Due Diligence Involved in Purchasing Commercial Property

If you are planning to purchase commercial property, you can protect yourself and your interests by doing due diligence prior to completing or commencing the transaction. Due diligence is the process of investigating the commercial opportunity to make sure you will be investing your money into a property that will give you a good return.

Commercial Property Purchasing and Due Diligence

Whether or not you are an experienced commercial investor, you may need guidance in handling the purchase of new property and properly investigating each opportunity because of the uniqueness of land and businesses. Consider the following prior to signing on to a commercial opportunity:

• Make sure you get complete financial records on the business from the previous owners for the past several years. This can help you determine if the location is profitable as it is being run or whether changes will be required to make it profitable.
• Unlike with the purchase of a home, the buyer must beware in commercial transactions. A buyer of commercial property is presumed to be a savvy business person and failure to adequately investigate prior to purchase will generally not be a defense for getting out of a contract.
• Get everything in writing. Do not accept word of the seller without written proof. A written document is generally presumed to encompass the entire agreement no matter what the seller says.
• You should compare the profitability of the business or land you are contemplating purchasing with that of other similarly situated plots of land or businesses.
• Assess the competition. Will nearby businesses be in direct competition with you?
• Make sure you know what kind of zoning laws will impact your business operations. There may be noise restrictions and other ordinances that you will need to take into account.
• Inquire as to what comes with the property purchase, such as equipment needed to operate an existing business or other fixtures you may want as part of the deal.
• Find out if the property is already subject to a lease or rental agreement. Some of these agreements must be assumed by a subsequent purchaser.

Getting Legal Help

An experienced commercial real estate lawyer can help you make sure you understand the due diligence involved in purchasing a commercial property. Your attorney can help you by reviewing documents, making sure the inspections are properly handled and advising you of your rights.