In our last post, we began to look at the University of Texas’ decision to purchase a tract of land in Houston, and some of the criticism of that decision. As we noted, the University chose to acquire the land before knowing exactly how it would put the tract to use. Again, performance of due diligence in raw land acquisition is, or should be, closely tied to the intended use of the property.
There are a variety of areas that should be considered when performing due diligence in land acquisitions. This includes due diligence regarding potential land use issues, which touch upon legal access to the property and zoning restrictions that could affect using the property for the intended purpose.
There are also title issues to consider, such as verifying ownership of the property and examining any liens and other encumbrances. Survey due diligence entails reviewing survey documents to ensure the survey doesn’t contain any errors or potential problems.
Environmental assessment involve determining whether there are any possible environmental liabilities in connection with the property and whether the intended use of the land will raise any other potential environmental problems or present problems with environmental compliance.
Potential issues with water and utilities also need to be reviewed, particularly whether any permits or licenses will be necessary, or whether new facilities will need to be built or old facilities modified or updated.
Financial due diligence includes obtaining an appraisal of the property, determining whether there are any liens that need to be released upon closing, or any taxes owed on the property. In terms of development, it needs to be determined whether there are any documents relating to the development process which could impact the proposed project.
Effectively addressing all these issues requires a lot of leg work and commitment to the project. Working with an experienced attorney in the due diligence process helps ensure that any issues with the property will be fully resolved and/or accounted for in planning a new development project.