Commercial real estate transactions involve countless complexities and considerations that require careful attention. Whether buying, selling, or leasing commercial property, understanding the key factors impacting the transaction’s success is crucial. This is why off-title searches are so important, as they reveal factors that could affect the buyer’s intended use of the premises. This blog will provide a high-level overview of some of the most commonly completed off-title searches in commercial real estate.
Off-title Searches
Although title searches are a feature of residential and commercial real estate transactions, the nature of the commercial property may necessitate comprehensive off-title searches. An off-title search aims to uncover potential issues, risks, or considerations that may impact the property’s value or future use that may not be evident from the title alone.
By conducting an off-title search, prospective buyers or investors can make more informed decisions and assess the potential risks of a commercial property transaction.
The following searches are commonly completed for various commercial real estate transactions.
Electrical Searches
Ensuring a property is properly maintained for electrical supply is paramount, especially in the commercial context. In order to properly run many types of businesses, large amounts of power must be delivered to the premises. Section 113(11) of the Electricity Act empowers the Electrical Safety Authority to issue orders for a broad range of work that the Authority considers “necessary or advisable for the safety of persons or the protection of property.” The Authority may be able to provide key information on whether the premises have been subject to problematic electric issues in the past.
Similarly, to complete the work mandated above, section 46(1) of the Electricity Act also codifies unregistered hydro easements that could exist over the property. Uncovering the existence of these easements is important to ensure legal compliance and prevent potential disputes or liabilities. Therefore, off-title searches involving the Electricity Act are essential in determining the property’s compliance with the legislation and could reveal important legal considerations before purchase.
Municipal Compliance
Unlike residential properties, which are specifically zoned for residential use, commercial properties can be permitted to be used in many ways. For example, within a commercial building, many different businesses often operate under the same roof. Despite the wide range of uses permitted within a commercial building, an off-title search can reveal whether the intended use would violate any by-laws and codes, specifically concerning setbacks, density, parking ratios, outside storage, and siting of garbage containers. This information can be valuable with respect to mitigating future liability.
Environmental
Whether or not the property has been used for any activity that could cause contamination, some type of environmental due diligence should always be completed. At any property, it is possible that the property could be contaminated by nearby businesses or industrial complexes, which could expose the buyer to liabilities under the applicable legislation. Although bringing a claim for damages based for fraudulent misrepresentation is possible, an environmental off-title search could help the buyer avoid this cost. For example, a search could be completed via the Environmental Site Registry under O. Reg. 153/04, which can provide information as to whether a record of site condition had been previously filed. If so, this record would include information, including a contamination assessment.
Safety Inspections
Due to their nature, many commercial properties also require particular attention for fire and health concerns. For example, a commercial kitchen is subject to the requirements contained within the Health Protection and Promotion Act, the Ontario Food Premises Regulation, and section 6.2.2.6 of the Ontario Building Code. When purchasing a property that includes a kitchen, ensuring that the premises comply with this legislation is prudent. The same goes for many types of businesses. In this context, off-title searches can ensure that the buyer can use the premises for the intended purpose and that any associated fire or health liabilities are exposed before purchase.
Corporate Existence Searches
A corporate existence search is an important due diligence check when purchasing a property from a corporation. It ensures that the entity is properly registered, active, and in good standing with the relevant regulatory authorities, the absence of which could complicate the legal validity of the transaction. Further, completing this check can uncover pending lawsuits, legal claims, or outstanding judgments against the corporation. This information helps uncover the potential liabilities that may affect the corporation’s ability to fulfill its obligations or impact the property transaction.
Overall, a corporate existence search provides valuable insights into a corporation’s legal status, potential liabilities, ownership, and compliance. This information is crucial for assessing the corporation’s ability to enter a real estate transaction and mitigating risks associated with its involvement.
Contact the Property Lawyers at Baker & Company in Toronto for Advice on Commercial Real Estate Transactions
At Baker & Company, our experienced real estate lawyers regularly advise our corporate clients on various real estate matters, including commercial real estate transactions, property disputes, and title searches. We help our clients with their business needs, ranging from small family businesses to large corporate enterprises. Our trusted lawyers will take the time to explain the law that applies to your situation and advise you of your options in order to obtain the best possible outcome. To speak with a member of our team regarding your real estate concerns, contact us at 416-777-0100 or contact us online to schedule an initial consultation.
