Because of the size and nature of most commercial real estate transactions, conducting thorough due diligence into the property and the transaction isn’t optional. Buyers and renters need to be able to weigh the potential risks in order to make informed decisions. Each transaction is unique, but there are some common issues that may be revealed during the commercial real estate due diligence process, including:
Undisclosed Legal Issues
Conducting a thorough inquiry into a commercial real estate transaction should identify whether the property is encumbered by judgments or liens, and whether there are any pending actions that could lead to such a result.
Building Code Violations
Buyers who opt to disregard due diligence, or to conduct only a cursory review, may be surprised to learn that their newly acquired real estate doesn’t meet municipal building code standards. Due diligence can help uncover work completed without the proper permits or violations of ADA codes.
Structural Deficiencies
A third-party review of the property itself can identify structural issues with things like the walls, roofs, or HVAC systems that were not identified in previous reports or documents.
Zoning Issues
Due diligence should confirm that the building is classified and zoned to allow for the purchaser’s intended use for the property. Existing violations or pending changes can negatively impact purchasers, who may find themselves dealing with frustration and added expenses if this step is overlooked.
Problems with Existing Tenant Lease Provisions
When a property comes with existing tenants, examining and analyzing existing lease agreements is critical. Doing so can identify problems with caps on expense provisions, fixed rents, tenant credit worthiness issues, cancellation provisions, sublease provisions and more.
Commercial Real Estate Due Diligence Expertise
In addition to these potential issues, due diligence should also include an evaluation of financing, lender requirements, the terms of closing statements, and property valuation determinations.
The benefits that come from conducting commercial real estate due diligence and identifying and addressing potential issues before signing the closing statement are imperative. At Baer Reed we assist firms by providing due diligence services on commercial real estate and other types of transactions. To learn more about how we can help, contact Baer Reed online, or call 888-433-1990.
Mr. Reyes graduated with honors from the Ateneo de Manila University, where he received the Procter and Gamble Student Excellence Award. He obtained his Juris Doctor degree from the Ateneo de Manila School of Law. During law school, Mr. Reyes was part of the Philippine delegation to the Willem C. Vis International Commercial Arbitration Moot held in Vienna, Austria. He was also a member of the Ateneo Society of International Law and the St. Thomas More Debate Society. He completed his internship at the Public Attorney’s Office. He wrote a thesis entitled: “To Kill A White Elephant: An Analysis of the Fiduciary Exception to the Corporate Attorney-Client Privilege”. Mr. Reyes is admitted to practice law in the Philippines and the State of New York.
Ms. Lardizabal-Manzano is a graduate of San Sebastian College-Recoletos, where she earned her B.A. in Political Science. In 2003, she received her law degree from Lyceum of the Philippines and was admitted to practice law in 2004.
Matthew Hersh earned a B.A. in Political Science from Columbia University in 1990 and graduated cum laude from Georgetown University Law Center in 1999. He also holds a master’s degree in international relations from the Georgetown University School of Foreign Service.
Cap. Avi Levak (Res. IDF) graduated from from Israel’s prestigious Ben-Gurion University of the Negev with a Bachelor of Science in Computer Science and Mathematics. He is also a Leadership and Communication coach trained in TuT coaching by Alon gal in Israel. Avi specializes in high-level, in-depth analysis of business and client needs, within systems and software strategy and architecture.
Ms. Tyler graduated cum laude from Georgetown University and received her law degree, cum laude, from Georgetown University Law Center. During law school, she interned at the United Nations Economic Commission for Europe. She also worked on The Tax Lawyer journal and was a member of the award-winning Barristers’ Council Mock Trial Team. Ms. Tyler is admitted to practice law in the State of California and the District of Columbia.
Ms. Cruz-Anonuevo graduated cum laude and top nine in her batch from Miriam College with a degree of Bachelor of Arts in InternationalStudies. She obtained her Juris Doctor degree from Ateneo de Manila University School of Law in Rockwell. During law school, she interned in Rivera, Santos, Maranan & Associates. She was also part of Ateneo’s Labor Law Bar Operations. She wrote her thesis on, “Stealing Privacy: Limitations on Media’s Photographic Invasion.,” Ms. Cruz-Anonuevo is admitted to practice law in the Philippines.
Ms. Aquino-Batallones obtained a Bachelor of Arts degree in Development Studies (with Minors in Global Politics and Hispanic Studies) from the Ateneo de Manila University. In 2011, she received her Juris Doctor degree from Ateneo de Manila University School of Law. During law school, she interned at Romulo Mabanta Buenaventura Sayoc & de los Angeles then became an intern of Ateneo Legal Services Center’s Clinical Legal Education Program.
Mr. De Guzman graduated from San Beda College with a degree of Bachelor of Arts Major in Economics and received his law degree from San Beda College of Law. He is multilingual and is fluent in three languages: Chinese, Filipino, and English. He was admitted to the Philippine Bar in 2003.