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What due diligence is required when buying a commercial property with existing tenants?
Commercial property purchases come with many questions and concerns. You may have even more if the property already has tenants. In this article, we have outlined some of the most important general due diligence we complete and then the extra due diligence required to satisfy the existing tenant questions we know every Buyer has.
Zoning Search
A zoning search is crucial. This search ensures the property is properly zoned for its current use and answers questions about potential or future uses and plans. If the property has both residential and commercial tenants, we also ensure that the zoning allows for this mixed-use and that the tenancies are permitted from a zoning perspective. Most zoning searches will also let us know if there are any outstanding work orders or notices, along with a few other important facts about the property.
Tax Certificate When Buying a Commercial Property with Existing Tenants
This search tells us if any arrears of taxes exist. While this is always important, it is extra important when tenants are responsible for taxes, as tax arrears not only need to be dealt with before closing, but this data can also be an indicator of a tenant’s poor performance for payment history and alert us to potential problems with the current tenants.
Title Search
We also check title for any registered leases and review the history of the title for the property and alert you to any title concerns.
Unregistered Easements
This search tells us if a public utility such as Hydro has any unregistered easements for this property. We search each applicable hydro utility that may own an unregistered easement. While this is always important, you will want to be extra certain your tenants are aware and permitted entry pursuant to any easements, whether registered or unregistered.
Review of Leases and Contracts
If you are assuming the tenants for this property, we can assist with reviewing the leases and the conditions and terms as set-out therein. We can then report to you with respect to landlord expectations and responsibilities, and any concerns with current Lease Agreements and tenants.
Rent Rolls and Estoppels
We can help review the rent rolls and estoppels which confirm the current monthly rent, the terms of the lease, any deposits paid, and other important data.
Vetting the LTB and Corporate Searches When Buying a Commercial Property with Existing Tenants
We are able to pull and review corporate profile reports, bankruptcy act searches, PPSA etc., in order to understand the tenant’s basic corporate structure.
The due diligence period of any Agreement is a time of exploration and questions. It’s a great opportunity to reach out and let us know about your plan for the property, your plan for the tenants in occupancy, and to let us report to you on all of the above and more.
If you have any questions, Contact Us today! We can help.
The content on this website is for information purposes only and is not legal advice, which cannot be given without knowing the facts of a specific situation. You should never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. The use of the website does not establish a solicitor and client relationship. If you would like to discuss your specific legal needs with us, please contact our office at 613-563-7544 and one of our lawyers will be happy to assist you.
The content on this website is for information purposes only and is not legal advice, which cannot be given without knowing the facts of a specific situation. You should never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. The use of the website does not establish a solicitor and client relationship. If you would like to discuss your specific legal needs with us, please contact our office at 613-563-7544 and one of our lawyers will be happy to assist you.
