Due Diligence refers to the time after signing a purchase contract that a buyer has to inspect a property. During this time the buyer is able to make a decision whether or not they want to buy or lease a property without recourse. Use the following due diligence checklist to make sure all diligence items are addressed:
1. Acquisition Documents
All drafts of purchase contract as well as fully executed purchase contract.
Copy of the construction blueprints, engineering plans, and as-built drawings in the seller’s possession.
ALTA survey and topographic study for the property.
Zoning Compliance Certificate for the property and all zoning approvals, including variances and pending applications.
The most recent title policy on the property, including declaration of covenants, conditions, restrictions, reservations and easements on the title of property.
3. Tenant Leases
A complete copy of each written lease and each guaranty, including amendments, and a certification that there are no oral leases or oral understandings. Verify all documents are in the full name of the seller.
An accounting of all rent and other income, common area maintenance, security deposits and real estate tax contributions paid by any tenant at the property, including, a certified rent roll, showing current rent, previous rent if applicable, delinquencies, security deposits, years of occupancy, lease commencement date and lease termination date.
An accounting of all historical income and expenses related to the property, including collection reports and tax statements for the last three years.
All security deposits and any other amounts to which any tenant, vendor, or any other party may be entitled.
A copy of the last three years’ real estate tax bills, including special assessments or incentives, copies of all tax protests, related correspondence and protest results for the property.
Copies of the prior two years’ utility bills for the property.
5. Service Contracts
A true, correct and complete copy of each written service contract.
Copies of any and all other contracts and agreements relating to the operation, maintenance and repair of the property.
Legal description of the property.
A schedule of pending litigation, if any, affecting the property or seller’s ability to convey the property.
A copy of existing insurance policies and certificates and any pending claims against the property.
8. Physical Property Inspection and Review
Seller’s Property Condition Assessment. Include structural, mechanical, code compliance and ADA compliance.
Environmental reports that include but are not limited to Phase I and Phase II site assessments, NFR letters, mold abatement reports and underground storage tank testing and closure reports.
Appraisals that include soil tests, foundation reports, termite or radon studies.
9. Personal Property Inventory
A list of all personal property, if any, owned by the seller, located at the property, and used or useful in connection with its operation and maintenance.
10. Governmental Review
A list of all permits, partial certificates of occupancy, certificates of occupancy, warranties, government notices, special assessments, code violations and unexpired guaranties and copies of same in seller’s possession or control.
11. Closing and Miscellaneous Actions
Request prorations from the seller and confirm all are correct.
Combine costs of correcting any problems discovered through due diligence and initiate any changes to the Closing Document.
12. Property Operations and Management
Select Property Management company and finalize an agreement.
13. Financing Matters (If applicable)
Contact mortgage consultant and select a lender.
Review and negotiate loan application before signing.
14. Internal Procedures and Reporting
Issue transition memo to Asset Management, Property Management and Accounting.
15. Any and all other matters as purchaser may deem reasonably necessary to satisfy itself, in its sole discretion, concerning the property and the status of the property’s title.