One of the main reasons a commercial property transaction can fail near closing is because one party has forgotten an important aspect of the transaction that must be taken into account before the relevant documents can be signed.

With that in mind, we’ve created a little checklist of things to keep in mind when closing on a commercial real estate property, to make sure you cover all the bases.

Acquisition of documents

You must ensure that all documents related to the purchase are in place and ready. This includes all of the following:

• A signed letter of intent
• Each and every draft of the purchase contract
• Any information related to your legal advisor
• Access agreements
• Any required client or portfolio manager authorization
• A fully completed purchase contract, which will be delivered on deposit
• Documentation of initial cash deposits for purchase
• Arrange any bank accounts that need to be opened

title matters

Title and zoning issues are also high priority, so make sure you have the following:

• You have selected a title company to which you can send the seller’s title commitment
• Take a HIGH survey and make sure you have the correct documentation
• Verify that all relevant leases and assets are in the seller’s name

tenant problems

If you are purchasing an apartment building or any form of commercial property where other businesses may become tenants and lease space, you must have all of the following:

• A current certified rental record
• A review of all current leases and related documentation for each.
• Your legal advisor should review these leases and compare them to the current revision
• Must review all current tenant files
• Resolve any outstanding issues related to the lease
• Receive all tenant-related reports, including sales and accounts receivable reports
• Transfer all tenant security deposits
• Check tenant’s credit and payment history
• Prepare and sign the tenant’s Certificates of Estoppel
• Final check of all documentation

Financial

The transfer of all relevant financial information is also extremely important. This includes:

• Copies of any historical or pro forma financial information
• Copies of utility bills
• Most recent tax returns
• A list of expenses for all expenses currently operating under the property

Litigation

You will need to consider the possibility that there is any current action against the existing property or owners and take that into consideration.

Sure

Getting building insurance is crucial, so it’s important to get a quote as early in the process as possible. Some of this may be covered by the Property Management Agreement.

Physical Property Inspection

Before any transaction is completed, the buyer must perform a physical inspection of the property to ensure that they are getting everything they expect from the property.

Final Closing Documentation

In order to complete the transaction, all relevant financial and legal documentation must be completed and delivered on time and completely accurate.