Under the current market conditions, it is important for businesses to understand the practical aspects of real estate transactions. Our team at M. Ross & Associates, LLC has put together a checklist to ensure businesses have everything they need for a successful real estate transaction. Although each of these topics is much more complex, the list below is a good overview of what businesses need to consider when purchasing an office building, warehouse, manufacturing facility, or other commercial property in New Jersey.
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Getting the Deal Started
One of the first things a business should do is arrange meetings with the seller to receive all documents and information about the property. During this process, your team should determine the scope of the due diligence, such as the budget and physical inspections testing. You also want to consider and evaluate.
Securing a Title
Once you gather all the documents and information about the property, you should secure back titled information. This includes the existing title policy of the seller, or the commitment commissioned by a realtor or third party. It should also include reciprocal easement agreements, deed restrictions that affect the property’s development and redevelopment, use, operation, maintenance, and more.
Get an Appraisal
Another important step businesses should mark on their checklist is appraisals. You will need to secure any existing appraisals and commission independent appraisals to confirm the market value and your purchase price—many lenders will require this.
Property Inspection
It is important to secure any architectural plans, specifications in the seller’s possession, drawings, square footage certificates, and site inspection reports. Key areas you should focus on when conducting a commercial property inspection are walls, roofs, HVAC systems, and fire suppression systems.
Environmental Inspection
Another area your business should inspect before purchasing a commercial property is to do a thorough environmental inspection. This includes collecting the seller’s environmental reports and tests regarding soil, water, radon, mold, asbestos, and lead paint.
Zoning & Permits
Before purchasing a commercial property, it is important to confirm that the property’s intended use is permitted in the subject zone. For example, if you want to use the commercial property to store hazardous materials, you will need to ensure that the property has the zoning and permits to facilitate your business needs.
You should also ensure that the property has the approvals and permits required to perform any build-out or site plan you may anticipate You can do so by asking the seller to provide you with all past and present permits, licenses, and approvals related to the property.
Building Operations
Below is a list of paperwork you need to complete inspection related to the building operations:
- Insurance information (including all policies)
- Current operating and capital expense budgets for the property
- Utility bills of the last two to three years
- Three years’ worth of financial statements for the property
- Real estate tax bills for the last three years
Tenants
If you are purchasing an income producing commercial real estate property, you should ask the seller for a copy of all the leases and related guarantees for each tenant. This includes the rent toll, a list of security deposits, financial statements, etc.
It is important that you have a clear understanding of the occupancy of the building and the duration of all leases if your business plans on taking on the role as a new landlord.
Potential Claims
When purchasing a commercial property, businesses always need to be aware of potential liabilities. For such reasons, it is important that you investigate the history of any litigation affecting the sellers, the property or disputes relating to deals or agreements.
Purchasing commercial real estate is a complex job for businesses. Thankfully, with our New Jersey commercial real estate attorneys on your side, we can help protect your investment. Contact us today at (201) 897-4942 to schedule a consultation!