When they plan to acquire a company or conclude a major deal, they conduct a legal audit of the future counterparty. In Western practice, the procedure is called due diligence. What does real estate due diligence mean?
What Should You Know About Due Diligence for Real Estate?
The due diligence procedure is gaining more and more popular among entrepreneurs. Translated from English, the term means the following – “ensuring due diligence.” The essence of due diligence is to provide detailed information about an investment object – a company, real estate, or land. When purchasing real estate or land, the buyer plans to use it. However, after obtaining a new property without proper legal control, the investor may have problems with the implementation of the planned projects.
In the Western tradition, due diligence for real estate is the name for a large-scale check of a business partner before a merger or conclusion of another significant transaction. During due diligence, the activities of the counterparty are analyzed from a legal standpoint, and the state of finances is checked. As a rule, a deep check is carried out before M&A deals. However, it is necessary to carefully analyze the state of affairs of counterparties not only before restructuring the business. This tool can be used widely.
Real estate dispute resolutions are:
- representation of interests in courts on all issues of land and construction legislation, legislation in the field of real estate and privatization, including challenging the cadastral value;
- pre-trial procedures for conflict resolution;
- resolution of complex and neglected situations;
- effective defense in court;
- legal reduction of the taxable base (cadastral value);
- obtaining consent to temporary restrictions on their rights in accordance with the law.
What Checklist to Follow for Real Estate Due Diligence?
The principles of real estate due diligence are actively used to obtain detailed information about a partner when making a deal. According to experts, in a few years, the level of popularity of due diligence will be the same as abroad. It can be invaluable information for those who want to penetrate the information systems of this organization. Implement data dictionary maintenance and change control procedures to ensure that the dictionary reflects the current data structure in the organization’s current information systems. Keep copies in remote locations.
A checklist to follow for real estate due diligence consists of:
- Environmental and Geotechnical Reports.
- AD Compliance.
- Financial confirmation.
- Occupancy Certificates and Licenses.
- Basic Property Information.
Verification of documents for real estate due diligence is an obligatory part of the preparatory stage of the purchase and sale transaction. Careful attention to this moment will help to avoid problems with real estate in the future. Contracts of sale, donation, exchange, rent, as well as certificates confirming the right to inheritance, etc., may appear as title documents. It is important to carefully study the originals of these documents. Wipes and sweeps cannot be in principle. If corrections are found, they must be officially certified by a notary.
The provision of Due diligence services is one of the priority activities of the company. Many companies have formed a strong team of investment analysts and can guarantee the clients the high quality of the work done. Among the specialists of the due diligence company, there are stock analysts, business brokers, real estate market analysts, M&A specialists, and many others.