Due Diligence Checklist for Commercial Real Estate Transactions

Due Diligence Checklist for Commercial Real Estate Transactions

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Title IssuesALTA SurveyEnvironmental ComplianceZoning ComplianceFinancial records inspection

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Commercial real estate transactions are very different when compared to residential real estate transactions. One of the main differences is ownership – individuals own residential real estate for residence purposes whereas entities and individual companies own commercial real estate primarily for business purposes.



The desire to limit liability is one primary reason why entities own commercial real estate.

Due to complexity, liability and huge amounts of money that can be involved and proper due diligence has become the most important component in these commercial real estate transactions.

Due to complexity, liability and huge amounts of money that can be involved and proper due diligence has become the most important component in these commercial real estate transactions.



Here is a broad due diligence checklist such as information, reports, physical inspections, documents, research, investigation, etc. one must conduct in order to empower the purchaser or project manager to make a timely go or no-go decision and help during negotiations.



Title Issues• The title review process is used to determine the condition of the title to be transferred to the buyer and identify any potential title issues.• You must analyze each exception listed and thoroughly research each documents corresponding to each of the exceptions.

You must analyze each exception listed and thoroughly research each documents corresponding to each of the exceptions.

You must analyze each exception listed and thoroughly research each documents corresponding to each of the exceptions.



ALTA Survey • Title Insurance firms rely upon a current and accurate land title survey of the property based on the new 2011 ALTA standards.• A prerequisite to obtaining an ALTA Survey is a current title commitment.• The title commitment will contain the legal description of the property and of any encumbrances to prepare the ALTA survey.• An ALTA Survey will then provide the title company with the information required to insure the title to the land and improvements to the high degree that a commercial development may require.



An ALTA survey is a comprehensive survey of the existing property in “as-is” condition. Some of the information that it would show is:

• Easements that may encumber or benefit the property• Possible encroachments across boundary lines or easements• Access to a public street or lack thereof• Zoning of the property along with setback requirements• Flood Zones that may affects the subject property• Evidence of any use by other parties• Location of any water boundaries on the subject property• Evidence of cemeteries• Names of adjoining property owners



ALTA surveys often are one of the most useful documents in the due diligence process, especially when they include one or more of the optional levels of detail available.

• An ALTA Land Title survey is a physical survey conducted by a licensed surveyor which allows the purchaser to review and confirm that the property matches with his or her business objective. • It may be very difficult to get a clear “as-is” picture from the legal documents/records alone.


The ALTA survey also provides the buyer with the exact location of utility and other easements and physical encumbrances, as well as depicts the precise location of physical improvements located on the property. • This information can also be very useful -as any further construction or remodeling improvement could depend on these layouts.

An ALTA survey should be initiated early enough in the due diligence process so that there is enough time to address any issues prior to closing.

An ALTA survey should be initiated early enough in the due diligence process so that there is enough time to address any issues prior to closing.


Environmental Compliance: • Describing this subject in detail is beyond the scope of this article. • Environmental inspection surveys look at issues like asbestos, underground tanks, underground tanks, wetlands, hazardous materials contamination, radon, mold, flood zones, etc and several types of regulatory compliance.


Zoning Compliance: • Current and future zoning compliance must also be researched. • Zoning analysis comes into play for most commercial real estate projects.


• The best laid plans can be useless if land use and zoning issues are not thoroughly researched. • Property use and land use is governed by local, municipal and state rules. • These rules called “Zoning laws or ordinances” dictate what can a commercial investor may build/use (where they can build and how the property may be used).


PZR (The Planning & Zoning Resource Corporation), our sister firm, is America’s largest Zoning Analyst and Due Diligence Firm that specializes in analyzing risks and providing zoning due diligence services and documents throughout USA and Canada.


Financial records inspection: Potential buyers will surely need to review and research all financial records of the property or land. For example: Annual profit/loss for the past 3/5 years (minimum), balance sheet, tax returns, insurance, existing leases, and more.


Commercial property due diligence is critical for all potential buyers to make a sound investment. Smith-Roberts National Corporation is the expert in Nationwide ALTA Land Title Survey coordination for complex commercial real estate transactions that may span several states and sites while providing zoning due diligence through our sister firm PZR(The Planning & Zoning Resource Corporation).

Please contact us and we can help you in a cost effective and timely manner.


Smith-Roberts National Corporation is a land survey coordination firm that specializes in coordinating Land Title Surveys for multi-site, multi-state real estate and single commercial transactions.

Incorporated in 1981, Smith-Roberts National Corporation has become a nationwide leader in the Land Survey industry with exceptional service, timely deliveries and reasonable fees. Smith-Roberts National Corp. is a nationwide ALTA Land Survey coordinator and the originator of the DesignReady Survey®.



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Smith-Roberts

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Phone: 405 840-7094 Fax: 405 516-2680 Toll Free: 800 411-2010

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