Due Diligence Checklist for Commercial Real Estate Transactions

Due Diligence Checklist for Commercial
Real Estate Transactions

Title Issues
ALTA Survey
Environmental Compliance
Zoning Compliance
Financial records inspection

http://smith-roberts.com

Commercial real estate transactions are very different
when compared to residential real estate transactions.
One of the main differences is ownership – individuals own
residential real estate for residence purposes whereas entities
and individual companies own commercial real estate primarily for
business purposes.


The desire to limit liability is one primary reason why
entities own commercial real estate.

Due to complexity, liability and huge
amounts of money that can be involved
and proper due diligence has become
the most important component in these
commercial real estate transactions.


Here is a broad due diligence checklist such as
information, reports, physical
inspections, documents, research, investigation, etc. one must
conduct in order to empower the purchaser or project manager to
make a timely go or no-go decision and help during negotiations.


Title Issues
• The title review process is used to determine the condition of the
title to be transferred to the buyer and identify any potential title
issues.
• You must analyze each exception listed and thoroughly research
each documents corresponding to each of the exceptions.

You must analyze each
exception listed and
thoroughly research each
documents corresponding
to each of the exceptions.


ALTA Survey
• Title Insurance firms rely upon a current and accurate land title
survey of the property based on the new 2011 ALTA standards.
• A prerequisite to obtaining an ALTA Survey is a current title
commitment.
• The title commitment will contain the legal description of the
property and of any encumbrances to prepare the ALTA survey.
• An ALTA Survey will then provide the title company with the
information required to insure the title to the land and
improvements to the high degree that a commercial development
may require.


An ALTA survey is a comprehensive survey of the existing
property in “as-is” condition. Some of the information that it
would show is:
• Easements that may encumber or benefit the property
• Possible encroachments across boundary lines or easements
• Access to a public street or lack thereof
• Zoning of the property along with setback requirements
• Flood Zones that may affects the subject property
• Evidence of any use by other parties
• Location of any water boundaries on the subject property
• Evidence of cemeteries
• Names of adjoining property owners


ALTA surveys often are one of the most useful documents
in the due diligence process, especially when they include
one or more of the optional levels of detail available.
• An ALTA Land Title survey is a physical survey conducted by a
licensed surveyor which allows the purchaser to review and
confirm that the property matches with his or her business
objective.
• It may be very difficult to get a clear “as-is” picture from the legal
documents/records alone.


The ALTA survey also provides the buyer with the exact
location of utility and other easements and physical
encumbrances, as well as depicts the precise location of
physical improvements located on the property.
• This information can also be very useful -as any further
construction or remodeling improvement could depend on these
layouts.
An ALTA survey should be
initiated early enough in the due
diligence process so that there
is enough time to address any
issues prior to closing.


Environmental Compliance:
• Describing this subject in detail is beyond the scope of this
article.
• Environmental inspection surveys look at issues like asbestos,
underground tanks, underground tanks, wetlands, hazardous
materials contamination, radon, mold, flood zones, etc and
several types of regulatory compliance.


Zoning Compliance:
• Current and future zoning compliance must also be researched.
• Zoning analysis comes into play for most commercial real estate
projects.


• The best laid plans can be useless if land use and zoning issues
are not thoroughly researched.
• Property use and land use is governed by local, municipal and
state rules.
• These rules called “Zoning laws or ordinances” dictate what
can a commercial investor may build/use (where they can
build and how the property may be used).


PZR (The Planning & Zoning Resource Corporation), our sister
firm, is America’s largest Zoning Analyst and Due Diligence Firm
that specializes in analyzing risks and providing zoning due
diligence services and documents throughout USA and Canada.


Financial records inspection:
Potential buyers will surely need to review and research all
financial records of the property or land.
For example: Annual profit/loss for the past 3/5 years
(minimum), balance sheet, tax returns, insurance, existing
leases, and more.


Commercial property due diligence is critical for all potential
buyers to make a sound investment.
Smith-Roberts National Corporation is the expert in Nationwide
ALTA Land Title Survey coordination for complex commercial real
estate transactions that may span several states and sites while
providing zoning due diligence through our sister firm PZR(The
Planning & Zoning Resource Corporation).
Please contact us and we can help you in a cost effective and
timely manner.


Incorporated in 1981, Smith-Roberts National Corporation
has become a nationwide leader in the Land Survey industry
with exceptional service, timely deliveries and reasonable
fees. Smith-Roberts National Corp. is a nationwide ALTA
Land Survey coordinator and the originator of the
DesignReady Survey®.
Smith-Roberts National Corporation is a land survey coordination
firm that specializes in coordinating Land Title Surveys for multi-
site, multi-state real estate and single commercial transactions.


Smith-Roberts
100 N.E. 5th Street
Oklahoma City, Oklahoma 73104
Phone: 405 840-7094
Fax: 405 516-2680
Toll Free: 800 411-2010

Email: Info@smith-roberts.com


Due Diligence Checklist for Commercial Real Estate Transactions

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Due Diligence Checklist for Commercial Real Estate Transactions