Commercial Real Estate

The Transfer of commercial real estate involves many issues clients encounter in the purchase of residential real estate. However, there are frequently additional issues which are unique to commercial real estate, including environmental issues, tax issues and financing issues. In fact, in many instances, there will be related business entity ownership issues which must be addressed. As with residential real estate, the Firm guides the owner through the process and handles the creation of necessary documents and ordering of the necessary searches.

What is Bulk Sales Tax and why do I have to have clearance from the State of New Jersey to sell my commercial property?

When a transferring commercial/investment property in the State of New Jersey, a seller must obtain bulk sales clearance from the New Jersey Division of Taxation (NJSA 54:50-38). This consists of the filing of certain forms with the State ,which reviews the seller’s tax history and determines whether the seller has paid its taxes. Often the State will require that a portion of the closing funds be held in escrow pending full investigation of the Seller’s tax payment history. In the event the Seller does not obtain clearance prior to closing, and it is later determined that the Seller did not pay its taxes, the Purchaser of the property may potentially be held responsible for the Seller’s tax liability.

What is ISRA and what are my responsibilities to transfer my commercial property?

ISRA is an acronym which stands for the Industrial Site Recovery Act (N.J.S.A. 13:1K and N.J.A.C. 7:26B). Until recently, the State of New Jersey required that a Seller of a parcel of property where industrial activities occurred to comply with ISRA and file a General Information Notice with the New Jersey Department of Environmental Protection and file for clearance under ISRA. As of 2008, the State suspended the Notification requirement due to budgetary constraints. However, it is unclear whether and when such requirements will be resumed. In the interim, it remains important that the same environmental issues are addressed by the Purchaser of industrial commercial properties to ensure that the Purchaser will not encounter significant future costs in the event it is discovered that contamination exists on the property post closing.

What are issues I must address in the purchase/sale of commercial real estate that are not usually encountered in the transfer of residential property?

More often than not, commercial property is owned by business entities. The title company will require the production of evidence that the purchasing/selling entities are properly formed, are in good standing and have proper authority to proceed with the transaction. Similarly, lenders of a business entity purchaser will require the proper documentation on the entity prior to agreeing to extend financing to it. The foregoing matters require the production of documentation which are prepared by the parties’ legal counsel.