Adaptive reuse projects are breathing new life into old spaces, from converting warehouses into breweries to transforming big box stores into medical offices or entertainment venues and office buildings into mixed-use developments. Adaptive reuse presents an opportunity for investors and developers, but it also introduces complex title challenges compared to traditional commercial transactions. Understanding these title considerations early is key to ensuring a smooth process from acquisition to closing.
1. Historical and prior use
Older buildings often come with a long history of ownership and use. Sometimes that history leaves behind complications. Easements, restrictive covenants or reversionary clauses may date back decades and can have an impact on how the property can be used or modified. A thorough title search helps uncover these historical encumbrances, allowing the development team to address or clear them before construction begins.
2. Zoning and land use restrictions
Even when a property’s physical structure is suitable for reuse, its zoning designation might not be. For example, converting an industrial space into multifamily housing or retail use could require a zoning variance or special use permit. Title professionals should work in tandem with zoning experts to confirm that the property’s title aligns with the intended new use, or to identify restrictions that could delay or derail approvals.
3. Easements and access rights
Adaptive reuse projects frequently involve older infrastructure, which may rely on shared access drives, utility easements or alleyways. Confirming that proper easement rights exist, and are recorded is essential. Especially if the new development increases traffic or utility demands. An updated ALTA survey and a current title commitment help verify that the property has adequate legal access and service rights.
4. Environmental and lien considerations
Previous industrial or commercial uses may have left behind environmental issues or mechanic’s liens that cloud title. Title searches must include environmental lien records and unpaid contractor claims to ensure a clean transfer of ownership. Some title companies offer specialized endorsements to provide additional protection against certain environmental or encroachment risks associated with redevelopment.
5. Parcel splits, assemblages and air rights
Adaptive reuse often involves combining or reconfiguring parcels, such as assembling multiple lots to create a larger mixed-use project. These changes can create gaps or overlaps in legal descriptions if not carefully reviewed. In urban areas, air rights or condominium structures may come into play. These require additional endorsements or separate title policies.
6. Construction
Once a reuse project moves into the construction phase, additional title updates are necessary to protect both owner and lender. Construction loan policies, mechanic’s lien coverage and periodic title updates ensure that the title remains clear throughout the buildout.
When commercial real estate investors and developers purchase an existing building for a new purpose, it’s best to consult a knowledgeable title professional. Landmark Title offers comprehensive title and escrow services and has experience with commercial and adaptive reuse projects throughout the Southwest. Our team can do the necessary research to help navigate and overcome potential title issues of multifaceted projects so the new property owner can focus on building what’s next. Get in touch to learn more about our services.