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Before You Buy That Commercial Real Estate . . .


Due Diligence Feasibility Issues to Carefully Investigate

Before you buy a commercial tract of land, you must address an abundance of site suitability questions. Most commercial real estate lawyers in Houston will agree that a buyer must undertake an exhaustive due diligence or feasibility investigation of the proposed site prior to the closing.  The commercial real estate contract must adequately preserve the buyers absolute right to terminate the contract within a commercially reasonable time period during a due diligence investigation period.

It is the job of the commercial real estate attorney to assist the buyer during contract negotiations, including securing in the real estate contract for the buyer an option or free look period which will precede the closing.  The commercial real estate attorney will also be familiar with the important covenants which should be included in the earnest money contract, including those which address the areas of most concern to buyers.

The buyers due diligence or feasibility investigation should minimally consider the following:


  •     existing usages of the surrounding properties
  •     visibility
  •     traffic counts
  •     accessibility
  •     topography
  •     soil conditions
  •     availability of utilities
  •     title or survey issues
  •     contaminated land (including nearby properties), environmental issues
  •     endangered species
  •     neighborhood groups attitude toward development
  •     local government attitude toward development
  •     building permit issues
  •     capacity of available utilities
  •     zoning issues in areas where municipalities have zoning ordinances
  •     platting requirements
  •     drainage issues, including water retention/detention requirements.

Before the contract is executed (but at the latest, early in the feasibility period) the prudent buyer should also engage architects, engineers, and contractors.  These professionals are best suited to navigate the proper course through the site development investigation.  In fact, they may suggest their own due diligence list (arising out of their own extensive professional experiences) which may be even more exhaustive than the preceding list.

It is far less expensive to learn at an early stage that you cannot feasibly develop a tract, and to terminate that contract; than to forfeit the entire earnest money deposit, or to purchase land which you cannot develop for its intended use.
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