Problematic Commercial Build-Out

[Jonathan Carpenter]

Hey there Bigger Pockets fam,

I've been working on a deal to build out some contractor shops in our area. Purchased the property in 2021 on an awesome owner finance note with the intention of starting the build quickly thereafter.

We had, what I thought was, a great quote in hand to throw up a pole barn and start our journey towards financial freedom with a grand slam of an investment. Unfortunately reality quickly set in when we contracted an engineering firm to start the septic and wastewater plan. 

Our property had a COSA in place from the 1970's stating we could not improve the property at all. This is a little detail our title company missed...

We contracted a lawyer after incurring close to $60k in engineering fees (they did find a way to lift the restrictions through the DEQ), to see if we could make a claim agains the title insurance. After a few months, he got back to us and said there was nothing we could do. He said we did have standing against the county for having approved an illegal septic on the property in 2004, but that he would not file that suit as he has a good working relationship with them.

SO: What would you all do? Pursue legal action against the county and risk future cooperation from them? Take it on the chin and eat the 3 years of holding costs and increase in construction costs? Rent the property as is and not improve, cash flowing approximately $1,800/month?

OR: Go for broke and secure the bag baby? $2.5 million acquisition and construction costs to cash flow a little over $5k/month

Lets go hive mind!

[Caroline Gerardo]

"They claim that since there had never been any enforcement of the restrictions, there's no reason anyone should have found it." The title company put that in writing?  If it was not on the preliminary or final title report you have a claim. If it shows on the report and you ignored and closed you have no claim.

Soil sounds like is the concern as is porous. So your design plan needs to gently address drainage.

Leases rarely a public record. Get a commercial agent not a residential one to tell you what your warehouse space market rents. 

What city ?