Today we find that many contracts for the sale of a commercial property are subject to due diligence prior to settlement. In that case the buyer of the property will have the facts of the property checked and reviewed to ensure that everything is in order.
The fact and event of due diligence should have been covered in your listing activity with the client. They should have been told that the process is likely to occur between contract and settlement; on that basis they could have had time to deal with any outstanding issues and problems.
I like clients to be prepared when selling their property, and all hurdles or challenges to be minimised. Given that you have done all the hard work as an agent in getting the property through the marketing phase, to inspections and the negotiation, you really do not want things ‘falling over’ in due diligence.
Now it should be said that you are not an ‘expert in everything’ when it comes to checking off the property facts, so if any doubt or challenges exist in the detail of a property, ask the client to bring in experts such as engineers, solicitors, and surveyors to help resolve the problems. Make sure you do all of this before you take the property to the market.
Some of the things to check in preparing for due diligence and would include facts and details inside the main categories of:
- Lease documentation for all tenants and the terms and conditions of each occupancy.
- Tenant contact detail
- Property owner detail and legal title
- Rental arrears, charging, invoicing, and accuracy to the lease documents.
- Property occupancy
- Tenant mix configurations
- Property usage and zoning
- History of occupancy
- Environmental and Heritage factors
- Orders, Notices, or Encumbrances and Rights of Way
- Relationships with neighbouring properties
- Income recovery
- Expenditure records for the current and previous years
- Outgoings analysis for the property today and the recoveries of outgoings that apply for each tenant.
- Budgets for Income and Expenditure
- Lease incentives
- Tenant negotiations
- Property boundaries
- Property site and access issues
- Development opportunities
- Structural concerns and factors
- Building approvals and codes
- Essential services
- Plant and equipment
- Maintenance activities and contractors
- Sales figures in a shopping centre
- Marketing budgets and processes in a shopping centre
- Renovation and refurbishment factors and requirements
So this is quite a comprehensive list. Yet, it is only skimming the surface and some of these topics can be quite ‘deep’. Ask the right questions at the time of property listing, and get in the experts to create the answers and check all the property detail before the property is taken to the market for sale.
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