Law Office of Henry B. LaTorraca Civil Trial Attorney

Commercial property buyers can't neglect due diligence

Californians who want to purchase property need to do more than simply find good deals. Experts say that it's just as critical to perform due diligence. This entails learning about the land or buildings that they're going to purchase before they finalize the transactions in question. With commercial properties, due diligence also includes aspects like finances.

Performing due diligence may include a range of different tasks. For instance, investors may find it wise to perform a basic visual inspection of fixtures like plumbing, ventilation and elevator shafts to ensure that there are no obvious material deficiencies. Although professional expertise is necessary for many of these assessments, buyers should still obtain and review copies of all inspection reports so that they can assure themselves of the results. Reports detailing environmental conditions, geology, soil, maintenance histories, structural engineering and commercial operating incomes are all important parts of making an informed purchase decision.

Buyers should be aware that conducting due diligence does more than just protect sellers from liability. Taking these steps also helps purchasers reduce the risk associated with property investment. Contracts typically include due diligence allowances, and a buyer who isn't satisfied after conducting their own assessment usually has the right to withdraw their purchase offer without being subject to a breach of contract penalty.

Investing in commercial real estate isn't always a smooth process. Even after performing due diligence, would-be property owners might be surprised to discover that sellers failed to disclose aspects of the asset in question or conditions that affect the viability of operating the property as a business enterprise. Becoming the victim of seller misrepresentation can be a major setback for business-minded investors, but attorneys with real estate transaction experience may be able to help them avoid such pitfalls through contract inspection.

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