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Real Estate Transactions: Due Diligence Investigations , Part 2

This post will continue discussing "due diligence" and what that means in a real estate transaction. The previous post examined the due diligence generally and how the method of diligence depends on your goals in the transaction. Essentially, the information you need to complete the transaction will guide your due diligence. This post will discuss the specifics of due diligence in a generic commercial real estate transaction.

Start with your goal, to acquire the property in it is entirety ? land and fixtures. This means that you need to confirm that the party selling you the property has good title to both fixtures and the land. You will want to inspect them to ensure they are stable and safe investments. Don't forget to investigate any restrictions or easements on the property. If you are acquiring the property to expand upon it, then you must ensure that you have the right to expand.

After you inspect the property, then you will need to investigate the legal situation surrounding the land. How is it zoned? Are there any compliance issues, i.e. Americans with Disabilities access problems? If the building has leaseholders, review all of the leases so you know what you are getting into.

Additionally, if the seller is furtively dodging your attempts to access and inspect records, that is a red flag. You may want to consider purchasing another property because you should full access to everything related to the property.

If you are engaging with another party to acquire commercial real estate then you may want to retain an attorney to review the agreement and oversee negotiations. These deals involve decades of investment and thousands or millions of dollars. You don't want to risk an investment of that lifetime over a simple typo or error. An attorney can ensure that the transaction comports with your goals and minimizes the risk of litigation.

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