Inspections are going to vary from sale to sale from building to building and no two transactions are the same based on the level of due diligence completed by the Buyer. Financing will also influence the level of inspections required as CMHC will require a higher level of inspection and scrutiny than traditional financing. Another area that will influence the due diligence period is the condition of the building and the obvious repairs required, optional or mandated by financing.
One of the easiest methods of understanding what will be required for mandatory documents and potential physical inspections is to look at the Master List of Due Diligence items. Keep in mind the list is long and not everything on the list will be required for every sale or Buyer; however, if you look at the list you will quickly ascertain which items may potentially apply to you the Seller and the particulars of the sale.
There are obvious ones such as rent roll, survey(s), taxes, zoning, appraisals, mortgage statements, insurance policy, environmental studies (if any), and income & expenses.
One of the things you can’t discard is the level of inspections that may be performed. The due diligence period depending on the nature of the sale and the condition of the building can feel intrusive and never-ending. I have seen inspections in various stages go on for a year due to further knowledge arising from a proper discovery period and inspections. Satisfying all parties can be doting. This is when involving property management and tenants in advance will gain you a high level of cooperation, paying dividends. Most transactions go very smoothly and when professionally managed timelines are strictly adhered to, closings can be quick.
All that is required is a timeline of 30 days for completing a full due diligence checklist and an additional 30 days for the lawyers and lending institutions to complete their obligations. This is very realistic, and the sale can be completed excluding a marketing period of 60 days. This takes a high level of cooperation, preparation/organization, and expertise.
The following is a quick review of potential Due Diligence items.
Pictures, Agreement of Purchase & Sale, Rent Roll, Tenant Rental Status Report, Survey, Taxes- Interim or Final, MPAC Statement Showing Individual School Tax Paid Per Unit, Zoning and Permitted Uses, Appraisal, Mortgage Statement(s), Insurance Policy, Insurance Quote, Phase One Quote, Management Contract, Superintendent Contract, Gas Bills, Hydro Bills, Water & Sewer Bills, Other- Telephone, Cable TV. Etc., Elevator, Contracts, Capital Item Improvement Leases, Additional Revenue Contracts, Floor Plans or Unit Square Footage, Pest Control, Snow Removal, Land, Maintenance & Repairs, List of Chattels Included in Sale, Fire Retro Fit Letter, Fire Safety Plan, Annual Fire Inspection Certificate, Blue Prints of Buildings, Capital Item Repairs/Improvements, Environmental Phase I, Environmental Phase II, Environmental Phase III Hazmat Removal, Engineers Structural Report, Asbestos Report, Tenant Rental Leases & Rental Applications, Commercial Lease(s) if Any.