Starting a new venture is exciting as well as challenging. When you’re in development or buying new commercial property, there are many things to consider, including financing, insurance, signing contracts and more.
And even after you have signed a contract, there is still so much to do. Due diligence, or the careful inspection of a property or asset under a business transaction between two parties, is one of the most critical parts of your commercial real estate acquisition. The due diligence period typically lasts 30 to 60 days and provides you with the opportunity to investigate the property you are developing or buying.
A due diligence checklist can help you keep track of all the information you need. Here is a list of various items that you should make sure to get when inspecting potential acquisitions:
- Property information. For example, keep track of information such as the number of floors, building size, zoning certificates, leasing documents and title policies. The more information you gather, the better prepared you will be.
- Environmental issues. This can include environmental permits or licenses, a list of dangerous substances, or the property’s disposal methods.
- Building system evaluations. It’s important to ensure that the various systems within the building are functioning correctly. Inspect everything from the sprinkler systems to the plumbing.
- Financial documents. Information such as tax statements, credit reports, and other related material is necessary to have.
- Litigation documents. If the property has been involved in litigation, request all pending or threatened litigation information from the seller.
There are many other factors to review before purchasing a property. If you find yourself overwhelmed with the amount of material you need to gather, it can be useful to consult with a commercial real estate attorney. They can break down the process and make it easier for you to get through.
Whether this is your first commercial property acquisition or your hundredth, it’s essential to be aware of what you need to gather during a due diligence check. This way you will be well-prepared and ready when the time comes to purchase your new property.