6A —November 10 - 23, 2017 — Lender’s Directory — Financial Digest — M id A tlantic
Real Estate Journal
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L ender ’ s D irectory
By Reilly Noetzel, Barley Snyder Five commercial real estate due diligence considerations you may be forgetting
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additional land development and permitting requirements. These overlays may increase a buyer’s requirements or impose additional conditions related to the subdivision and land development approval process. 4. Condominium and Planned Community Con- cerns. A property often is subject to a condominium or planned community dec- laration. Some hallmarks of these ownership structures include common areas shared by owners of each property within the condominium or
planned community, as well as unit owners’ associations charged with administering the properties and enforc- ing any regulations. It is important to review any dec- larations (and accompanying plats) affecting the property to determine the obligations of each owner within the com- munity containing the prop- erty. Ask about items like signage permission, shared access, parking and potential amendments or additions to the planned community or condominium. 5. Leases. A lease encum- bering a property can be a due diligence nightmare. Leases often contain hidden clauses and rights. A tenant’s right of first refusal could be det- rimental for a buyer in any transaction, especially if the right is initially undisclosed and the tenant later refuses to consent to a waiver of that right. It is important to obtain an estoppel certificate from any tenant at the property you are purchasing. These certificates help to ensure the lease you are assuming is valid and enforceable. In the event that a buyer is obtain- ing financing for its purchase, a tenant, in connection with an estoppel certificate, may also request a subordination and non-disturbance agree- ment (SNDA). SNDAs subor- dinate the tenant’s leasehold interest to the buyer’s mort- gage, but assure the tenant will not be “disturbed” in its occupancy of the property in the event of a foreclosure of the mortgage. These items require additional negotia- tion, so be sure to adequately review them during any due diligence phase. In order to review any of these due diligence items, it is important at the outset of a transaction to ensure the seller discloses all available information and documenta- tion related to the property. Additional investigation may include searching the local re- corder of deed’s office, obtain- ing a zoning compliance letter or engaging an appraiser to appraise the property. Reilly Noetzel is an as- sociate in Barley Sny- der’s Lancaster, PA office, whose practice includes both real estate and con- struction. Contact him at rnoetzel@barley.com or at 717-399-1561. n
he due diligence phase is crucial to any real estate transaction.
can create an opportunity for a reduction in purchase price or additional purchase incentives. Here are five due diligence items to consider: 1. Access. Consider wheth- er the property you are pur- chasing has sufficient legal access. Some easements and access agreements may not be recorded, in which case it is important to speak with the sellers regarding the property’s current access ar- rangements. 2. Stormwater Manage- ment. Storm water manage- ment facilities may implicate
various maintenance and repair obligations set by state environmental agencies. In Pennsylvania, the existence of a property’s post-construc- tion stormwater management facility could mean numerous state maintenance obliga- tions, as well as specific notice and consent requirements for subsequent property trans- fers. 3. Zoning Overlays. Al- though a property’s zoning classification is a common due diligence consideration, municipalities often enact overlay zones which impose
When prop- erly drafted in an agree- ment of sale, it can allow buyers to ob- tain ample i n f o r m a - t i on about a property.
Reilly Noetzel
Perhaps most importantly, it could give buyers additional negotiation leverage. An un- foreseen issue exposed during a due diligence investigation
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