Before purchasing any piece of commercial real estate, organizations should be confident that the target property will meet their project and/or transaction objectives, and that they truly understand the precise details of what they are purchasing. Conducting broad and thorough due diligence for commercial real estate transactions is a best practice for several reasons. It can:
1. Identify Major Issues That Could Impact Use of the Property
Due diligence can uncover potential problems like zoning issues, environmental problems, or other types of legal issues or encumbrances. If an organization closes on a commercial transaction without conducting due diligence and later discovers an issue that interferes with the use of the property, it can be costly. The law assumes that purchasers of commercial properties are sophisticated buyers, so consumer protection laws may not apply.
2. Uncover Issues with Leases or Contracts
Commercial real estate often transfers subject to existing tenants’ leases or service contracts. During a thorough due diligence process, documents should be reviewed so the potential buyer understands the scope of the obligations that they will be assuming, if they move forward with the closing.
Organizations that are acquiring commercial property as investments will want to be reasonably certain of the quality of existing tenants and the stability of expected future cash flows. They will also want to be prepared with information on any other rights or obligations that exist under the current leases or contracts.
3. Reveal Potential Title Issues or Construction Barriers
Due diligence on commercial real estate should include title work to ensure the buyer will be obtaining clear, marketable title after the close of the transaction. The due diligence process should also include land surveys to identify and address any potential problems, especially when the buyer intends to construct one or more new buildings on the site.
4. Ensure Property Will Structurally Meet the Intended Purpose
Buyers who intend to use the property in substantially the same condition it is in should conduct sufficient due diligence to be confident that the building(s), parking area(s), and other structures on the property will meet their needs. No business wants to buy a property and later learn that its trucks cannot access the loading docks or that the parking lot isn’t large enough to accommodate the expected business traffic. Due diligence can provide reassurance that the property being considered is the right one for that business and its needs.
Expertise with Due Diligence for Commercial Real Estate
At Baer Reed, our experienced legal professionals are efficient and well-versed in conducting due diligence for all types of commercial transactions. To learn more, contact us online or call us at 1-888-433-1990 today.
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.