Commercial Real Estate Update
The world of commercial real estate is ever changing. It is important to stay in touch with the legal updates surrounding commercial real estate in order to appropriately protect yourself, your company, and your investment. Below are a few of the more recent developments directly impacting the commercial real estate world.
- Below v. Norton
The Wisconsin Supreme Court in Below v. Norton, 2008 WI 77, 751 N.W. 2d 351, expanded the reach of the Economic Loss Doctrine (ELD) to bar claims of fraud and intentional misrepresentation in residential real estate transactions. The Wisconsin Legislature has fought back:
"In addition to any other remedies available under law, a transferee in a residential real estate transaction may maintain an action in tort against the real estate transferor for fraud committed, or an intentional misrepresentation made, by the transferor in the residential real estate transaction." Please see the full text of the Senate Bill here: http://www.legis.state.wi.us/insession/insessiondocs/docs/SB-9.pdf
This new legislation strengthens the ELD as to all other contracts. Below came down July 1, 2008 and by January 21, 2009, the Senate was working to overturn this decision. ELD decisions in commercial real estate contracts came down long before Below, but no such legislation has been created and passed for commercial protection.
II. Foreclosure Market
Whether as an investor, developer, financier, or just a company looking for a home, the commercial foreclosure market is big business. However, understanding what fees transfer to the new owner of a property and those that do not are important in properly valuing commercial property. It is always important to discuss these possible pass through fees with an attorney prior to entering into an offer to purchase.
However, with the surplus of large commercial developments available currently, there are some great values to be had, if you can afford to hold the property for a few years. The quick flip of years gone by is no longer.
III. Economic Stimulus
Everyone is talking about stimulating the economy, but taking advantage of the economic stimulus packages should be considered. While developers may be able to use the $8,000 first-time homebuyer credit to entice new sales, commercial real estate owners may want to look at the tax incentives for energy efficiency.
An attorney or financial analyst may be able to discuss the possible tax advantages of energy efficient upgrades to your commercial real estate. Not only are there possible tax advantages, but also the reduction in energy costs and the possible “green good-will” that are considerations in looking to upgrade your commercial properties.
IV. Collections
In tough economic times it can be difficult to collect rent payments from tenants. My recommendation is to make your expectations very clear with your tenants and not allow them to get behind by multiple months before you take action. But, don’t be afraid to make some concessions for good tenants. Letting a good tenant make partial payments or deferred payments is better than holding an empty space.
