3 Obstacles You Need To Know When Buying Commercial Real Estate

By Vinay Thapliyal

By Vinay Thapliyal

Associate Lawyer

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Toronto Commercial Real Estate Building

Buying commercial real estate can reward owners with financial incentives like earning rental income or flipping as an investment.

However, before searching for your ideal commercial real estate property, every purchaser must be careful of the risks. In this blog, I highlight 3 obstacles to consider when purchasing commercial real estate.

What is Commercial Real Estate?

There can be confusion when comparing different real estate properties so let’s first define commercial real estate. Commercial real estate typically involves office space, medical centres, banks, strip malls, restaurants, auto dealerships, hotels, lodges, resorts, and other types of retail spaces. 

Whether you are purchasing a commercial real estate property for an investment or looking for space for your growing business, three obstacles can impede your goals. 

1. Zoning in Commercial Properties

City of Toronto zoning map
City of Toronto Zoning Map

Zoning is used as a classification system in Ontario land use planning by municipalities to separate land according to the type and intensity of the issue; see Ingram and Scott v. Lethbridge (City) (1962), 34 DLR (2d) 490 (Alta SCAD).  

Municipalities have zoning by-laws that deal with matters respecting the permitted use of the property. 

It is crucial to speak with your commercial real estate lawyer to understand the allowable uses. Understanding which permits you will need to resolve any zoning issues. This will be relevant to your success in owning and operating the commercial property. Remember that applying for permits also comes with additional costs and can impact your timeline. 

Suppose the property does not comply with a zoning by-law. In that case, your lawyer can help you determine how to conform to the zoning by-law and help you meet your needs. 

2. Set a Budget Before Buying Commercial Real Estate

Buying Commercial Real Estate Financial Planning

Don’t make the mistake of signing an agreement without figuring out your finances. Commercial properties are typically expensive. You may end up with serious debt from the lack of due diligence in financial planning. 

Make sure to apply for a pre-approved loan before signing the agreement to purchase the commercial property or speak with your financial advisor regarding your financial options. 

Anticipating costs and solutions with your advisors through proper financial planning ultimately minimizes monetary risks.

3. Heritage Designations

Osgoode Hall in Toronto
Osgoode Hall.

Suppose the commercial property is designated under the Ontario Heritage Act, R.S.O. 1990, c. O.18., (Ontario Heritage Act) to be part of historic interest or architectural value. In that case, the municipality had enacted a by-law whereby the property’s assigned as a “designated property.” A designated heritage property can impact your need to alter or improve the property, subject to the provisions of the Ontario Heritage Act. 

Your commercial real estate lawyer can help you send an inquiry to the municipality to confirm whether the property has a heritage designation. 

About TR Law Firm

Need any legal consultation with commercial real estate? TR Law Firm helps clients navigate through the complexities of a commercial transaction. Please contact us to set a virtual chat with our experienced lawyers. Or feel free to call us at (905) 463-2088 or email us at  

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