When handling property transactions as an agent, it is crucial to be aware of the legal aspects involved to ensure that all transactions are conducted smoothly and in compliance with local laws. While a commercial real estate agent is not a licensed attorney and cannot provide legal advice, they should have a strong understanding of the legal framework surrounding property transactions. This will allow them to guide clients properly and avoid potential legal issues.

Here are some key areas of legal advice and guidance for property transactions that an agent should be aware of:

1. Understanding of Property Laws
Property Rights and Title: Before engaging in a property transaction, Advisory must ensure that the seller holds clear title to the property. Legal issues such as encumbrances, liens, or disputes over ownership can complicate a deal. The agent should encourage clients to verify that the property title is clear and free of legal claims, or that any existing claims are resolved before proceeding.
Zoning Laws: Advisory should have a basic understanding of zoning laws and land-use restrictions in the area where the property is located. Zoning laws dictate what type of use a property can be put to (e.g., residential, commercial, industrial) and could impact a sale or lease, especially in commercial real estate.
Easements and Encroachments: An agent should be familiar with any easements (rights of way) or encroachments (when a structure or part of a property extends onto another property) affecting a property, as these can affect the use or value of the property.
2. Contract Law and Agreement Drafting
Sales and Lease Agreements: In commercial real estate transactions, Advisory often work with attorneys to prepare or review sales and lease agreements. These contracts should clearly outline the terms and conditions, including payment structures, timelines, contingencies, rights and obligations of each party, and any penalties for non-compliance.

Sales Contract: This includes clauses such as purchase price, closing date, contingencies (e.g., financing, inspection), and representations and warranties about the property condition.
Lease Agreement: This would include the duration of the lease, rent amount, payment due dates, maintenance obligations, renewal options, and terms for breaking or terminating the lease.
Disclosures: Laws often require sellers to disclose certain conditions of the property (e.g., environmental hazards, structural problems, past property damage). Advisory should ensure that all necessary disclosures are made in the transaction, and encourage clients to be honest and transparent to avoid future legal claims.

3. Legal Compliance and Regulatory Issues
Fair Housing Laws and Anti-Discrimination Laws: Advisory must ensure that property transactions comply with fair housing regulations. Discrimination based on race, color, national origin, religion, gender, disability, or familial status is prohibited in both residential and commercial real estate transactions. While these laws are more commonly applied to residential properties, Advisory should still be aware of them, especially if representing property owners who lease to businesses or tenants.
Environmental Regulations: Environmental laws may impact commercial property transactions. For instance, properties located in environmentally sensitive areas (e.g., wetlands) or properties with potential environmental contamination (e.g., hazardous waste) may require environmental assessments or remediation before they can be sold or developed.
4. Due Diligence and Property Inspections
Title Searches and Property Records: Advisory should recommend that buyers perform a title search to ensure there are no issues with the property’s ownership, such as liens, mortgages, or claims against it. Buyers may also want to check for any legal disputes involving the property.
Property Inspections: Advisory should advise buyers to conduct thorough property inspections, particularly for commercial properties. A professional inspection can uncover hidden issues such as structural problems, electrical or plumbing defects, or potential code violations that may need to be addressed before a sale is completed.
Surveying: A property survey can identify boundaries, easements, or encroachments, which is crucial in commercial real estate transactions. Ensuring the property is accurately surveyed helps avoid boundary disputes down the line.
5. Financing and Securing Funds
Financing Agreements: Advisory should advise buyers on obtaining financing for property transactions. While Advisory are not involved in securing loans, they may work with lenders to ensure that all financing terms are clear. Advisory should ensure that any financing contingency is properly included in contracts, providing buyers with an option to back out if they cannot secure financing.
Escrow Services: In many commercial property transactions, an escrow service is used to hold funds until all conditions of the contract are met. An agent should be familiar with how escrow works and ensure that the transaction proceeds smoothly.
6. Closing the Transaction
Closing Procedures: At the closing of a property transaction, all documents must be signed, and the final payment must be made. The agent’s role in the closing process typically involves ensuring that all documents are in order and that all terms of the contract have been met. The closing process may require the involvement of attorneys, especially for more complex commercial transactions.
Transfer of Ownership: Once all documents are signed and funds are exchanged, the property’s title is transferred to the buyer. Advisory should ensure the buyer receives all necessary documentation, including the title deed, and that the transaction is properly recorded with local authorities.
7. Risk Management and Liabilities
Professional Liability Insurance: Advisory should consider carrying professional liability insurance to protect against claims of negligence or errors made during the transaction process. This is particularly important for Advisory dealing with high-value commercial properties.
Indemnity Clauses: In both sales and lease agreements, indemnity clauses may be included to protect one party from legal liabilities caused by the other party’s actions. Advisory should be familiar with these clauses to ensure they are properly drafted and understood.
8. Dispute Resolution
Mediation and Arbitration: If disputes arise during or after a property transaction, Advisory should be familiar with alternative dispute resolution (ADR) methods like mediation or arbitration, which can help resolve issues without resorting to litigation.
Litigation: In cases where disputes cannot be resolved through ADR, litigation may be necessary. While Advisory cannot represent clients in legal matters, they can assist in facilitating communication between clients and attorneys to resolve property-related legal disputes.
9. Ethical and Fiduciary Responsibilities
Agent’s Fiduciary Duty: Advisory have a fiduciary duty to act in the best interest of their clients. This means they must provide full disclosure, avoid conflicts of interest, and maintain confidentiality throughout the transaction process.
Ethical Standards: Advisory must adhere to local and national ethical standards, such as those outlined by the National Association of Realtors (NAR) or other relevant industry organizations. These ethical standards govern how Advisory should conduct themselves in terms of transparency, honesty, and professionalism.
Conclusion
While commercial Advisory cannot offer specific legal advice, understanding the key legal considerations in property transactions is essential. By advising clients to consult legal professionals when necessary, ensuring compliance with applicable laws, and working alongside attorneys to draft and review contracts, Advisory can minimize legal risks and ensure smooth property transactions. This proactive approach helps Advisory protect their clients’ interests and maintain trust and credibility in the real estate market.