Making transition from tenant to owner

Contract Language. By Steven M. Harris, AMNews correspondent. Feb. 3, 2003.

CONTRACT LANGUAGE

A column examining the ins and outs of contract issues

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As your practice grows, you may be considering whether to purchase the building in which you have been a tenant, or build at another location. Here are some issues to consider when making the transition from tenant to property owner:

Once you have identified the property you are interested in purchasing, your attorney should obtain a title report or other evidence of title to confirm the correct identity of the property owner.

Evidence of title will enable your attorney to determine if the property is in a land trust and whether the proposed signatory is the trustee, the beneficiary of the land trust, or an agent of the owner. If the owner is a corporation, you must obtain evidence of good standing and corporate authority prior to the closing. The title report should also identify any existing mortgagees of the property and any other personal liability.

You should also make sure to thoroughly investigate all environmental matters including transformers, asbestos and underground storage tanks. Ask to review any environmental audits that have been conducted and consider if any additional testing and audits need to be completed prior to the closing.

Make sure to check the applicable zoning laws prior to purchase to ensure that you have the proper zoning for your intended use of the property. If there is new construction on the premises, you might also need to obtain a certificate of occupancy, which is a certification by the municipality that the building has been constructed in accordance with the requirements of the applicable local ordinances.