Protecting Your Commercial Real Estate Investment

A Due Diligence Checklist for Commercial Lending Transactions

Once you have negotiated acceptable terms for the purchase of commercial property, there are specific steps you need to take to minimize your risk and protect your investment. Here’s a checklist of the critical issues you need to address before you finalize the deal:

  • Any liens or encumbrances on the title—You should receive a title commitment, which will list any exceptions to clear title. There should be documents recorded for each exception. You want your lawyer to examine all underlying documents. Your lawyer should also address title insurance matters, including the type and extent of title insurance needed.
  • Environmental concerns—You want the property inspected for potential environmental problems by an reputable third party. The inspection should consider past, present and potential uses of the premises.
  • Potential zoning restrictions—Make certain you confirm what the current zoning is for the property, and that it allows the use you plan to make of the property. If not, you may still purchase the property, but will need to determine the likelihood that you will be able to get a variance or permit, as well as the cost of doing so. Your lawyer should also confirm whether there are currently any violations of zoning or land use ordinances.
  • Building code violations—A thorough building inspection should be completed, identifying any existing violations of the building codes, as well as issues that may affect the structural integrity of the buildings. The inspection should include any roof, all walls, HVAC, electrical, plumbing and fire/sprinkler systems.
  • Accuracy of the survey—A professional survey will help you properly evaluate many or all of the exceptions to title, such as easements or similar burdens on the property. A survey can also show encroachments or other uses that may not appear on the title commitment.
  • Current leases—If you plan to assume any leases currently on the property, you will need to verify the financial viability of tenants, as well as lease terms. You also want to ensure that all payments and expenses (including commissions due to real estate brokers) due under the leases are apportioned properly as of the time of closing.

Contact Our Office

At Del Duca Lewis & Berr, we bring more than five decades of commercial real estate and business law experience to clients throughout southern New Jersey and the greater Philadelphia area. Attorney Damien Del Duca is listed as a New Jersey Super Lawyer. To schedule an appointment to discuss your real estate or business law needs, contact us online or call our office at 856-427-4200.