Closing costs in a commercial real estate purchase or sale are the costs payable by the buyer (aside from the purchase price itself) or seller on closing.
For a buyer, the biggest of these is the land transfer tax. In Ontario for commercial property it’s on a sliding scale, up to 2% of generally the purchase price. Non-Canadians buyers of land in many specified areas in Ontario pay an additional tax of 15% of the purchase price. Title insurance comes with a premium tied to the purchase price, about 50 to 70 cents per $1,000, so on a $10 million purchase, an owner’s policy will cost $5,000 to $10,000. The buyer also has to pay the fees of his or her lawyer and others assisting the buyer to get to closing, for environmental, financial, building and other investigations and reports commissioned as part of the due diligence. The buyer also has to pay his or her accountants and financial advisors who advised on structuring the deal for the buyer. Title insurance comes with a premium tied to the purchase price, about 50 to 70 cents per $1,000, so on a $10 million purchase, a owner’s policy will cost $5,000 to $10,000. Other costs: appraisal fee
The seller also has closing costs to pay. The largest of these is paying the commission to the real estate broker, often 4% to 6% of the sale price. The seller also has to pay its lawyer and others assisting the seller on the sale. If a mortgage has to paid off, then in addition to the mortgage amount, the seller has to pay accrued interest to date, and perhaps early-termination penalties and fees and, to register a discharge of the mortgage, a mortgage discharge fee.
All these costs have to be planned and budgeted for. Each party’s respective lawyer will prepare a closing funds statement for his or her client well ahead of closing and arrange to be “in funds” to close.