Due Diligence In Connection With Real Estate Acquisition and Construction

As the economy stabilizes and shows signs of improvement, many business owners are revisiting delayed plans to acquire new space or to make improvements to their existing locations as there are good opportunities in the commercial real estate market. In some locations, designated as Economic Revitalization Zones, State tax incentives with credits against the Business Profits Tax (BPT) or Business Enterprise Tax (BET) may be available.

In evaluating the suitability of property for your building or addition, price, functionality and appearance along with exposure to your customer base are big factors to consider, but to get real value and minimize surprises, you need an opportunity for full due diligence regarding all applicable land use regulations and any potential environmental conditions on the property.

Environmental conditions are not limited to hazardous materials. The presence of wetlands, including poorly drained soils which do not appear as a wet area in most seasons, can severely limit the development potential of any property. Locally mandated protective setbacks and buffer zones may prevent building or other improvements including parking lots, septic systems or drainage treatment on portions of the parcel that are otherwise fully buildable upland.

Similarly, the local zoning ordinance may have particular provisions that impact your use, for example, different parking requirements based on your activity. Thorough due diligence can also bring to light provisions of the ordinance that are favorable as well, for example, the availability of special exceptions to allow a 50 foot building height or a multi-use building.

This is a short summary. The best way to approach any real estate investment or building expansion is by assembling a team of qualified, experienced advisors, knowledgeable about commercial real estate, construction and the potential environmental and legal restrictions on the use of the target property.