Commercial due diligence checklist for BC buyers

Say you've got an accepted offer on a two-storey retail and office building on a busy street in Surrey, with three weeks of subjects. The first week disappears faster than you'd think: the lender orders an appraisal, the environmental consultant needs site access, and the seller's documents come in a few at a time. The way through is a list, an owner for each item and a date you'll chase it by. This page is that list.

How to run the subject period

• Day one: order the title search, ask the seller for the leases and rent roll, and book the inspections.
• First week: get the lender's list of reports and confirm who's ordering what.
• Second week: read the leases against the rent roll, review the reports as they land and write down every question.
• Last few days: decide whether to remove subjects, renegotiate or walk away, and talk to your lawyer before you sign anything.
• something is running late, ask for an extension in writing before the deadline, not after.

Due diligence is how you find out what you're really buying. It's your job as buyer, and the subject period is your window. Use this list as a starting point and adapt it with your lawyer, accountant and lender. There's also a shorter checklist on the main site.

Title and legal

• The Land Title and Survey Authority (LTSA) keeps BC’s land title records. Current title search from the LTSA: information for property owners.
• Every charge: mortgages, Easements, Statutory right of way (SRW)s, Covenant (title)s, liens, Certificate of pending litigation (CPL)s.
• Survey or building location certificate.
• Personal Property Registry (PPR) search for equipment.

Leases and income

• Every lease and amendment; compare with the Rent roll.
• Estoppel certificates from tenants.
• Arrears, disputes and side agreements.
• Renewal options, Option to purchase and First right of refusal (ROFR) rights.
• Bank deposits against reported income.

Operating costs

• Actual operating statements, tax notices, insurance and utilities.
• Operating cost reconciliations with tenants.
• Service contracts.

Building

• Building condition assessment.
• Roof, heating, ventilation and air conditioning (HVAC), electrical, plumbing, life safety.
• Permits and inspections; outstanding work orders.

Environmental

• Environmental Site Assessment (Phase I) and, if needed, Phase II ESA.
• Site information and the Site Registry (Government of BC) search.
• Whether a Site disclosure statement is required.

Zoning and permits

• Zoning, Permitted use, Non-conforming use status.
• Official Community Plan (OCP) designation.
• Business licences.

Tax

• Property Transfer Tax (PTT).
• Goods and Services Tax (GST) status and any GST going-concern election.
• Provincial Sales Tax (PST) clearance certificate for business assets.
• Capital cost and allocation (see an accountant).

Strata

• Form B, bylaws, minutes, budget, Depreciation report, Contingency reserve fund (CRF).

Estoppels the day after the contract

Send estoppel certificates as soon as the contract is firm. They are slow, and they catch free rent, unpaid landlord work, and fights the rent roll skipped.

Match each estoppel to the lease and the collections file. Occupancy without payment is not income.

Your lawyer reviews form language; I help chase the commercial replies.