Purchaser Due Diligence in Commercial Real Estate Acquisitions

by Practical Law Real Estate

A Practice Note that provides guidance to a purchaser and its counsel on conducting due diligence for the acquisition of commercial real estate. This Note discusses the critical steps and transaction-specific considerations involved in the purchaser's investigation of a property. It outlines several material areas of legal due diligence, including the review of leases, service contracts, title, and survey. The guidance also covers compliance with laws governing land use, zoning, and environmental issues. It specifically addresses environmental liability concerns under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) and the role of Phase I and Phase II environmental site assessments. This Note explores the process of reviewing existing loan documents for a potential loan assumption. The note explains how due diligence findings impact the negotiation of a purchase and sale agreement, particularly the representations, warranties, and indemnities. It also addresses unique considerations for due diligence in multistate transactions involving a portfolio of properties.