Underperforming properties can be a drag on even the strongest real estate portfolios. For large operators in Michigan, repositioning these assets, through renovations, rebranding, or changing their function, is often a smart strategy. However, this process involves several legal risks that, if ignored, can result in costly delays or enforcement actions.
Start with Zoning and Permitted Use
Before repositioning a property, confirm that your new intended use aligns with current zoning regulations. Municipal zoning laws in Michigan vary widely. For example, converting an old retail space into housing or turning a single-family home into a short-term rental may require rezoning, a variance, or a special use permit. Skipping this step could result in denied occupancy, stop-work orders, or legal disputes with the municipality.
Review All Existing Leases
If tenants currently occupy the property, repositioning becomes more complicated. In Michigan, leases carry over when ownership changes, and their terms remain binding. Trying to change a building’s use while tenants still hold valid leases can expose operators to breach-of-contract claims. Always conduct a legal review of tenant agreements before implementing significant changes.
Conduct a Title and Lien Review
Ownership issues can quickly derail repositioning efforts. Title defects, unpaid taxes, mechanic’s liens, and unresolved land contracts are more common in distressed or neglected properties. These problems must be addressed before renovations or rebranding can begin. A thorough title review helps you avoid costly legal entanglements after acquisition.
Consider Code Compliance and Safety Upgrades
Underperforming properties often come with deferred maintenance and outdated infrastructure. Before repositioning, operators must ensure the property complies with all applicable local and state safety codes. Many municipalities require updated fire, electrical, plumbing, and accessibility compliance before issuing new occupancy permits. Failing inspections due to code violations can stall or halt the repositioning process altogether.
Ensure a Legally Sound Strategy Before You Reposition
Repositioning real estate in Michigan can be an excellent way to revive a struggling asset, but only if the process is legally sound from the start. From zoning compliance and lease reviews to title checks and code upgrades, every step should be guided by legal due diligence.
If your firm is repositioning underperforming properties across Michigan, the Law Offices of Aaron D. Cox can help you avoid costly mistakes and protect your investment.
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