How a commercial real estate buyer should handle due diligence

After signing a contract for your commercial building purchase, you begin due diligence, which is usually a 45- to 60-day period you and your broker use to inspect every possible issue, use or aspect of the property. There are a number of key areas to consider and you only have a limited time to do so.

“Next to negotiating the purchase price, the due diligence period is probably the most important part of the transaction from the buyer side,” says Simon Caplan, SIOR, principal at CRESCO Real Estate.

Smart Business spoke with Caplan about the critical points to check — or re-check — during the due diligence period.

Who do you check with about property use and government concerns?

Every community has different zoning codes and definitions vary from city to city. It’s imperative to check with the mayor or local zoning official that your planned use of the property fits within the current zoning and to ascertain what you need to do to get all required occupancy permits to operate your business. This would include building permits if major renovations or an addition are part of either your short- or long-term plans. It’s also important to ensure your building will pass fire and building inspections. In addition, some cities require a point of sale inspection; for the most part, these are the inner ring suburbs bordering the city of Cleveland such as Bedford and Garfield Heights.

Usually the availability of a tax abatement, income tax credits or other economic incentives are mentioned in the purchase agreement. However, the due diligence period is most likely when the incentives are actually granted.

What are some best practices to follow with the title?

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