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The due diligence process in commercial real estate transactions

On Behalf of | Jul 16, 2020 | Commercial Real Estate

If you own commercial property in Massachusetts, you know that any transactions related to them are complex. Whereas residential purchases typically occur between individuals, entities are usually the buyers and sellers. This helps limit liability and attain the capital necessary. We often help property buyers and sellers through each step in the transaction. 

According to Cnergy, the due diligence process addresses the relevant information and addresses your primary concerns about buying a particular property. This multi-phase process can be time-consuming and there may be additional requirements depending on the property locations. 

Environmental factors 

This broad category focuses on environmental information that may affect the property, covering the condition and history as it pertains to the land. It identifies the presence of potentially hazardous materials and the status and location of underground storage tanks. A walk-through site inspection may conclude the first portion of this due diligence aspect. 

As a follow-up, groundwater testing and core samples can determine if regulated hazardous materials are present. Depending on the magnitude of the contamination, an investigation and remediation activities may become part of the negotiation. If the inspection identifies mold, lead paint or asbestos on the property, site closure and removal may also affect the closing agreement. 

Title issues 

This step in the due diligence process provides documentation of the title and precise legal description of the property. The title commitment report includes a current list of exceptions on the property, including the following: 

  • Judgment liens 
  • Liens 
  • Restrictions 
  • Easements 
  • Unpaid taxes 
  • Equitable servitudes 

The title insurance company generally requires an American Land Title Association survey. This comprehensive survey encompasses the current state of the property, the original plans, parcel boundaries, adjacent infrastructure and improvements. You may request that the study include specific additional details based on your needs and plans. 

Commercial real estate closing services can help you save time, money and the worry about missing a pertinent detail before buying or selling commercial property.