Acquiring commercial real estate — whether a retail center, office building, or industrial property — involves substantially more due diligence than a residential purchase. Missing a critical item during the diligence period can result in unexpected costs, legal exposure, or a property that doesn’t actually work for its intended use.
Title Review
A thorough title review identifies liens, easements, restrictive covenants, and any other encumbrances affecting the property. Title issues discovered after closing can be costly and time-consuming to resolve — a title commitment should be reviewed carefully, with any exceptions investigated before the diligence period expires.
Survey Review
An updated ALTA survey identifies the property’s actual boundaries, easements, encroachments, and improvements — and often reveals discrepancies between what’s recorded and what physically exists on the ground. Buyers should confirm the survey is recent and meets current ALTA standards, rather than relying on an outdated survey from a prior transaction.
Zoning and Land Use Compliance
Confirming the property’s current zoning designation supports the buyer’s intended use is essential before closing — a property zoned for one use that a buyer intends to use differently may require a variance, special exception, or rezoning, none of which are guaranteed. This is significant enough to warrant its own dedicated review; see our article on zoning and land use issues for commercial buyers for more detail.
Environmental Due Diligence
A Phase I Environmental Site Assessment is standard practice for most commercial acquisitions, identifying potential contamination risks based on historical property use. Depending on the results, a Phase II assessment (involving actual soil or groundwater testing) may be warranted. Our article on environmental due diligence covers this in more depth.
Existing Leases and Tenant Estoppels
For an income-producing property being acquired with existing tenants in place, reviewing each lease in detail — and obtaining estoppel certificates from tenants confirming the lease terms, rent status, and absence of landlord defaults — is essential to understanding exactly what’s being acquired.
Financial and Operating Records
Reviewing historical income and expense statements, tax records, utility costs, and any service contracts (property management, landscaping, security) affecting the property helps confirm the actual economics match what’s been represented during negotiations.
Physical Condition and Property Inspections
A professional property condition assessment identifies deferred maintenance, structural issues, and the remaining useful life of major systems (roof, HVAC, electrical) — critical information for both valuation and post-closing capital planning.
Financing Contingencies and Timeline
Commercial real estate purchase agreements typically include a due diligence period during which the buyer can terminate the agreement (often with an earnest money refund) if issues are discovered. Coordinating the diligence timeline with financing contingencies and lender requirements is essential to avoid being contractually committed before diligence — and financing — are actually complete.
Acquiring commercial real estate and need thorough legal due diligence? Brent A. Levison, P.A. has over 25 years of experience guiding buyers through commercial real estate acquisitions across Florida. Contact the firm today for a consultation.
The information in this article is provided for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please consult a qualified attorney.