Avoiding Legal Pitfalls in Commercial Real Estate
Surviving in a difficult market is all about reducing risk. Whether that your exposure, the type of tenant you use, or the type of buildings you buy. The Naples commercial real estate market is still moving along, albeit at a slower pace, just like it has done for the past 100 or so years.

There are always winners and loser in the property game, many of the losers over exposed themselves, or bought the wrong lots. Some though simply didn’t understand the market or the industry enough. There is a reason there are so many lawyers in this country, and it isn’t because we all like to sue each other. It’s because we have one of the most complex legal systems in the world.

Not only do they vary by state, many even vary by city or county. There are pitfalls abound when dealing with any legal matter so it’s always advisable to consult a professional when there is money at stake.

To avoid most of the legal pitfalls involved in investing in commercial real estate, in Naples or anywhere there are a few basic rules that could save you thousands of dollars. It always amazes me when new investors don’t invest a little in the proper legal forms. Downloading cheap one from the internet or Staples isn’t a good idea. These forms are the whole basis of an investment career, and trying to do them on the cheap isn’t a good start. Every contract works well until there is a dispute. Then the true value of them is realized. A good lawyer will pull a bad contract to pieces in moments. Make sure yours are bullet proof if you want to make any money in this industry.

Not using the proper disclosures is another rookie mistake I have seen too many times. For example, federal law requires every building built before 1978 to have a lead paint disclosure. Each state has its own requirements and it isn’t always enough to just include an all encompassing disclosure form in all your properties. Employing people off the books is another tactic used by rookies. It may seem like an expensive undertaking to employ someone legitimately, but it can cost a lot more not to. If the IRS or the local state department catch you, they will fine you heavily. Not only will you have to pay the tax and other costs, but will be fined a “Withholding tax” which can include up to a 25% penalty on top.

You are personally responsible for this, so it won’t be the company liable for any penalties, but you. If you employ freelancers or self-employed people make sure you get some paperwork off them saying you are only contracting them. Get a copy of their liability insurance and file a 1099 if you pay them more than $600 in a given year. It may be more administration at the time, but could save a lot of pain later. The Naples commercial real estate market needs good investors, those that don’t want to do it properly we can do without.