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Retail Real Estate Transactions

RNN LAW > Real Estate Law  > Retail Real Estate Transactions

Retail Real Estate Transactions

Retail real estate transactions are a subset of commercial real estate transactions. Like other types of commercial real estate transactions, a Texas real estate attorney can be a great asset in making the transaction run smoothly.

Retail real estate transactions are unique, though, in the sense that the buyer will be inheriting existing tenants and their retail leases. It is incredibly important for the buyer to review all the leases. In analyzing the retail leases, it important to consider whether the lease is a gross lease or a net lease.

A gross lease is a lease in which the landlord is responsible for all costs including real estate taxes, common area maintenance, and insurance. A single net lease requires the tenant to pay for one of those costs, typically common area maintenance. A double net lease requires the tenant to pay for two of those costs. A triple net lease (NNN Lease) requires a tenant to pay for all three of those costs.

However, even in NNN leases, definitions of Common Area Maintenance Costs (CAM), real estate taxes, or insurance may differ. For example, CAM’s may be capped by annual percentage increases or controllable costs. Real estate taxes may be capped or have a refined definition that could differ between the leases.

In addition, a landlord’s or tenant’s lender may require certain subordination agreements prior to the deed transfer. Also, it is important to review any existing use restrictions that are contained in leases or deed restrictions. Certain deed restrictions often include exclusivity. In addition, though, they could include restrictions on the percentage of alcohol sales, hair product sales, or any other type of category.

It is also imperative to consider planning and zoning issues. Retail uses are not the same everywhere. Sometimes, a prospective tenant may require a special use permit if they are even allowed. Alternatively, planning and zoning ordinances may require more parking for particular uses.

When preparing a contract for the purchase of retail real estate in Texas, a buyer would be advised to first contact a Texas real estate attorney. A Texas real estate attorney will ensure the contract is prepared to protect the buyer and require the seller to provide the proper documentation. In addition, a Texas real estate attorney will require the seller to provide the proper closing documents to make the closing smooth with your third-party lender.

The Law Office of Robert Newton, PC is a law firm located in Frisco, Texas, that practices in the area of real estate, business, and estate planning. Please feel free to contact the firm for a consultation. The above information was provided for information purposes only and not as legal advice.

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