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Some common commercial real estate disputes

Commercial real estate involves income-producing properties that are generally worth more than residential properties. Consequently, the stakes are higher in the Idaho CRE segment, and litigation is common.

Breach of contract

A breach of contract is one of many commercial real estate disputes. It can occur when one party fails to honor the terms of the agreement and walks away from the deal. Disputes arise when the buyer or seller feels they have the legal right to cancel and the other side disagrees. For example, the financing contingency gives a buyer the right to cancel the contract if they’ve made a good-faith effort to secure financing and failed. A problem occurs when the seller believes that the buyer got cold feet and didn’t try hard enough to obtain a mortgage loan. A case like this will often end with the buyer filing a lawsuit to recover their deposited good-faith money, which can be considerable.

Fraud and misrepresentation

The due diligence section of a commercial real estate contract allows the buyer a stated amount of time to investigate the seller’s books and records and conduct other prudent research measures. Unfortunately, sellers may forge leases, underestimate maintenance costs and overstate income. They may keep one set of books for public review and more accurate accounting for in-house reference. Litigation will settle the issue when the buyer discovers the discrepancy.

Property boundaries

Commercial boundary line disputes are usually more complex than residential disagreements. Suppose a neighbor installed a fence over your property line. The neighbor can remove the fencing, but the solution’s not that easy if an office building encroaches on a neighboring lot. Often, a seller discovers the issue when a prospective buyer orders a land survey. In this case, the seller may agree to pay the neighbor a negotiated price for the land in question.

Commercial real estate is a high-stakes game, so complete your due diligence before purchasing any property.