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Performing due diligence before buying commercial property

Prospective purchasers of California commercial real estate most likely do not look forward to performing due diligence, but they make the effort because they know that taking shortcuts in this area can cast a long shadow. Poring over documents may not provide much in the way of excitement, but the information this kind of research can yield about the legal, financial and physical condition of a property could be crucial.

The information uncovered during due diligence can protect commercial property sellers as well as buyers. While the process provides buyers with what they need to make more prudent decisions, sellers are less likely to be sued over undisclosed defects or misrepresentation. The due diligence process generally begins in earnest when an initial offer is made, and buyers often have 30 days or less to gather the required financial and legal documents and have the property physically inspected.

Performing due diligence involves studying legal and financial documents to ensure that the property is free of liens and other title defects and generates the kind of income that sellers claim. Physical assessments of the property include inspections and soil tests. Commercial property buyers should also check the results of any previous appraisals to gauge market trends and find out what kind of modifications or alterations have been made to the building in recent years.

Failing to perform adequate due diligence can lead to costly and protracted real estate litigation. Attorneys with experience in this area could help property buyers to conduct effective due diligence by pointing out the kind of issues that could derail negotiations or prompt bitter legal disputes. Attorneys may also seek to keep commercial property transactions on track by addressing the legal issues uncovered during the review.

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