SO YOU WANTTO INVESTIN COMMERCIALREALESTATE Legal Matters

Commercial real estate is “income-producing property used solely for business purposes”.

Once you have been approved by the Lender for a capital loan, your lawyer will be instructed as to the types of security the Lender wishes to obtain from the Borrower.This generally takes the form of a realty mortgage and a lien on the personal property of the Borrower by way of a General Security Agreement.In the case of rental units, generally an assignment of rents will be requested by the Lender to be registered against title to the property as well as under The Personal Property Security Act.

Depending upon the credit worthiness of the Borrower, the Lender may also require a personal guarantee for the loan from each of the principals of the corporation in addition to postponements of claim from each guarantor relative to funds that may become payable by the Borrower to the principals.

Traditional due diligence corporate searches are needed to process a mortgage loan, i.e. Corporate Entity Reports, Bankruptcy, Bank Act and Personal Property Security searches, in addition to a search for outstanding litigious claims against the Borrower.Afull search of the title to the property to be secured is also required for Planning Act contraventions, liens that may be registered against title and outstanding Executions that may be filed against the Borrower with the Sheriff on the Jurisdiction in which the property is located.Off-title searches are also required relative to tax and water arrears, zoning compliance and work orders under current zoning by-laws, Electrical Safety inspection, by-law enforcement issues, and outstanding fire inspections to name a few.

Commercial Loans are title insured for the Lender relative to both Title and Off-Title Risks for coverages that are too numerous to mention in this article.

If more than one advance is required, such as for a construction loan, searches will be updated for each advance.

My colleagues at Weilers LLPare experienced and knowledgeable about your borrowing or lending needs. Whether your transaction is simple or complex, we aim to complete it smoothly. My thanks to Lenore Martin, senior commercial real estate clerk, for assistance with this article.