{"id":2827,"date":"2023-10-23T11:10:42","date_gmt":"2023-10-23T15:10:42","guid":{"rendered":"https:\/\/jfrealestatelaw.com\/?p=2827"},"modified":"2023-11-02T09:20:09","modified_gmt":"2023-11-02T13:20:09","slug":"the-importance-of-due-diligence-in-commercial-real-estate-transactions","status":"publish","type":"post","link":"https:\/\/jfrealestatelaw.com\/the-importance-of-due-diligence-in-commercial-real-estate-transactions\/","title":{"rendered":"The Importance of Due Diligence in Commercial Real Estate Transactions"},"content":{"rendered":"\n

The term caveat emptor <\/em>is not widely known among most real estate buyers and investors, but it is one of the most important and consequential legal principles of Commercial Real Estate transactions. Latin for \u201clet the buyer beware,\u201d it means that the buyer alone is responsible for verifying the quality and suitability of whatever they are purchasing. In other words, if the buyer fails to exercise due diligence on their Commercial Real Estate<\/a> transaction \u2013 e.g., thoroughly investigate the subject property being purchased \u2013 any problems that emerge after the fact may be their burden to bear with little to no recourse.

Before entering into any real property transaction, learn the basics of due diligence and why you should contact Farshchian Law, P.A. to help you safeguard your Commercial Real Estate investment.<\/p>\n\n\n\n

What Due Diligence for Commercial Real Estate Transactions Means<\/strong><\/h2>\n\n\n\n

Due diligence can be understood in three simple words: \u201cverify, verify, verify!\u201d This means you must thoroughly investigate and understand every aspect of your transaction, from its end goal to the physical and legal conditions of the property itself. It also entails making sure you know what you want in this transaction \u2013 is it an income property or a commercial business space? Are you looking to invest or to occupy? This will determine what due diligence steps you need to take prior to committing to the purchase. In short, the point of due diligence is to avoid any potential risks and costs before it is too late.<\/p>\n\n\n\n

When Should Due Diligence Begin?<\/strong><\/h2>\n\n\n\n

Due diligence should start in the negotiations phase of the transaction \u2013 you can request a rent roll to run your numbers or determine whether a property can be used for a particular purpose before you even sign the contract. Once the contract is signed, you must complete your due diligence during the inspection period so that any improprieties or issues with the transaction can be uncovered and resolved, or so you can cancel the deal without legal or financial penalty. <\/p>\n\n\n\n

For most commercial transactions, the minimum time period for due diligence should be 20-30 days, and the contract should also state that buyer can cancel, in his or her sole discretion, during the due diligence period if they are not satisfied with any item they uncover during the due diligence review. For larger commercial transactions that involve multiple tenants, zoning matters, or environmental studies, sixty days for due diligence may not be enough. It is important to speak who specializes in Commercial Real Estate transactions to determine what is an appropriate due diligence timeline for your particular transaction.<\/p>\n\n\n\n

What Does Due Diligence Review Entail?<\/strong><\/h2>\n\n\n\n

Due diligence should be as comprehensive as possible. While certain aspects of due diligence will vary depending on the nature of the purchase and what you intend to do with property, among the items due diligence should entail are the following:<\/p>\n\n\n\n