If you’re buying commercial real estate in Kansas City, you are likely focused on location, price, financing, and potential returns. But what many buyers underestimate is the legal due diligence process. In commercial transactions, this step is where real risk management happens. Overlooking legal issues can turn a promising deal into a financial headache — or worse, a lawsuit. Whether you’re purchasing an office building on the Plaza, a warehouse in the Northland, or a retail center in Johnson County, here are key legal issues you shouldn’t overlook.
Title and Survey: Are You Actually Getting What You Think You’re Buying?
A clean title is the foundation of your investment. Legal due diligence starts by ordering a title commitment from a reputable title company and reviewing:
- Easements: Does anyone else have a right to access or use the property?
- Restrictive covenants: Are there rules that limit how the property can be developed or operated?
- Liens and encumbrances: Are there unpaid debts or judgments that could follow the property?
A survey — ideally an ALTA/NSPS Land Title Survey — should be obtained to verify boundaries, building placements, access roads, encroachments, and whether improvements are on the property.
Bottom line: You can’t afford to skip this. Without clear title and boundaries, your investment could be on shaky ground.
Zoning and Land Use: Just Because It’s There Doesn’t Mean It’s Legal
Don’t assume a property’s current use is legally permitted or that your planned use will be allowed. A building that’s used for retail might not be zoned for it — or might only be allowed due to a grandfathered exception.
Buyers should:
- Check the zoning classification with the local municipality
- Review permitted uses, conditional uses, and special use permits
- Investigate whether the property is in a redevelopment or overlay district
- Ask about any pending zoning changes, road expansions, or public projects nearby
In Kansas City, for example, certain areas fall under Form-Based Code or Urban Renewal Plans, which can impose unique restrictions or design standards. In suburban communities like Overland Park or Lee’s Summit, signage regulations or buffer zone requirements can also affect your plans.
If you’re planning a change in use — say, converting a warehouse into a mixed-use space — make sure the local planning department is on board before you close. See our article titled, Decoding Local Land Use Decisions: What Cities in Kansas City Really Consider in Rezoning and Special Use Permit (SUP) Applications for more information.
Environmental Risks: Liability You Didn’t Bargain For
Even if you didn’t cause environmental damage, you can still be liable for cleanup under federal and state law. That’s why environmental due diligence is a must, especially for industries that present potential environmental risks. It is recommended to obtain a Phase I Environmental Site Assessment (ESA). If the report flags concerns — like the possibility of underground storage tanks or prior spills — you may need a Phase II ESA, which involves soil or groundwater testing. This is especially important in older parts of the Kansas city area or in legacy industrial zones.
Also consider: Flood zones, wetlands, or properties in stormwater management areas can carry additional obligations and restrict development. FEMA flood maps and Army Corps of Engineers reports can help identify these issues.
Leases and Tenant Rights: What Are You Inheriting?
If you’re buying a leased commercial property, you’re not just buying the real estate—you’re stepping into the shoes of the landlord. That means taking on all the obligations in existing leases, whether or not you like them.
Key items to review:
- Rent rolls: Confirm current rents, lease terms, and tenant improvement allowances.
- Lease abstracts: Get a clear summary of renewal options, termination clauses, and exclusivity rights.
- Estoppel certificates: These are signed by tenants to confirm lease terms and certify there are no disputes — crucial for validating income-producing assets.
- SNDA agreements (Subordination, Non-Disturbance, and Attornment): Legal documents that govern the relationship between a tenant, a landlord, and the landlord’s lender in commercial real estate transactions. They provide clarity and protection for all parties involved in the event of a foreclosure.
In multi-tenant properties (like strip malls or office buildings), anchor tenants often negotiate special rights — like co-tenancy clauses, early termination options, or concessions tied to occupancy levels. If you overlook these, you may face unexpected rent drops or early lease exits.
Contracts, Permits, and Legal Exposure: The Fine Print That Could Cost You
Beyond leases, there may be service contracts in place — think landscaping, snow removal, HVAC maintenance, alarm monitoring, etc. Many of these auto-renew or require notice to terminate. Review them carefully to avoid inheriting long-term obligations you didn’t anticipate.
Don’t forget to:
- Confirm that all necessary permits and licenses (e.g., occupancy certificates, liquor licenses, fire code approvals) are in place and transferrable.
- Investigate pending litigation, code violations, or disputes that may involve the seller or the property.
- Ask for a seller disclosure of known issues or liabilities.
Seller Authority: Make Sure They Can Actually Sell
It sounds obvious, but you’d be surprised how often this is overlooked: Does the person or entity selling the property have the authority to do so?
Review:
- Entity formation documents (LLC agreements, corporate bylaws, partnership agreements)
- Board resolutions, member consents, or trust certificates authorizing the sale
- Documentation confirming who can sign binding agreements on behalf of the entity
Legal formalities matter, including when a property is held in trust, by a family LLC, or jointly owned by multiple parties. Title companies may require formal evidence of authority, and delays or disputes can arise if it’s not in order.
Final Thoughts: Get It Right Before You Close
Commercial real estate is a high-stakes investment. Whether it’s a flex space in the City or a local shopping center, legal due diligence is your safety net. It’s what helps you make informed decisions, uncover hidden risks, and negotiate from a position of strength.
Working with experienced legal counsel who knows the Kansas City real estate market can make all the difference.