Off-Title Search

About the service

Commercial real estate transactions involve numerous complexities and considerations that require careful attention. Whether buying, selling, or leasing commercial property, understanding the key factors impacting the transaction’s success is crucial. Off-title searches are vital as they reveal factors that could affect the buyer’s intended use of the premises. This blog will provide a high-level overview of some of the most commonly completed off-title searches in commercial real estate.

Off-Title Searches

While title searches are a standard feature in both residential and commercial real estate transactions, the nature of commercial property often necessitates comprehensive off-title searches. An off-title search aims to uncover potential issues, risks, or considerations that may impact the property's value or future use, which may not be evident from the title alone.

By conducting an off-title search, prospective buyers or investors can make more informed decisions and assess the potential risks of a commercial property transaction.

Common Off-Title Searches in Commercial Real Estate

Electrical Searches

Ensuring a property is properly maintained for electrical supply is paramount in the commercial context. Many types of businesses require substantial power, and Section 113(11) of the Electricity Act empowers the Electrical Safety Authority to issue orders for work deemed necessary for safety. The Authority can provide crucial information on whether the premises have had past electrical issues.

Additionally, Section 46(1) of the Electricity Act codifies unregistered hydro easements that might exist over the property. Discovering these easements is important for legal compliance and to prevent potential disputes or liabilities. Thus, off-title searches involving the Electricity Act are essential for determining the property’s compliance with legislation and revealing important legal considerations before purchase.

Municipal Compliance

Commercial properties are permitted for various uses, unlike residential properties zoned specifically for residential purposes. An off-title search can reveal if the intended use of a commercial property violates any by-laws or codes, particularly regarding setbacks, density, parking ratios, outside storage, and siting of garbage containers. This information can be valuable for mitigating future liability.

Environmental Searches

Environmental due diligence is crucial regardless of whether the property has been used for potentially contaminating activities. Nearby businesses or industrial complexes could contaminate the property, exposing the buyer to liabilities under applicable legislation. An environmental off-title search, such as through the Environmental Site Registry under O. Reg. 153/04, can reveal if a record of site condition has been filed, including a contamination assessment. This helps avoid the costs associated with claims for fraudulent misrepresentation.

Safety Inspections

Commercial properties often require attention for fire and health concerns. For instance, a commercial kitchen must comply with the Health Protection and Promotion Act, the Ontario Food Premises Regulation, and section 6.2.2.6 of the Ontario Building Code. Ensuring compliance with these regulations is prudent when purchasing a property with a kitchen or any business-specific requirements. Off-title searches can confirm that the premises can be used for the intended purpose and expose any associated fire or health liabilities before purchase.

Corporate Existence Searches

A corporate existence search is an important due diligence step when purchasing property from a corporation. It ensures that the entity is properly registered, active, and in good standing with the relevant regulatory authorities. This check can also uncover pending lawsuits, legal claims, or outstanding judgments against the corporation, providing insights into potential liabilities that might affect the corporation’s ability to fulfill its obligations or impact the property transaction. This information is crucial for assessing the corporation’s ability to enter a real estate transaction and mitigating associated risks.

Conclusion

Off-title searches are an indispensable part of commercial real estate transactions. They help uncover potential issues that might not be evident from the title alone, allowing buyers and investors to make informed decisions. By revealing crucial information about electrical compliance, municipal regulations, environmental risks, safety requirements, and corporate status, off-title searches provide a comprehensive understanding of the property's condition and legal standing. This ensures that all parties involved can navigate the transaction with confidence, reducing the likelihood of future legal and financial complications.

‍