Suppose you find a well-priced convenience store on a busy Lufkin corridor. Because it has operated for decades, the purchase may seem simple. Yet commercial property can carry zoning limits, title defects, contamination or tenant obligations that stay with the land after you buy it. Knowing where these risks hide helps you plan a thorough review.
Check how you can use the property
Start by confirming that the property allows your intended use. Cities such as Lufkin regulate land use through zoning. Most unincorporated Texas land has no county zoning, though deed restrictions may still limit its use. An older restaurant or hotel may also be a nonconforming use, meaning it predates current rules. Under many local ordinances, that protection can end if the use stops for a set period or the building expands.
Review the title for ownership issues
Next, look at what you would actually own. A title company uses a title commitment to promise coverage once you meet certain conditions. A Texas title commitment generally lists the exceptions a policy will not cover, such as easements or unreleased liens. Because mineral rights in Deep East Texas often belong to someone other than the surface owner, the policy may exclude them. A current survey can reveal boundary conflicts the records miss.
Inspect the property for costly problems
The land’s condition matters just as much. Texas generally does not require commercial sellers to provide the disclosure notice required for homes, and many commercial sales are “as is.” Courts often enforce these clauses, although exceptions may apply if the seller hid known defects. Convenience stores may also have leaking underground fuel tanks.
To claim certain federal defenses to cleanup costs, you must, among other conditions, complete all appropriate inquiries into contamination before buying. This review, usually a Phase I environmental site assessment, generally must occur within one year before purchase, with key parts updated within 180 days.
Look at any existing leases
If the property has tenants, you will likely inherit their leases. Many restaurant and retail sites sell with long-term triple net leases, under which the tenant generally pays property taxes, insurance and maintenance. Review each lease for rent, renewal options, termination rights and any tenant purchase rights. Tenant estoppel certificates confirm lease terms and any defaults, helping you verify the income you are buying.
Review the contract before closing
Your purchase contract sets the time you have for these reviews. Most commercial contracts include a feasibility period during which you may terminate and, depending on the terms, recover your earnest money. Also check which seller promises survive closing. If you plan a 1031 exchange, which may let you defer capital gains tax by reinvesting in like-kind property, your closing dates must fit strict federal deadlines.
Prepare carefully before making the purchase
Buying commercial property in Deep East Texas involves more than price and location. Zoning, title, environmental condition, leases and contract terms each carry risks that can follow the property long after closing. Before you sign a letter of intent, build a due diligence schedule that gives each review a deadline inside your feasibility period. Planning early leaves room to negotiate, request repairs or walk away.
