REAL ESTATE DUE DILIGENCE BEYOND THE CHECKLIST Prepared by: Kendall D. Adair, Esq. Harris, Finley & Bogle, P.C. 777 Main Street, Suite 1800 Fort Worth, Texas 76102 817.870.8700 kadair@hfblaw.com for TEXAS ADVANCED PARALEGAL SEMINAR October 4, 2017 Presented by the Paralegal Division State Bar of Texas 582365.1 Purchaser s Due Diligence Checklist Page 1
FOR PURCHASER S USE ONLY Due Diligence Checklist [Note: This is not a comprehensive acquisition checklist. Select items are presented below for discussion.] Issue Date:, 2017 Project Project Type: [land; office; warehouse; retail; multifamily, etc.] Project Proposed Closing Date: SELLER:, 20 PURCHASER: SELLER S COUNSEL: LENDER: PURCHASER S COUNSEL: Kendall D. Adair Harris, Finley & Bogle, P.C. 777 Main Street, Suite 1800 Fort Worth TX 76102 817.870.8715 817.332.6121 (direct 817.333.1198) kadair@hfblaw.com LENDER S COUNSEL: 582365.1 Purchaser s Due Diligence Checklist Page 2
TITLE COMPANY: SURVEYOR: SELLER S BROKER: PURCHASER S BROKER: ENVIRONMENTAL ENGINEER: CIVIL ENGINEER (LAND PLANNER): PROPERTY INSPECTION COMPANY: STRUCTURAL ENGINEER: 582365.1 Purchaser s Due Diligence Checklist Page 3
1.0 Preliminary Site Information: 1.1 Legal: Lot, Blk, Additional, County, Texas (or attached metes & bounds) 1.2 Site Dimensions Acres: Square Feet: 1.3 Impervious Cover Requirements? 1.4 Confirm Direct Access to Public Road or Street: 1.5 Any curb cut or median break issues? TxDOT approval(s) required? 1.6 Road Conditions: New road(s) required? Road Improvement Required? _ Cost/Responsibility:$ / 1.7 Traffic Lights needed? 2.0 Acquisition Terms 2.1 Purchase & Sale Agreement 2.2 Delivery of Independent Contract Consideration 2.3 Delivery of Earnest Money/Escrow Deposit 2.4 Warranty Deed [General; Special; Deed w/o Warranty; Quitclaim] 2.5 Assignment of Leases 2.6 Bill of Sale 2.7 Assignment of Contracts 2.8 Non-Foreign Affidavit 2.9 Closing Instruction Letter 2.10 Closing Statement 3.0 Title/Survey: 3.1 Commitment for Insurance 3.2 Copies of exceptions to title listed in Commitment for Title Insurance, including recorded final plat, easements and restrictive covenants 3.3 Policy Pro Forma 3.4 Owner s Policy of Title Insurance 3.5 UCC Search State and County 3.6 Current On-The-Ground Survey to 582365.1 Purchaser s Due Diligence Checklist Page 4
3.7 Is Property within 100 year flood plain or subject to flood hazard? 4.0 Existing Due Diligence Materials: 4.1 Soil reports and compaction tests 4.2 Existing Construction Documents and Warranties 4.3 As Built Building Plans and Specifications 4.4 Architect s Certification of Completion and ADA Compliance 4.5 Health Department approval for facilities 4.6 Fire Department approval of fire and safety systems 4.7 Elevator approval (if required by local code) 4.8 List of violations issued by the Building Department (if any) 4.9 All zoning and other code variances granted 4.10 Certificates of Occupancy 4.11 Zoning Classification Zoning letter? 4.12 Platting/Subdividing Requirements and Process: 4.13 Floor plans 4.14 Termite inspection report 4.15 Itemized inventory of all personal property 4.16 Site Plan 4.17 Standard lease and deposit agreement (rental property) 4.18 Copies of historic and projected capital expenditures with supporting details for the last 5 years 4.19 Copies of tax statements for the current year and for the last 5 years to 582365.1 Purchaser s Due Diligence Checklist Page 5
4.20 Copies of all existing contracts and agreements affecting the property including: 4.20.1 Brokerage 4.20.2 Management 4.20.3 Maintenance 4.20.4 Landscaping 4.20.5 Pest control 5.0 Specific Development Issues: 5.1 Easements required? Electrical to Water Gas Sanitary/Sewer Communications: Other: 5.2 Setback Requirements? 5.3 Height Restrictions Exterior / Interior / 5.4 Any pending taxes/protests? 5.5 Ag Exempt? Are rollbacks applicable? Who pays? When? 5.6 Estoppels from existing Property Owner s Associations 5.7 Estoppels from third parties under Reciprocal Easement Agreements, Parking Agreements, etc. 6.0 Environmental: 6.1 Obtain Phase 1 Environmental Report (or copy of existing report) 6.2 Obtain Phase II Environmental Report (if required) 6.3 Reliance letters (if needed) 582365.1 Purchaser s Due Diligence Checklist Page 6
6.4 As needed: Closure reports/certificates Underground storage tank reports Notices regarding environmental conditions / hazardous substance release 6.5 Wetlands: Does site contain designated wetlands? 6.6 Endangered Species: Is site habitat for endangered species or animals that must be accommodated? 7.0 Utilities: 7.1 Water Provider Size/capacity Cost/Responsibility to deliver 7.2 Electric available? Cost/Responsibility to deliver: 7.3 Gas Cost/Responsibility to deliver: 7.4 Storm Drainage Size/capacity Cost/Responsibility to deliver: to 582365.1 Purchaser s Due Diligence Checklist Page 7
7.5 Sanitary Sewer Size/capacity Cost/Responsibility to deliver Lift Station required? 7.6 Telecommunications available? Cost/Responsibility to deliver: Data capability 7.7 Telephone Service Data Capability (If a telephone vault is required, obtain design criteria) 7.8 CATV or Satellite TV available? Cost/Responsibility to deliver: to Data capability 7.9 Trash Removal: Cost/Responsibility to deliver 582365.1 Purchaser s Due Diligence Checklist Page 8
8.0 Economic Incentives: 8.1 Property Tax Abatement 8.2 Ch. 380 Agreement 8.3 TIF 8.4 Other Funds or Fee Waivers 9.0 Leases: 9.1 Rent Roll and copies of Tenant Leases 9.2 Property status report (summarizes leasing and collection data) 9.3 Property trend report (summarizes revenue item by month) 9.4 Lease expiration report (shows future lease expirations) 9.5 Occupancy report 9.6 Days vacant report 9.7 Market rent deviation report 9.8 Scheduled concessions report 9.9 Month-to-month deposit recap 9.10 Cash receipts journal 9.11 Security Deposit control report 9.12 Delinquency report 9.13 Prepaid units report 9.14 Tenant Estoppels 9.15 SNDAs (subordination, nondisturbance and attornment agreement) to 582365.1 Purchaser s Due Diligence Checklist Page 9