Law on Acquiring Real Commercial Property in Arizona

Arizona law regulates the form and substance of commercial property transactions.

Acquiring commercial real estate in Arizona requires careful investigation and due diligence to ensure compliance with all legal requirements, as well as awareness of all potential legal liabilities. Taking ownership of a piece of commercial real estate can be exciting and profitable, but it may also result in legal risks and potential liability if you're not careful. Legal risks may be obvious, such as dilapidated buildings or dangerous equipment on the property, or more subtle, such as hidden title defects or subsurface environmental conditions.

Disclosures

Arizona state law requires the seller of a piece of commercial real estate to disclose to the potential purchaser all material facts known to the seller. A material fact is any information that a reasonable buyer would want to know. For example, if the seller knows about hidden defects in the soil or in the construction of buildings on the property, the seller must disclose those facts.

Environmental Liability

Both Arizona state law and U.S. federal law hold property owners liable for any environmental damage occurring on, or caused by, the property. Accordingly, the buyer should conduct an environmental review of the property so that he knows exactly what potential liability is associated with the property. Buyers who conduct the proper environmental due diligence before taking title to the property may fall under the protection of the innocent landowner defense. The innocent landowner defense relieves a property owner of any environmental liability that may arise after the landowner takes title to the property. Instead, the former owner of the property is fully responsible for the environmental liability.

Title Review

Arizona state law allows for the creation of various claims, liens, encumbrances and ownership interests in commercial real estate. The buyer should thoroughly inspect public title records on a piece of commercial property --- Arizona law doesn't provide any exceptions for ignorance. Instead, Arizona law generally provides that a recorded property interest is enforceable and superior to any later-recorded interests in the same property.

Deed

The proper and legal way to acquire title to commercial real estate in Arizona is through acceptance of a property deed. Arizona allows the use of three types of deeds: the quitclaim deed, the conveyance deed and the warranty deed. A quitclaim deed includes no guarantee from the seller that the seller actually owns title to the property. A conveyance deed includes a guarantee that the seller is unaware of any reason why the seller wouldn't have the right to convey title. Finally, a warranty deed includes an absolute guarantee that the seller actually holds valid title to the property. Arizona statute provides the form and language for each type of deed.

References

• Arizona Revised Statutes: Title 33 --- Property
• "Modern Real Estate Practice"; Fillmore W. Galaty, et al.; 2007