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American Bar Association - Defending Liberty, Pursuing Justice

Summer 2008

Vol. 4, No.3

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Real Estate


Due Diligence Checklist

  1. Physical
    1. Property description including detailed description of mechanical systems.
    2. Plans and specifications, if available.
    3. Roof report.
    4. Engineering reports to cover the following items:
      1. structure, including the condition of the slab, columns, bumpers, structural walls, exterior doors, and dock doors;
      2. masonry;
      3. exterior caulking;
      4. exterior painting;
      5. washrooms and locker rooms;
      6. interior ventilation;
      7. unit heaters;
      8. mechanical systems including sprinkler systems, electrical, plumbing, and HVAC;
      9. lighting, ceiling tiles and light lenses, dry wall, and entrance steps;
      10. compliance with laws and ordinances, including ADA;
      11. building size;
      12. parking lot; and
      13. landscaping.
    5. Phase I Environmental Assessment (including asbestos).
    6. Phase II Environmental Assessment, if recommended by engineer.
    7. Floor and service plans.
    8. Meters in multitenant spaces.
    9. Permits.
    10. Soil analysis for load-bearing capacity, if required.
    11. Access and other appurtenant rights, such as easements, that benefit the property.
    12. Availability and adequacy of utilities.
    13. Code violation search from the local municipality, if required.
    14. ADA compliance.
  2. Tenant Analysis (If There Are Tenants)
    1. Financial statements and credit reports.
    2. Tenant interviews covering the tenant’s plans regarding the building, comments regarding the building and its management, and a discussion of the business outlook of the tenant.
  3. Economics of Property
    1. Analysis of historical income and expense statements.
    2. Comparison of historical income and expense statements to purchaser’s pro form/budgets.
    3. Cash flow analysis.
    4. Review of tenant files including billing statements, tenant collections, and comparison to lease.
    5. Review and analysis of reimbursable and nonreimbursable expenses.
  4. Lease Analysis (If There Are Tenants)
    1. Review all leases and abstract the same.
    2. Analyze lease problems, if any.
    3. Analyze expansion rights and option space in multiple-tenant buildings for conflicts.
    4. Analyze potential conflicts between use clauses and restrictions on retail multitenant properties.
    5. Review for options to purchase, options to terminate, and rights of extension or renewal.
    6. Review “Go Dark” clauses and assignability clauses on multitenant retail properties.
  5. Market Analysis
    1. Rent comparable and sale comparable.
    2. Market description/supply and demand.
  6. Legal
    1. Review title commitment and exception documents.
    2. Review survey.
    3. Review zoning.
  7. Ancillary Contracts.
    1. Insurance.
    2. Certificates of occupancy or equivalent.
    3. Warranties (including roof) and assignability thereof.
    4. Management company in place to manage the property.
    5. Service contracts-cancellation clauses.
    6. Any common area management agreements.
    7. Other agreements.


This checklist is from “The Essentials of Due Diligence” by Sidney G. Saltz, published in Probate & Property, Volume 22, No. 3, May/June 2008. Copyright © 2008 by the American Bar Association. Reprinted with permission.

Sidney G. Saltz is a senior counsel in the Chicago office of Holland & Knight and the group chair of the Section’s Leasing Group.

© Copyright 2008, American Bar Association.