Due Diligence Checklist for Commercial Real Estate Transactions in South Florida
Commercial real estate investments in south Florida can provide lucrative returns when they are selected and managed properly. Rather than just rushing into a transaction, an investor will be more likely to realize those returns if he follows a due diligence checklist on commercial real estate transactions in Miami and anywhere else in the State of Florida. The key items on that checklist are as follows:
- ACQUISITION DOCUMENTS
Both Purchaser and Seller must confirm that they are satisfied with the purchase contract and all ancillary documents, including corporate authorizations and approvals, escrow agreements, and disbursement instructions.
- TITLE AND ZONING
The transaction should not close until the Purchaser has reviewed the title policy and any applicable surveys, and has concluded that no exceptions will preclude him from acquiring a clean title to the commercial real estate.
- TENANT AND LEASE REVIEWS
The Purchaser should analyze leases to confirm the building’s occupancy and any vacancies. They should also confirm and arrange for transfers of tenant security deposits.
The Purchaser’s accounting team should review the building’s historical financial performance and any available pro forma projections, as well as maintenance and utility bills and capital improvement expenses.
- LITIGATION AND OTHER LEGAL MATTERS
The Seller should disclose all actual and threatened or pending litigation and provide the Purchaser with access to litigation files. This will give the Purchaser a better picture of legal risks that run with the building.
The Purchaser should review existing insurance policies, and they should contact their own insurance carriers to get accurate quotes for new insurance well before the Closing of the transaction. Exposure to hurricane damage or flooding is a significant factor in South Florida. New insurance policies may be substantially more expensive and may change the financial appeal of the transaction.
- REGULATORY REVIEW
The Purchaser should independently verify that the building is not subject to environmental or other regulatory actions.
- INSPECTION AND INVENTORY
The Purchaser should schedule a physical inspection and property inventory as close to the Closing as is possible.
About the Author
Alejandro E. Jordan is the Chair of the Jordan Pascale, PL’s Commercial Real Estate Law Group, with over a decade of experience in the business of real estate, finance, development, and due diligence. His broad base of knowledge allows him to stay ahead of the game and keep abreast of the latest real estate issues and trends.
ESQ.title law firm has over 20 years’ experience as advisors to foreign national and domestic real estate investors, real estate owners and tenants, developers, real estate investment companies, and ultra-affluent high net worth individuals. If you have any questions on whether or not a particular a commercial real estate transaction is right for you, need assistance in acquiring or in analyzing due diligence on a particular opportunity, contact us at 305-501-2836 or visit us at www.JordanPascale.com for a complimentary consultation for immediate assistance. Our offices are conveniently located in Miami, Florida (Coral Gables), Miami-Dade County and Palm Beach County.