Buying Commercial Property? 7 Legal Questions to Ask First

Ken Engel

 

Investing in Commercial Property? Start with Legal Due Diligence

Buying commercial property can be a smart move for your business or investment portfolio—but it’s rarely simple. From title concerns and zoning restrictions to existing leases and liability risks, commercial real estate deals come with significant legal complexities.

Whether you're purchasing a retail space in Minneapolis, an office building in Madison, or a development site in St. Paul, asking the right legal questions up front can save you from expensive mistakes later.

1. What’s the Title History?

Before closing, make sure you have a clear and marketable title. Work with your attorney to review the title history for:

  • Liens and encumbrances
  • Easements or right-of-way agreements
  • Unresolved boundary or ownership disputes
  • Quiet title actions or probate issues

A title search and legal review ensure there are no surprises—like a third party claiming ownership after you’ve purchased the property.

2. Are Zoning, Permits & Land Use Aligned with Your Plans?

Zoning laws can make or break your investment strategy. It’s essential to understand:

  • Current zoning designation and allowable uses
  • Permitting requirements for renovation or expansion
  • Whether variances or special approvals will be needed
  • Restrictions on signage, traffic, or building height

In Minnesota and Wisconsin, zoning and permitting vary by municipality, so local legal knowledge is key.

3. Are There Environmental Risks or Liability Concerns?

Environmental issues can be costly and create long-term liability. Be sure to:

  • Order a Phase I Environmental Site Assessment (ESA)
  • Investigate the property’s history, including prior industrial use
  • Review any environmental remediation reports
  • Ask about adjacent land that could impact your property

Failing to uncover contamination could make you liable for clean-up—even if the issue predates your ownership.

4. What Are the Lease Terms & Tenant Obligations?

If the property includes tenants, thoroughly review:

  • Current lease agreements
  • Tenant rights and renewal options
  • Who’s responsible for maintenance and taxes
  • Rent control or local tenant protections
  • Occupancy status and tenant payment history

You may be acquiring not just the property—but also contractual obligations that last for years.

5. What Are the Financing Terms & Risk Factors?

Understanding your purchase agreement is just as important as financing itself. Review with your attorney:

  • Financing contingencies and conditions
  • Escrow deposit terms and refund rights
  • Default penalties or termination clauses
  • Obligations related to appraisal, inspections, or lender approval

Ensure your agreement gives you flexibility while minimizing exposure.

6. Are You Protected by Title Insurance & Escrow Safeguards?

Always secure commercial title insurance to protect your investment. You should also confirm that escrow is handled through a trusted third party until all terms are satisfied. This reduces your risk of:

  • Unresolved liens or legal claims
  • Unpaid taxes
  • Transfer issues with deeds or documentation

Title insurance and escrow aren’t just optional—they’re essential.

7. Do You Have a Clear Exit or Ownership Transfer Strategy?

Most buyers focus on the deal—but what about what happens next? A smart plan includes:

  • Defined ownership structure (LLC, partnership, etc.)
  • Provisions for future sale or refinance
  • Buy-sell agreements with partners
  • Estate planning for future heirs or successors
  • Strategy for leasing, resale, or development

Even if you’re focused on the acquisition, planning your exit ensures flexibility and value preservation.

Next Steps for Commercial Buyers in MN & WI

Whether you're an experienced investor or purchasing your first commercial property, working with a local real estate attorney ensures you avoid unnecessary risk.

At Engel Professional Association, we support clients throughout Minneapolis, Madison, St. Paul, and surrounding areas with:

  • Contract review and negotiation
  • Title due diligence
  • Lease and tenant counsel
  • Risk assessment and transaction structuring

Ready to Move Forward with Confidence?

Before signing, make sure you're protected legally—today and down the road. Call Our Office Now: (613) 343-4555

Engel Professional Association: Trusted Real Estate Legal Counsel for Minnesota & Wisconsin.