The Commercial Real Estate Due Diligence Checklist TDG Commercial Never Skips

The Commercial Real Estate Due Diligence Checklist TDG Commercial Never Skips

In commercial real estate, due diligence is where deals are protected -- or where problems get inherited. One missed item can surface as a six or seven figure issue after closing. That's not an exaggeration. It's the reality TDG Commercial has seen play out in the Macomb County market, which is exactly why they approach every acquisition with a comprehensive checklist and a non-negotiable commitment to leaving nothing unexamined.

Here's what that checklist looks like.

Financial Documentation -- The Starting Point

Every commercial due diligence process at TDG Commercial starts with the financials. That means reviewing the rent roll trailing 12 months -- a running picture of actual rent collected, not just what leases say should be collected. It means verifying those numbers against bank statements to confirm that what's on paper matches what's actually hitting the account.

Lease review goes deep here too. TDG Commercial looks at expiration dates, escalation clauses, reimbursement provisions, and any special terms that affect the economics of each tenancy. Estoppels -- written confirmations from tenants of the lease terms as they understand them -- are requested to surface any discrepancies between the lease documents and the tenant's actual understanding of their rights and obligations.

Title, Survey, and Legal Items

Title commitments are reviewed to confirm clean ownership and identify any liens, encumbrances, or title defects that need to be resolved before closing. Surveys are ordered to verify property boundaries, identify any encroachments, and confirm that easements affecting the property are understood and acceptable.

Zoning and use verification is also part of this process -- confirming that the property's current and intended use is permitted under applicable zoning regulations and that there are no outstanding code violations or permit issues that would need to be addressed.

Physical Condition -- The Items That Cost the Most When Missed

The physical inspection covers the five major capital items that buyers most often underestimate: roof condition, HVAC systems, plumbing, electrical, and parking lot. Each of these can represent significant capital expenditure if deferred maintenance has been allowed to accumulate.

Parking lots in particular are a frequently overlooked cost. Full replacement of a large commercial parking lot can run into six figures. TDG Commercial always includes a parking lot assessment in physical due diligence -- even when the lot looks acceptable on a walkthrough.

Any deferred maintenance items identified during inspection get factored into the acquisition analysis so buyers can negotiate appropriately or reserve for upcoming capital needs.

Environmental -- Phase 1 and Phase 2 Assessments

If a Phase 1 environmental assessment is already on file, TDG Commercial reviews it. If one isn't available, they order one. A Phase 1 assesses the likelihood of environmental contamination based on historical use, site inspection, and record review -- without any physical sampling.

If the Phase 1 identifies recognized environmental conditions that warrant further investigation, a Phase 2 -- which involves soil and groundwater sampling -- gets ordered. The goal is to make sure the property is clean and deliverable before closing.

Insurance, Taxes, Liens, and Capex Planning

Insurance quotes are obtained prior to closing, including reviews of flood zone status, wind exposure, and prior loss history. Current tax bills are reviewed -- and critically, TDG Commercial projects what taxes will look like after a sale. Reassessments following a commercial transaction frequently result in meaningful tax increases, and buyers who don't account for that going in often find their return projections don't hold up.

Any service contracts, utility meter arrangements, vendor agreements, outstanding liens, or active litigation involving the property are identified and addressed before closing. A final walkthrough is conducted, and tenant notices are prepared as part of the closing operations.

A capex and reserve plan rounds out the process -- giving buyers a clear picture of anticipated capital needs over the near and medium term so they can structure their acquisition financing and reserves appropriately.

TDG Commercial Leaves No Stone Unturned

The cost of a thorough due diligence process is a small fraction of what a missed item can cost after closing. TDG Commercial protects buyers in Macomb County and Rochester, MI by going through the complete checklist on every transaction -- regardless of how clean a deal looks on the surface.

If you're evaluating a commercial acquisition and want to make sure your due diligence process is airtight, TDG Commercial is the team to have in your corner.

📲 Ready to talk through due diligence on a commercial property? Reach out to TDG Commercial today.