Commercial Property Due Diligence in Alberta

1. Confirm the property and registered interests

Start with the current Alberta land title and the legal description. A title can identify the registered owner and interests such as mortgages, caveats, easements and builders’ liens. Registered plans and related instruments may be needed to understand access, utility rights and other obligations.

A civic address is useful for searching listings, but legal review should work from the title, legal description and registered documents.

• Current title
• Legal description and LINC
• Easements and rights-of-way
• Caveats, liens and other registrations

2. Verify land use and the intended operation

Municipal zoning or land-use classification does not automatically confirm that every intended operation is permitted. Review the applicable bylaw, site-specific overlays, prior development permits and any conditions attached to approvals.

If the acquisition depends on a change of use, subdivision, density, signage, outdoor storage or other approval, make the approval pathway and timing part of the acquisition analysis.

• Current zoning
• Permitted and discretionary uses
• Development and building permits
• Non-conforming conditions

3. Investigate environmental history

Past uses can create environmental risk even when the present operation appears low-risk. Alberta’s Environmental Records Viewer provides public regulatory records, but a records search is not a substitute for professional environmental assessment.

The Alberta environmental framework distinguishes initial records and site-history work from intrusive investigation used to confirm and characterize potential contamination. The appropriate scope should be set by a qualified environmental professional.

• Historical uses
• Neighbouring uses
• Storage tanks and hazardous materials
• Phase I and, where indicated, Phase II assessment

4. Test the physical asset

Review structure, roof, envelope, mechanical and electrical systems, fire and life-safety systems, accessibility, paved areas, drainage and site servicing. Industrial users may also need to verify clear height, loading, power, floor capacity and yard functionality.

Translate inspection findings into immediate repairs, near-term capital requirements and a longer-term capital plan.

5. Rebuild the income and expense picture

For income-producing property, reconcile rent rolls to leases, amendments, inducements, arrears and deposits. Separate recurring property income from one-time items and identify expenses that are recoverable, non-recoverable or currently understated.

The objective is a supportable normalized net operating income, not simply the number shown in a marketing package.

• Lease abstracts and amendments
• Rent roll and payment history
• Operating statements
• Property tax and insurance
• Capital items excluded from NOI

6. Coordinate tax, financing and closing advice

Commercial real property transactions can have GST implications. The Canada Revenue Agency states that sales and rentals of commercial real property are generally taxable, subject to the specific facts and statutory exceptions.

Use qualified legal, accounting, environmental, engineering and financing professionals. Conditions, deliverables and deadlines should be written into the transaction documents and monitored as one coordinated work plan.