Q: I own a small business on the South Shore, and we currently rent our space. With rent on the rise, we were thinking about securing a loan and purchasing a commercial property. What are some of the legal implications we should consider?
A: Initially, the most important three words of advice are “financial due diligence.” Make sure you thoroughly evaluate all of the costs of ownership, including taxes [and increases over time], utilities, insurance, capital improvement funding [roof, structure, boiler, HVAC system] and of course mortgage loan obligation.
After adding all of these [and other items] and evaluating them with an accountant experienced in real estate ownership, who will also advise you of the tax benefits [depreciation, real estate tax and mortgage interest deductions], you can then make an informed evaluation and decision on which works better all things considered. Then, retain a lawyer to either review the lease or contract of sale.
Abraham B. Krieger is Co-Chair of the Commercial Real Estate practice group and a member of the Corporate Finance Law practice of Meyer, Suozzi, English & Klein, P.C. located in Garden City, Long Island, N.Y. Mr. Krieger joined the firm in 2007 focusing his broadly-based practice on representing businesses and individuals in commercial and residential real estate lending, sale, and lease transactions and real estate, lease and commercial litigation. An integral portion of his practice includes representing commercial lenders and borrowers on real estate fiduciary transactions and title insurance companies on defending fee title and mortgage validity claims.
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