Buying and selling real estate can be challenging, even when you’re only interested in it for personal use. The challenges are multiplied when making commercial real estate transactions.
Even a small mistake can cost tens of thousands of dollars, and large mistakes can cost millions or even billions. As such, any commercial real estate transaction should involve a real estate litigation attorney from day one.
The following are other due diligence measures you should take when buying or selling commercial real estate.
Learn Everything You Can About the Property
This is wise regardless of whether you’re buying or selling, though it’s particularly true when buying. The more information you have, the better informed you’ll be throughout the process.
Here are some examples of information you should have before making any moves:
- Most recent title policy or title commitment
- A current survey of the property
- All construction blueprints, including blueprints for any renovations
- County records
- A legal description of the property
- All zoning approvals and certificates
- A recent environmental report
- Copies of any current leases
- Tax information and a history of tax payments
- A complete list of anything on the property that isn’t part of the sale
- Proof of insurance
- List of all past and current litigation involving the property
- Precise details of who owns the property, especially if there are multiple owners
You may need to do a considerable amount of work to get some of this information, but it will be worth it. The best real estate transactions happen when both parties are on the same page regarding all essential details and everything about the sale is fully transparent.
Double-Check Everything With Local Governance
One of the most frustrating aspects of real estate transactions is when a local governing agency steps in and creates issues. For example, a zoning board might declare that the property can’t be used for a specific purpose, or an environmental board might claim that the intended use will incur tax penalties.
These problems may sound like they would only affect the buyer, but they could also be a headache for the seller. Local government decisions could prevent a sale, or a buyer might sue a seller if they provided inaccurate assurances that there wouldn’t be problems with governing agencies.
Understanding and complying with local regulations takes time, often adding months or even years to a sale. However, if you don’t do this, you could end up sinking millions into a property you can’t legally use for the purpose you intended.
Never Be Afraid to Back Out
An important part of due diligence is a willingness to back out if things seem fishy. Again, this holds true for both the buyer and the seller.
If you’re the buyer and you seem to be getting inaccurate information from the seller, you may be tempted to give them a chance to offer clarification or correct themselves. While that could be appropriate, it’s often best to just back out, accept the sunk cost of any money you’ve already spent, and look for a better option.
By the same token, if a buyer’s financing is questionable, you may want to reconsider the deal before it’s too late. It may be more prudent to sell to someone with better finances at a lower price than potentially going through months of negotiations only to watch a sale evaporate.
Complex Sales Require Experienced Consultation
The best way to protect yourself in complex real estate deals is to trust your lawyer. An experienced real estate litigation lawyer from Levy Goldenberg LLP in Manhattan can help represent you and promote your interests throughout the transaction.