What Is Commercial Real Estate Law?

Terry Masters
Terry Masters
Leasing is one of the most common aspects of commercial real estate law.
Leasing is one of the most common aspects of commercial real estate law.

Commercial real estate law is the collection of statutes, regulations, and judicial decisions that deal primarily with real property and commercial transactions. This type of law includes many of the same topic areas as residential real estate law, such as construction, mortgages, and leases, but addresses them strictly in a business context. Since the transactions are commercial, the law governing the actions of involved parties lacks many of the protections that can be found in consumer-level real estate law.

The law controlling real estate transactions differs depending upon the jurisdiction where the property is located. Commercial real estate law is generally concerned with business property, such as office buildings, shopping centers, and warehouses. The agreements that are made regarding these types of properties typically happen between businesses. As a result, the amount of money at issue and the complexity of the transactions are often much greater than in a residential transaction. The parties to commercial transactions usually have a higher level of business savvy, so the law does not provide the same types of statutory reliefs for mistakes and bad judgment as it does at the consumer level.

The two common aspects to commercial real estate law are construction and leasing. Commercial real estate law concerning the construction of business assets typically involves complex contracts on ownership structuring, acquisition, original and bridge financing, government approvals, permits and licensing, environmental hazards, and employment of project contractors. While the residential construction process can take 1 to 3 years, a commercial project can take a decade or more to complete.

Commercial leasing is a real estate topic in its own right. These types of leases can run for decades and can include variable payment terms that set a flat fee for the use of the space in addition to a percentage of sales that must be paid to the landlord every month. There are no legal protections against overpricing, price hiking, or eviction at the commercial level. The entire relationship is governed by what is contained in writing. Commercial real estate law addresses the circumstances that can arise under the terms of the lease from a contract perspective.

Construction and leasing make up the largest part of commercial real estate law, but there are other types of transactions that would also fall under this legal umbrella. Real property can be used as an investment vehicle to set up real estate investment trusts (REITs), and the law surrounding this type of ownership structure is particularized. Commercial property has significant insurance needs and can be subjected to coverage disputes if natural disasters, terrorist activity, or other sorts of unforeseen happenings impact the property. Bankruptcy is always a concern with businesses, and commercial real estate can often be tied up in proceedings that originated in financial difficulties that an owner experiences in other areas of life. A commercial real estate lawyer might be retained to deal with any of these matters.

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    • Leasing is one of the most common aspects of commercial real estate law.
      Leasing is one of the most common aspects of commercial real estate law.