The Legal Landscape of Commercial Real Estate
The legal landscape regarding commercial real estate laws in Colorado is always evolving. Every year, new legislation is enacted that will affect you as a real estate owner. Staying up to date with the latest changes to real estate laws and regulations will keep you out of legal trouble and can help you avoid a costly lawsuit. We spoke to local Denver premise liability lawyer Kyle Bachus of Bachus & Schanker about what you need to know about commercial real estate laws:
What Are the Most Important Laws that a Commercial Real Estate Owner Needs to Be Aware of?
The most important commercial real estate laws are those concerning landlord-tenant laws, disclosure laws, and zoning laws. There are also several things to know about buying insurance and local ordinances. Landlord-tenant laws and regulations, including security deposits, lease interpretation, zoning limitations, and other laws and regulations, are especially important.
Commercial Real Estate Laws
It can be helpful to break down the various commercial real estate laws into different topics. Here are the types of laws that regulate commercial real estate activities:
Landlord-Tenant Laws
Landlord-tenant laws include a large number of laws that govern the leasing process from start to finish. Here are some of the many landlord-tenant laws that any commercial real estate investor should be aware of:
- Application Fees – Colorado law dictates when a landlord can charge an application fee and what disclosures they must make about how it’s used.
- Taxation – Generally, you don’t have to collect tax from your tenants on top of their rent. Your income is taxed as a property owner.
- Right of Privacy – A tenant has rights to privacy. You may only enter the property under certain circumstances.
- Procedures for non-payment – Unfortunately, tenants don’t always pay their bills. There are specific steps you have to take when you approach the topic of non-payment.
- Warranty of Habitability – The property must be fit for tenancy.
- Subletting – A tenant can sublet unless the contract specifies otherwise. A tenant in bankruptcy may sublet without landlord consent.
In addition to landlord-tenant laws that you need to follow, it’s also important to be aware of how the courts interpret specific laws that impact commercial real estate. For example, in the Carder v. Cash decision, the Colorado Court of Appeals invalidated a tenant’s claimed right to renew their lease indefinitely.
The court said that when the lease is unclear, the lease may be renewed one time for the same rental period. Colorado courts also state there is no maximum amount of time for a lease. However, they have made a general maximum term of 99 years.
Disclosure Laws
As the property owner, there are disclosures you must make. Disclosure involves telling the prospective tenant certain things about the property so that they can decide if they want to rent it or not. You must disclose potentially harmful problems with the property such as toxic substances, asbestos, lead, radioactive materials, and bed bugs. Depending on your location, you may have to also provide information about energy use on the property.
Disclosure requirements are part of the “Contract to Buy and Sell Real Estate” from the Colorado Department of Regulatory Agencies Division of Real Estate. The seller must disclose conditions they are aware of. They’re not legally liable for an issue if they fail to disclose something that a reasonable person should be able to discern themselves. Topics such as foundation issues, roof leaks and repairs, and significant mechanical problems are all important to include in your disclosures.
Zoning Laws
Nearly all pieces of property in the United States are subject to zoning laws. Zoning laws are local laws that determine how the property owner can use the property. For example, a property might be zoned for residential, commercial, or industrial use.
Some limitations can exist within a category, like light industry or heavy industry. A residential zone may or may not be approved for short-term rentals. It’s important to know what zoning laws apply to your property. In addition, if you want a special use exemption, you may need to go before a local zoning board to make your case.
Insurance laws
Every commercial real estate owner should have insurance. The insurance is protection for your investment. Be sure to carefully research what commercial insurance covers and what is excluded from the policy.
In addition, remember that your commercial insurance as the property owner generally doesn’t cover your tenant’s property. They need their own renters and business insurance. Insurance requirements vary significantly from state to state.
Premises Liability Laws
Premises liability laws make a property owner legally liable when someone gets hurt because of an unreasonably dangerous property condition. If someone gets hurt on your property, the question may arise as to whether you or the tenant is responsible for the injury.
The question comes down to who has control of the property and who is responsible for the condition of the property at the time of the injury. If you’re responsible for common areas, you need to have a plan to limit your premises liability by taking sufficient care for property maintenance.
Anti-Discrimination Laws
Anti-discrimination laws prohibit discrimination in renting and selling real estate. You may not refuse to rent or sell a property based on a protected class like race, national origin, or gender. Anti-discrimination laws come from both federal and state sources. A violation can prompt an investigation by government authorities as well as legal action on behalf of the party of aggrieved applicants.
Local Laws and Ordinances
On top of state and even national laws, there are also local laws that apply to commercial real estate. You need to determine what local laws and ordinances apply to your property. For example, the City of Denver has a noise ordinance. Some localities have light ordinances. Be aware of local laws and regulations to avoid conflict and costly modifications to your commercial real estate.
Colorado Commercial Real Estate Laws
Colorado commercial real estate laws impact both landlords and tenants. By complying with the various types of requirements, you can create clear expectations and minimize conflict. Real estate laws cover topics like landlord-tenant relationships, disclosures, insurance, and even premises liability. Be sure to check for local laws that may apply only in your location.
Kyle Bachus opened Bachus & Schanker, with little more than a tiny, rented office and a lot of determination. Starting with less than $15,000, their business has grown into one of the largest, most well respected personal injury firms in the Colorado region. Kyle and his partner Darin Schanker are committed to understanding the circumstances confronting their clients, and ensuring that responsible parties are held accountable for damages they have caused.
