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Commercial Loan Due Diligence Toolkit
Practical Law Toolkit w-020-1026 (Approx. 23 pages)
Commercial Loan Due Diligence Toolkit
by Practical Law Real Estate
| Maintained • USA (National/Federal) |
A Toolkit containing a collection of due diligence resources for commercial real estate loan parties. It contains a compilation of resources offering guidance explaining how to uncover and evaluate information on a wide variety of subjects including the organizational structure and status of the borrower parties; the condition of the property, including its physical condition, its leases; and the state of legal title. This Toolkit also includes resources related to special types of loans and properties.
Loan due diligence is the review and evaluation of information that is pertinent to a loan transaction. Due diligence is relevant to lenders, borrowers, developers, investors, and other participants in the transaction. For a summary describing the role of loan counsel in a commercial real estate loan transactions, see Practice Note, Commercial Real Estate Loans Due Diligence: Overview: Role of Loan Counsel.
Scope of Due Diligence
All loan due diligence shares common characteristics, but the scope and depth of due diligence depend on the facts and complexity of the transaction. The main subject areas and special factors that can affect due diligence include:
- The property's condition and its compliance with applicable law (see Property Condition and Compliance with Laws).
- The property's leases and agreements (see Leases and Other Agreements).
- Matters disclosed on the title commitment, the survey, and in public record searches (see Title, and Survey, and Public Record Search).
- The borrower's organizational structure, good standing, and compliance with applicable laws (see Borrower Party Formation, Organization, and Good Standing).
- The effect of state law on the analysis of the loan documents and due diligence findings (see Practice Note, Commercial Real Estate Loans Due Diligence: Overview: Effect of State and Local Laws on Due Diligence and State Comparison Materials).
- Special types of loan such as:
- securitized loans (see Securitized Loans);
- mezzanine loans (see Mezzanine Loans);
- construction and development loans (see ); and
- ground leasehold mortgage loans (see Ground Leasehold Mortgage Loans).
- Special property types, such as:
- hotel loans (see Hotel Properties); and
- green property loans (see Green Energy Properties).
The parties' respective roles and interests in the transaction is also a factor. For example, in a loan refinancing, the borrower's counsel's role is usually limited to complying with the lender's due diligence requests. In contrast, for acquisition financing, the borrower's counsel must contemporaneously perform much of the same due diligence as the lender (see Purchasing and Selling Commercial Real Estate Toolkit).