Earlier this month, the Federal Reserve System's Board of Governors, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency issued a joint warning that banks are weakening underwriting on commercial real estate loans. According to the regulators, some banks are allowing more underwriting exceptions and are not sufficiently monitoring market conditions. These regulators said that they will increase their scrutiny of lenders and may request banks to strengthen their underwriting standards, raise capital or better monitor their loans.
Commercial real estate transactions are not limited to drafting a purchase agreement and signing a sales contract with sellers and purchasers. Profitable and legal use of real estate includes numerous players in several venues. Any of these actors may stop progress on a commercial venture or even stop it from beginning.
Municipal zoning ordinances control how property owners can use and develop their property. However, governments can grant variances that excuse compliance with certain zoning ordinances in appropriate circumstances.
Anyone who has ever purchased or sold a home in Minnesota has dealt with a daunting volume of paper that is necessary to complete the final deal. These documents, however, pale in comparison to the amount of paper that is needed to complete a commercial real estate transaction.
Minnesota cities have to keep up with changing commerce that can decimate a real estate market, urban growth and property values. Downtown St. Paul, for example, once had eight department stores and lost the last remaining Macy's Department Store in early 2013. Following Macy's closing, there were plans to develop the site as a giant parking ramp with office space for the Minnesota Sex Offender Treatment Program.
In Minnesota, private negotiations are normally utilized to resolve disputes over routine changes required to complete a construction project. However, the construction industry is concerned over implementation of mediation to settle a dispute over $15 million in change orders for construction of the new Viking Stadium in the Twin Cities.
Real estate issues for business extend beyond the sale and purchase of their place of business. Many issues can continuously impact property owners.
In Minnesota, the sale or transfer of adjacent property in commercial real estate transactions can hold consequences for neighboring business. Accordingly, in some cases, a party may challenge an action such as land conveyance.
Through zoning, local governments in Minnesota can restrict or regulate the use of property. However, this issue becomes complicated when a property owner engages in permitted activities if a local government later issues a zoning ordinance restricting these activities.
Minnesota businesses can face serious setbacks by not providing sufficient attention to the fine print of agreements. This may have particularly serious ramifications in commercial real estate leases that may allow for the sale of the property occupied by a tenant's business.