Commercial Real Estate
Growing your portfolio
As a buyer of a commercial property, it is vital to perform due diligence on the property. Ask questions:
1. Is the seller the true owner of the property ?
2. Is the property clear of any liens or charges ?
3. How do I protect my money when I make my deposit or buy ?
4. Is the property conform with the law ?
5. What is the value of the leases affecting the property ?
Buying Commercial Real Estate
- Promise to purchase
- Deed of sale of a property
- In-depth title examination
- Revision and examination of the certificate of localisation
- Clearing immovable liens and hypothec
- In Trust transfer of funds
- Decontamination Report
- Inspections
- Commercial loans mortgages
- Commercial Hypothecs
Commercial Lease
- Legal counsel for lessor
- Drafting of a commercial lease (net, double net, triple net leases)
- Emphyteutic lease
- Publication of a notice of lease
- Radiation of a notice of lease
- Revision of lease for tenant
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Due Diligence
You are ready to purchase a commercial building that suits your needs ? It probably meets all your must-have criteria : it is well located, suitable for your corporate image, the price is right, it will help your business grow… Now what ?
Before your finalize the transaction, it is important to perform a due diligence to minimize risk and evaluate the worthiness of your investments.
Give yourself 30 to 60 days at least to perform an integral due diligence of the property, taking the time to evaluate both the physical and legal aspects, such as :
- Inspection of the building (roof, structure, quality, foundation)
- Evaluation of the value and potential of the building
- Decontamination of the land
- Evaluation of the commercial leases and relationship with the tenants
- Evaluation of the conformity to the law (municipal, environmental, etc.)
- Title examination or revision of the history of ownership of the building
- Is the building being sold with legal warranty or title warranty ?
- Is the building clear of any liens, hypothecs, or any other registered charges ?
- Evaluation by your financial institution for financing
- Payment of real estate taxes
- What will the welcome tax be ?
- Building implantation
- If you intend on renovating or building on a vacant lot, it is important to verify the permitted use, zoning and by-law regulations
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Transfer of funds
Notaries must conform to strict rules regarding transfer of funds in order to assure secure transactions.
Money entrusted to a notary is held until financial institutions can execute proper conciliation and recognize the availability of the funds in order to prevent fraud.
When purchasing a property is it important to protect your money until you receive a guarantee of ownership. The notary “in trust” account serves as an escrow account.
It is recommended to remit the deposit and the down payment directly to the notary. Once the funds are in the notary in trust account, the parties may proceed to the signing of the legal sale documents and loans, if any.
Subsequently, the notary will publish the sale contract to the official Quebec registry in order to validate the transfer of the title of ownership. Once the sale is published and clear of any liens or hypothecs, the notary will release the balance of sale funds to the seller.
This type of transfer control assures total security between the buyer and seller.
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What is a certificate of localisation
A certificate of location, sometimes called a certificate of localisation, is a report and plan prepared by a Quebec Land Surveyor. When you purchase a property, the certificate of location will provide the notary with an expert opinion concerning different aspects of the property, namely:
- Study of title of ownership
- Encroachments
- Illegal views
- Servitude of view, servitude of non-construction, servitude of right of way, servitude of utility
- Discrepancies between measurements and original cadastre
- Cadastral history
- Conformity with municipal by-laws
- Conformity with laws concerning zoning laws, cultural heritage, agriculture, etc.
- Plan of building and land
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Signing a commercial lease
When signing a commercial lease, it is important to consider these common points :
- Term of the lease
- Options and renewal periods
- Rent
- Permitted use of the space and the types of business
- Space and service, including :
- Parking
- Heating, ventilation and air conditioning (HVAC)
- Cleaning services
- Security
- Snow removal
- Grass cutting and landscaping
- Garbage
- Repair and mainetance
- Leasehold improvements
- Subletting and assignment
- Utilities
- Taxes
- Insurance
- Signage
- Building Rules
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Net Net Lease and other types of leases
Different terms are used to describe types of leases and the responsibilities of a tenant, such as:
- Net Lease / single net lease
- Net net lease / double net
- Net net net lease / triple net
- Absolutely net lease
- Gross rent lease
- Percentage lease
What is a Gross rent lease ?
The tenant usually pays a flat rate being the base rent, as well as other specific expenses.
What is a net lease / single net lease ?
In a single net lease, the tenant pays the base rent and a portion of the taxes.
What is a net net lease (double net lease) ?
In a double net lease, the tenant usually pays the base rent, taxes, insurance costs and some operating expenses.
What is a net net net lease (triple net lease) ?
In a triple net lease, the tenant is responsible for all fees associated with the lease premised, namely base rent, real estate taxes, business taxes, insurance, operating expenses, cost of maintenance and repairs, including major repairs.
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Register a commercial lease
A Notice of Lease is the tenant’s protection against eviction or unexpected termination of his lease. In the event that a leased property is sold, a new landlord is bound to respect the terms of a registered lease. A notice of lease is published at the official real estate registry in Quebec, (Registre Foncier du Quebec).
According to the law, a landlord cannot prevent tenant from registering his lease.
When published, the notice of lease contains information regarding the parties, address, duration, option, and any special conditions or rights agreed upon by the tenant and landlord.
