Commercial Real Estate Closing Checklist

One of the main reasons that a commercial property transaction can fail when it is close to closing is because one of the parties has forgotten an important aspect of the transaction that must be considered before the relevant documents can be signed.

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

Acquisition documents

You need to make sure that all the documents related to the purchase are in place and ready. This includes all of the following:

• A signed letter of intent
• Each and every one of the drafts 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 in custody
• Documentation of initial cash deposits for the purchase.
• Make arrangements for any bank accounts required to be set up

The title matters

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

• You have selected a title company to which you can send the seller’s title pledge.
• 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.

Retention issues

If you are buying an apartment building or any form of commercial property where other businesses can become tenants and rent space, you should have all of the following:

• A current certified rental list
• A review of all current leases and related documentation for each.
• Your legal advisor should review these leases and compare them to the current review.
• You need to review all current tenant files
• Resolve any outstanding issues related to the lease.
• Receive all reports related to tenants, including sales reports and accounts receivable.
• Transfer all tenant security deposits
• Review the tenant’s credit and payment history
• Prepare and sign the Estoppel Certificates of the tenant
• Final verification 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
• An expense list for all expenses currently operating under the property.

Litigation

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

Sure

Obtaining insurance for the building is crucial, so it is important to get a quote as soon as possible in the procedures. Part of this may be covered by the Property Management Agreement.

Physical property inspection

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

Final closing documentation

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