part of either the landlord or the tenant can result in one taking legal action against the other.
Real estate laws lay down certain building codes which have to be followed while constructing property or making any renovations to existing property. These codes are developed to ensure proper quality in construction and so as to increase the safety of inhabitants of the properties. Details regarding plumbing, electrical wiring, size and height of the buildings, number of floors and rooms, area and floor space etc are specified in the building codes.

As a commercial real estate investor, it is to your advantage to learn as much as you can about the myriad statutes that cover real estate law. Competent legal representation is also essential. At Lynx or HREA we can recommend legal professionals that can make your experience with commercial real estate investing as profitable and trouble free as possible. Contact your Lynx Real Estate advisor for more information on this or other commercial real estate subjects at (404) 477-2044 or email info@lynxre.com.