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3 issues to investigate when investing in commercial property

When investing in commercial property, you need to be particularly careful about zoning regulations -- they can sometimes catch even seasoned buyers off guard.

Most towns and cities have their zoning organized into categories -- but never assume that a category that you're familiar with in one location means the same thing in a different jurisdiction. In addition, watch for the following issues:

1.The previous tenant or owner was granted a "grandfather" clause in order to use a property in a way that violates current zoning regulations because the business was already in existence at the time the zoning was changed. In some cases, that special status is transferable only as long as the business remains the same. In other cases, the special variance ends when the current owner leaves the business.

For example, a tattoo parlor permitted to operate in a specific location due to a grandfather clause may be allowed to continue operating when the owner sells to his nephew -- as long as the nephew doesn't try to turn it into a nightclub as well. In other cases, once the current owner decides to move on, the variance ends and the new owner has to conform to current zoning regulations.

2. There are conditional requirements the owner of the property has to meet in order to operate. For example, a bed and breakfast may be permitted to operate only if it meets certain conditions, such as keeping the signs and colors of the place historically accurate.

While those are typically small issues, you want to know what they are before you run afoul of an agreement that you didn't realize was in place.

3. Combination zoning areas can be a nightmare to understand. Where residences and businesses overlap, it's important to understand everything you can about a property's zoning regulations -- from the amount of parking that has to be provided to what size signage is permitted -- before you sign a lease or invest.

A real estate lawyer can help you avoid running into problems with commercial property investments.

Source: FindLaw, "Types of Zoning," accessed Aug. 31, 2017

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