S.E.C. Real Estate Observer

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As real estate professionals, if we do not bring value to a transaction, we will not be in this business very long. The days of order takers are over! Now buyers, sellers, potential tenants and landlords can access so much information on the different web sites that they can actually cut us out of the deal without ever even asking us for our opinions or comps. So how do we bring value to the transaction?

Anyone with a high school education can fill out a lease form with a little help. What a potential tenant or buyer might not know CAN hurt them. Let’s brainstorm about some of the latest pitfalls in our business. First, we will review some of the obvious:

1. In most states, a commercial real estate professional (sales person or broker) is liable if they are selling a tract of land and do not recognize potential environmental problems. I was representing a client that was buying an office warehouse in Dallas many years ago and was amazed that the seller had never mowed the end of his lot. At the far end of the tract, covered in high grass, was a piece of 4″ pipe sticking out of the ground about 5 feet high. Sure enough, the property had been used by a car rental firm years before and they had an under ground fuel storage tank for gasoline. I immediately contacted our state office for that type of storage and found that the tanks had been removed but the vent stack was still there. No problems, but if I had not insisted that the seller mow the high grass, no one would have ever been the wiser. My buyer was impressed and I breathed a sigh of relief. I will never forget that one! Close call. Could have cost me my license.
2. Another environmental issue – you probably know that you must inform all your buyers and tenants that they should have the subject property inspected for asbestos. But many think that because the ACM is not friable there is no need to worry. Floor tile covered in carpet is ok. Right? Maybe for the first time. But what happens when you need to replace the carpet and must pull up the old carpet that you glued direct to the floor tile? The guys in space suits must remove it. Now add the cost of disposal in clay-lined pits of yards and yards of carpet in addition to the original floor tile. Do you get my point? Potential liability here or not? Help your owner think through these mine fields. And with the city building inspection departments under intense federal government scrutiny to keep our air clean, just know that they are maintaining much better records. Don’t go trying to tell the city inspectors in our area “I don’t know what happened to that tile.” Big time fine. Maybe jail time. And people over 6 feet tall should not wear stripes!
3. How about one that you might not know yet. The 2002 National Electric Code (which most cities and counties use), went into effect January 1. The code requires the removal of abandoned cables in commercial buildings whenever changes to the systems are made. If the cables are not terminated at both ends to a connector or other equipment, or if they are not tagged for future use, they are considered abandoned and they have to come out! This applies to both horizontal (above ceiling) and vertical (in the walls). The National Fire Protection Agency drafted the rules under the NEC code 800.52B. The reason for the mandate is that the wrapping around the old wiring and cables are materials that include toxins and in a fire can be very dangerous. The code applies to ALL WIRES AND CABLEING, including copper and fiber. Who is responsible for removing the wiring? If your client is buying the 1980’s vintage building that has been re-tenanted several times, do you think there might be a potential liability associated with his ownership? What about your tenant that you are moving from one building to another? Do you have any exposure at either end of that transaction?

The list goes on and on; ADA, radon gas, chemical spills, etc. And these are just some of the physical issues. Do you have any that you would add to the list? Maybe we can brainstorm a list of potential pitfalls later this year at one of our meetings. What if we begin to produce a list of ways we can add value?