Key Dealbreakers in Commercial Real Estate and How to Steer Clear of Them

Commercial real estate can be a rewarding long-term investment, but even strong opportunities can crumble when hidden risks aren’t addressed early. Whether you’ve closed multiple deals or you're evaluating your first property, understanding what typically disrupts transactions can save you time, money, and unnecessary stress.

If you’re preparing for a purchase, here are some of the most frequent dealbreakers to look out for—and how to proactively avoid them.

Title Problems and Undisclosed Liens

A commercial deal can quickly stall—or fall apart entirely—when title complications surface late in the process. Issues such as unsettled liens, misfiled documents, ownership disputes, or unclear boundaries can create uncertainty around who legally has the right to sell the property.

Conducting a full title search early is essential. This step helps uncover potential problems before you're too far along. In addition, securing an owner’s title insurance policy adds a layer of protection against future claims or legal challenges tied to past owners.

Lease Complications and Tenant Risks

If the property includes existing tenants, a detailed review of every lease is crucial. Relying on projections or assumptions can be misleading. Instead, verify actual payment histories, check for overdue balances, and carefully evaluate lease terms that may influence future cash flow.

Unexpected clauses—such as termination options, purchase rights, or unresolved tenant disputes—can significantly affect the property’s financial stability. Always request estoppel certificates, rent rolls, and documentation that confirms what obligations and agreements you're inheriting.

Environmental or Structural Concerns

Environmental hazards or structural deficiencies can result in costly repairs or regulatory obstacles. Issues like contaminated soil, groundwater concerns, asbestos, or aging mechanical systems may not be obvious during a casual walkthrough.

Include a Phase I environmental assessment in your due diligence to spot early warning signs. If needed, follow with a Phase II assessment for deeper testing. Pair these with a full engineering inspection to evaluate the integrity of the building and major systems.

Zoning Limitations and Land Use Restrictions

Even if a property suits your vision, zoning regulations may stand in the way. Deals often break down when buyers assume they will be approved for permits or changes that aren’t guaranteed.

Before committing to renovations or making a deposit, confirm zoning classifications, allowed uses, signage limitations, parking requirements, and any variances you may need. Make sure the expected approval timeline aligns with your projected closing date to avoid setbacks.

Mid-Deal Contract Modifications

Changing the contract after negotiations have begun can create ripple effects, especially if lenders or title professionals aren’t notified promptly. Even small adjustments—like adding credits, warranties, or revised timelines—may trigger new review periods.

If updates are necessary, communicate them clearly to everyone involved. Ensure that revised documents are shared with the lender and title company, and request written confirmation to keep the deal moving without confusion.

Financing Challenges or Underwriting Delays

Commercial financing comes with strict requirements, and missing just one condition can cause the entire transaction to stall. If your loan structure or timeline doesn’t match the agreement in your contract, financing may be delayed—or fall through completely.

To sidestep these issues, align each step of your deal with your lender’s checklist. Understand when funds will be ready, build in time for unexpected delays, and consider lining up an alternate lender as a backup plan.

Inspection Findings and Repair Disagreements

Surprises uncovered during inspections often spark disputes—especially when there’s confusion about who should handle repairs or cover the associated costs. These disagreements can quickly erode trust and delay closing.

Whenever possible, negotiate repair expectations in advance. Decide whether repairs will be handled through credits, caps, or seller obligations. Gather written estimates for significant issues and document all agreements within the contract.

Missed Deadlines and Critical Milestones

Commercial real estate deals involve many time-sensitive tasks, and missing a key date—such as inspection windows, financing approvals, or document submissions—can weaken your legal standing or place the entire deal at risk.

Use a detailed checklist to track deadlines and assign responsibility for each task. Consistent follow-up helps ensure everyone stays on track and reduces the chance of costly delays.

Legal Problems and Code Violations

Pending lawsuits, open code violations, and unpermitted construction can disrupt a deal or significantly reduce a property's value. These aren't always easy to spot and often require digging into public records and municipal databases.

Investigate any open legal matters, expired permits, or unresolved regulatory issues early in your review. Factor remediation costs into your financial planning, and be prepared to step away if the deal no longer aligns with your investment goals.

Final Recommendations

Beyond standard due diligence, verify the accuracy of all seller representations. Review utility expenses, past insurance claims, upcoming assessments, and tax histories that may impact long-term revenue. Request ALTA/NSPS land surveys and examine access rights and easements to ensure no surprises surface at closing.

The more you uncover upfront, the fewer obstacles you'll face later. A thorough, organized approach helps you identify issues early—when they're still manageable or negotiable.

No commercial property is flawless, but most challenges can be handled with proper preparation, clear communication, and support from experienced professionals in legal, lending, and title services. If you’re evaluating a property and want guidance on identifying potential pitfalls before they jeopardize your deal, reach out to our office. We’re here to help you move forward with confidence.