When you’re purchasing a house or a commercial business, much of the focus is on the state of the building prior to purchase. Is there mold? Is the foundation strong? Are there any leaks or drainage issues? What’s the condition of the roof? What obvious repairs are needed?
Many of these questions don’t need to be asked when buying a vacant or undeveloped lot. There is no structure to worry about, and you may be excited about bringing your vision to life on this empty lot. However, just because there are no structural issues with a property, it doesn’t mean that extensive research into the property isn’t required. In fact, many vacant and undeveloped lots have preexisting title defects that need to be sorted out before you close on the property. In today’s blog, we explore why many vacant lots have existing title defects, and we explain how you can resolve them prior to purchase.
Vacant Lots And Title Issues
We’re not saying that every vacant lot has title errors, but it’s unwise to assume that just because nothing has been built on the property that it is free from hidden issues. Title defects are typically attached to the land itself, so even though no structure sits on the property, the chain of custody with that specific land may date back hundreds of years and multiple owners, all of which increases the possibility of preexisting title issues.
Some of the most common title defects associated with vacant lots include:
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Unpaid Liens - An owner is still required to pay property taxes on undeveloped land, so it’s not uncommon for a previous owner to fail to pay these taxes because of an oversight, since it’s not their primary business or residence.
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Mechanic’s Liens - Perhaps construction or improvements on the land were started by a previous owner, who eventually gave up on the project and failed to settle up with contractors. This could trigger a mechanic’s lien on the property.
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Boundary Issues - It’s not always easy to determine where boundaries begin and end, especially on undeveloped property. If a neighbor has placed a fence on what could become your property, or a survey reveals other boundary issues, you’ll want to resolve these before closing.
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Unpaid Maintenance Requirements - Sometimes a city will require that vacant lots and undeveloped land be maintained to a certain extent, even if it remains undeveloped. Fines and fees associated with failing to maintain the property, or if the city bills the owner for performing this maintenance work, can lead to unpaid dues that require settlement prior to closing.
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Chain Of Custody Disputes - You’ll also want to ensure that a seller has the legal right to sell the vacant property. If other parties are named on the title, like a business partner, a spouse or other family members, you’ll need to make sure that all parties are interested in selling, otherwise your purchase may not constitute a legal sale.
Vacant lots need to be researched like any other property, and the team at Commercial Partners is here to help you discover and resolve any title defects that may be found prior to closing. Don’t assume undeveloped land is free from title issues. Let us investigate a property and protect your financial interests ahead of closing.
For more information about researching or purchasing undeveloped commercial space, reach out to the team at Commercial Partners today at (612) 337-2470.