Maybe. What if the property’s food service use was grandfathered under a prior zoning designation that was changed years ago? What if your concept — with indoor seating, a commercial kitchen, and late hours — triggers a different use category than “retail bakery”? What if the parking lot has 20 spaces and a café with your seating capacity requires 32?

These are not permit questions. They are due diligence questions. The permit office will tell you the answers, but only after you’ve already signed a purchase agreement and committed earnest money.

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What Zoning Actually Controls

Zoning is a municipal classification that determines what activities are permitted on a parcel and how land and structures may be used and improved. Most people understand the broad categories — commercial, industrial, residential. What they often miss is the detail inside those categories.

Use requirements determine not just the broad category but the specific permitted use. Permitted use tables in zoning ordinances are detailed. Restaurant is not the same as retail. Medical office is not the same as professional office. Drive-through window is sometimes a conditional use or special exception, not a by-right use. A property zoned commercial does not mean any commercial use is permitted — you need to confirm that your specific intended use is on the permitted or conditional use list for that zoning district.

Dimensional requirements set minimum setbacks, maximum building height, lot coverage limits, and minimum lot size. These determine what can be built and whether existing improvements comply. A property with a nonconforming setback — a building that was built closer to the property line than current code allows — may not be expandable without a variance.

Parking requirements are set by use type and square footage and are recalculated when use changes. A change from a low-parking retail use to a high-parking restaurant use can create a parking deficiency that either kills the project or requires a variance before you can open.

Signage regulations control sign size, height, placement, and illumination. If your business depends on visible signage, verify what is permitted before assuming the existing sign is representative of what you’re allowed.

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Nonconforming Uses: The Hidden Risk in Established Properties

A nonconforming use is one that was lawfully established under prior zoning regulations but is no longer permitted under current zoning. These uses are typically grandfathered — allowed to continue — but with significant restrictions, and the protection erodes over time.

In Indiana and most jurisdictions, a nonconforming use that is abandoned loses its protected status. “Abandonment” is typically defined in local ordinances as a period of non-use — often 12 to 24 months — during which the prior use was not actively conducted. If the prior tenant moved out 18 months ago and the property has sat vacant, the nonconforming use protection may already be gone.

This is where buyers get surprised. The prior use was permitted. The property was used that way for years. The obvious assumption is that you can do the same thing. But if abandonment occurred — even unintentionally, simply through vacancy — you may be starting from scratch under current zoning. Verify the nonconforming status and when the last active use occurred.

Nonconforming uses are also typically restricted from expansion. You can usually continue the existing use, but you may not be able to add square footage, significantly renovate, or intensify the use without losing the protected status and triggering full compliance with current zoning.

Change of Use and When It Triggers a Review

A change of use — shifting from one permitted use category to another — typically requires a review of whether the proposed use is allowed in the zone. This is true even when moving between uses that feel similar. Switching from a general retail use to a bar with entertainment may involve different use categories, liquor licensing requirements, parking calculations, and building code occupancy classifications.

Change of use also frequently triggers a building code review, requiring compliance with current ADA accessibility standards, fire codes, occupancy load calculations, and energy efficiency requirements. The cost of bringing an older building into compliance for a new use can be substantial. Budget for it before you budget for buildout.

Local zoning ordinances vary by municipality. Each county could have several different ordinances, with the one affecting your property dependent on which county, city or town has jurisdiction. Verify zoning under the specific local ordinance that governs the property — not a general assumption about the city or county. An address that lists a specific city does not control which ordinance applies.

The Indiana Variance and Special Exception Process

If your intended use is not permitted by right in the applicable zoning district but might be permitted with approval, you are looking at either a variance or a special exception before the local Board of Zoning Appeals. In Indiana, BZA procedures are governed under IC 36-7-4.

A use variance is the harder road. To obtain a use variance in Indiana, the petitioner must demonstrate that strict application of the zoning ordinance creates an unnecessary hardship that is specific to the property — not merely inconvenient or economically undesirable for the owner. The hardship must be tied to the property’s physical characteristics, not to the business plan.

A development standards variance — relief from dimensional requirements like setback, height, or parking count — has a lower threshold, requiring only that the variance will not substantially harm the public interest and that the property has special conditions justifying the relief.

BZA hearings in Indiana require public notice, neighbor notification, and an opportunity for objection. The process from application to hearing typically takes 60 to 90 days, and the BZA may impose conditions on approval. This timeline is fundamentally incompatible with most deal closings unless zoning was identified early and the purchase agreement was structured to accommodate it.

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What Your Purchase Agreement Should Say About Zoning

At minimum, the seller should represent in the purchase agreement that the current use of the property is a lawful, conforming use under applicable zoning ordinances. This representation creates a basis for the buyer to terminate or seek damages if the representation is false.

For buyers intending a use different from the current use, a specific zoning contingency is the right protection. The contingency should define the intended use, specify what approvals are required, and give the buyer a termination right if approvals are not obtained within a defined period. The contingency should also address who bears the cost of the variance application and who controls the process.

For development deals where rezoning or a BZA approval is part of the business plan, the purchase agreement should include a seller cooperation covenant — seller agrees to sign applications, cooperate with municipal review, and not take actions that impair the approval process during the contract period. Without this, you may find a seller who becomes uncooperative after they have a signed contract and know you’re committed.

In all cases, don’t leave zoning to the permit application. Verify it during due diligence, when you still have leverage.

Bottom Line

Zoning is not a permit department problem. It is a deal-stage problem. The time to discover a zoning issue is during due diligence, when you can exit cleanly, reprice, or restructure the transaction. The time not to discover it is after closing, when your options are expensive and the leverage is gone.

Before you sign: verify the current use classification, confirm it is a conforming use, understand what your intended use requires, and check whether any recent vacancy triggered nonconforming use abandonment. If your deal depends on zoning approval you don’t yet have, put the right contingency in the contract — and the right timeline.

Mike Lang is a transactional lawyer who writes weekly for commercial real estate investors and owner-operators navigating the deals that define their portfolios. Questions or topics you want covered? Email Mike.

Once that window closes, the deal changes fundamentally. Earnest money is usually at risk. Exit rights narrow considerably. Whatever you didn’t find during diligence is now your problem.

Most buyers treat this window as a building inspection scheduling exercise. That is not enough.

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What the Due Diligence Period Actually Protects You Against

The due diligence period is not just about finding roof problems. It is your window to discover any reason — legal, physical, financial, or regulatory — why this property doesn’t work for you. After the period expires, you may still be able to exit if the seller breaches a representation or if a specific financing contingency fails, but your unconditional right to walk away for any reason is gone.

In Indiana commercial transactions, the purchase agreement language controls everything. Some agreements give buyers a broad inspection contingency with full discretion to terminate for any reason during the period. Others are narrower — termination rights limited to physical inspection findings, with a specific definition of “material defect” that the buyer must satisfy. Know which agreement you have before the clock starts running.

This is a document problem before it is a diligence problem. If the purchase agreement doesn’t give you a broad termination right, push to negotiate one before you sign.

Also, remember, in most deals, the real estate is owned by and LLC and that LLC is going to liquidated soon after closing. Unless you have a serious fraud issue or you have an escrow hold back, there’s usually very little recourse against the seller post-closing, even if you have a clear breach of the purchase agreement. Its very hard to claw money back once the LLC distributes it.

The Four Categories of Diligence

Physical diligence is the most visible and the most scheduled. Get a property condition assessment performed by a qualified commercial inspector. For complex properties — older buildings, properties with HVAC or structural concerns, or properties with environmental use history — consider going beyond a basic inspection. A Phase I environmental site assessment is standard practice in commercial transactions, not an optional upgrade. It tells you whether there are recognized environmental conditions on the property that warrant further investigation.

Legal and title diligence runs in parallel with physical inspection. The title commitment should arrive in the first two weeks of the period. Review it with counsel. Pull and read every recorded document referenced in Schedule B-II — easements, declarations, restrictions. If there are existing leases on the property, get certified copies and read them, including all amendments.

Financial diligence matters for income-producing properties. Get at least two to three years of operating statements, actual rent rolls, utility bills, insurance history, and property tax records. CAM reconciliation statements from prior years reveal how expenses have been allocated and whether there are disputes in progress. Any pending tax assessment appeals — and in Indiana, the assessment appeal process is active — should be tracked because they affect both future tax liability and current income calculations.

Regulatory diligence is the most frequently skipped category. Verify the zoning, confirm the current use is legally conforming, and check whether your intended use is also permitted. Pull any open or recently closed building permits. Check for recorded code violations, notices from the municipality, or pending condemnation proceedings. In Indiana, municipalities maintain records of open violations — ask for them. The existence of an open violation doesn’t necessarily kill a deal, but you need to know about it before closing, not after.

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What Most Buyers Miss

Estoppel certificates. If you are buying a property with existing tenants, you need estoppel certificates — documents signed by each tenant confirming the current lease terms: rent amount, lease expiration, renewal option status, that no defaults exist, and that no side agreements exist outside the written lease. The purchase agreement should require seller to deliver these; if it doesn’t, add the requirement before signing. A missing estoppel means you are relying entirely on the seller’s representation of what the leases say. That is not the same as tenant confirmation.

CAM audit rights. If existing leases give tenants the right to audit the landlord’s CAM expense allocations, that right survives the sale. You are buying a property where a tenant may have a pending audit claim that could result in a credit against future rent — reducing income you’ve already underwrote.

Assignment and change of control provisions. Many commercial leases require landlord consent to assignment — and define a change of ownership of the landlord entity as a triggering event. Some leases give tenants a right to terminate upon a change of ownership. Review every lease for these provisions before closing. Discovering that your anchor tenant has an exit right tied to the sale is not a due diligence success story if you find it after closing.

Indiana-Specific Contract Issues

The earnest money structure in your purchase agreement determines your risk during and after the due diligence period. In many Indiana commercial transactions, earnest money is paid in one deposit at signing and is refundable during the inspection period. After the period expires, it becomes non-refundable except for specific contractual breaches by the seller.

If you are inside a due diligence period and you’ve found a problem, you have three options: terminate and get your deposit back, negotiate a price reduction or seller credit, or proceed knowing the issue. Once the period expires, the negotiating leverage to get a credit or reduction diminishes significantly. Sellers know the buyer is past the clean exit point.

Under Indiana contract law, an inspection contingency that requires the buyer to identify specific “material defects” creates a burden on the buyer. If you use general language about a “satisfactory inspection” with full discretion to terminate, that is a stronger position. The distinction matters when a dispute arises over whether a termination was proper.

How to Extend When You Need More Time

If 30 days is not enough — and for complex commercial properties, it often isn’t — your purchase agreement should include a mechanism to extend the period. This might be an option to extend for an additional earnest money deposit, or a notice-based extension right.

If no extension mechanism is built in, contact the seller before the period expires. Most sellers prefer a brief extension to losing a deal. Document any extension in writing — even an email exchange confirming an additional two-week period is better than nothing. A formal written amendment is better than that.

Do not let the period expire while still conducting diligence and assume you can sort it out informally. Sellers can and do declare the inspection period expired and hold you to a non-refundable deposit. Get the extension confirmed before the clock runs out.

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Bottom Line

The due diligence period is the only time in a commercial real estate transaction when you have full information rights, a clean exit, and leverage to renegotiate based on what you find. Use it to do real diligence across all four categories — physical, legal, financial, and regulatory — not just to schedule a building inspection. What you don’t find during the period is your problem after closing.

If you are buying commercial real estate, get the legal and business issues sorted out before deal momentum makes them harder to fix.

Mike Lang is a transactional lawyer who writes weekly for commercial real estate investors and owner-operators navigating the deals that define their portfolios. Questions or topics you want covered? Email Mike.

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The title commitment arrives in your inbox as a PDF attachment. It’s 30 to 50 pages. The cover email says “please review and let us know if you have any questions.” Most buyers forward it to their attorney. That is the right call — but if you’ve never understood what you are looking at, you won’t know what your attorney finds, what needs to be cleared before closing, or what you are stuck with afterward.

The title commitment has three parts. Schedule A is the easy part. Schedule B-I is the action list. Schedule B-II is where problems live.

What Title Insurance Actually Covers

Title insurance insures against losses from defects in title that existed before the policy date but were unknown at closing. You pay once at closing. The coverage runs for as long as you own the property.

What it covers: errors in the public record, forged or defective deeds in the chain of title, undisclosed heirs with a claim to the property, certain liens and encumbrances not disclosed before closing.

What it does not cover: conditions that arise after closing, physical conditions of the property, zoning violations, building code issues, and — critically — anything specifically listed in Schedule B-II as an exception to coverage. Understanding this last point is the whole game.

Schedule A: What You’re Insuring

Schedule A is the foundation of the policy. It tells you the effective date of the commitment, the insurance amount, who is insured, how title is being vested (LLC, individual, trust, or tenancy in common), and a legal description of the property being insured.

Read the legal description carefully and compare it to the survey. Errors in legal descriptions are more common than they should be in commercial transactions and can affect what you actually own. If the description does not match the survey boundary, that discrepancy needs to be resolved before closing, not after.

The vesting instructions in Schedule A also matter from an ownership structure standpoint. How you take title has implications for estate planning, future financing, and ownership exit — not just for this transaction.

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Schedule B-I: Requirements — The Action List

Schedule B-I lists conditions that must be satisfied before the title company will issue the policy. These are not optional suggestions. They are requirements. Common items include:

Payment and release of the seller’s existing mortgage. The seller’s lender must be paid off at closing and a release or payoff letter obtained. The title company coordinates this through the closing process, but it should be tracked.

Payment of property taxes through the closing date. Indiana property taxes are assessed and paid in arrears, which means the closing settlement statement will include a prorated credit from seller to buyer for taxes accrued but not yet due.

Release of judgment liens against the seller. Judgments in Indiana attach to real property in the county where they are docketed. Any judgment against the seller needs to be released before insurable title can pass. If there are judgments, expect them to be paid from closing proceeds.

Corporate or entity authority documents. If the seller is an LLC or corporation, the title company will require evidence that the person signing the deed is authorized to do so — typically an operating agreement excerpt or a corporate resolution.

Assign every B-I item to a responsible party and confirm they are on track during the pre-closing period. A missed requirement discovered the week of closing can delay or derail the deal.

Schedule B-II: Exceptions — What the Policy Won’t Cover

This is where you need to pay attention. Schedule B-II lists encumbrances, restrictions, easements, and other matters that are specifically excluded from coverage. If a loss arises from anything listed in Schedule B-II, the title company will not pay.

Utility and drainage easements. These are usually recorded in the chain of title and permit utility companies or adjacent landowners to cross the property for specified purposes. The question is where they run and what they prohibit. An easement across the rear 20 feet of a parking lot is different from one that bisects the buildable area.

Declarations of covenants and restrictions. Subdivision or development declarations recorded in the chain of title can restrict use, require architectural review board approval for improvements, prohibit certain signage, or impose maintenance obligations on the property owner. Pull the declaration and read it.

Mechanic’s liens. Under Indiana law, contractors, subcontractors, and material suppliers who have not been paid for work or materials have a lien right that can attach to the property — even if the property owner paid the general contractor. If the property has had recent construction or renovation, get a mechanic’s lien waiver and affidavit from the seller as part of closing.

Rights of tenants in possession. If tenants occupy the property, their leases are binding on the buyer. The title policy does not insure against claims arising from tenant rights. This is why reviewing leases and obtaining estoppel certificates is critical due diligence.

Survey exception. If a current survey has not been provided, the title company will typically include a broad exception for all matters a current, accurate survey would disclose. This exception can cover a significant range of problems — encroachments, boundary issues, unmarked easements. Provide a current survey and ask the title company to remove or narrow the survey exception.

Indiana-Specific Issues to Watch

Indiana’s mechanic’s lien statute is pro-claimant. Subcontractors and suppliers have lien rights even without direct contact with the owner, and the statutory timeframes for filing are generous enough that liens can appear after closing on a property where work was recently completed. In commercial transactions with recent construction, a mechanic’s lien search and pre-closing waivers are essential — not optional.

Access easements in Indiana must generally be recorded to be enforceable against future owners, but prescriptive easements — rights acquired by long, open, continuous use without permission — can arise by operation of law without any recorded instrument. If your property’s only vehicle access crosses another parcel, verify that the access right is recorded, that it is broad enough to cover your intended use, and that the easement is insured.

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What to Actually Do With the Title Commitment

First: make sure one arrives early. Title commitments should be provided during the first half of the due diligence period. If you’re two weeks from closing and haven’t seen one, ask immediately.

Second: read Schedule B-I and confirm each item is assigned and being handled. Your closing attorney coordinates most of this, but you should know what’s on the list.

Third: read Schedule B-II and flag anything that affects use, access, development potential, or future financing. Ask your attorney to pull and review every recorded document referenced — easements, declarations, and restrictions are often incorporated by reference and need to be read separately.

Finally: ask about an extended coverage endorsement. For a modest additional premium, the title company can remove or narrow the survey exception and provide broader coverage against matters that a survey would disclose. In most commercial transactions, it is worth the cost.

Bottom Line

The title commitment is the most important disclosure in your transaction. Schedule A tells you what you’re insuring. Schedule B-I tells you what needs to be done before closing. Schedule B-II tells you what you’re permanently stuck with. Most buyer problems that surface post-closing trace back to something that was in the title commitment and nobody caught in time.

If you are buying commercial real estate, get the title commitment early, read Schedule B-II carefully, and get the underlying documents. The title policy insures everything except what’s listed in B-II. What’s in B-II is yours.

Mike Lang is a transactional lawyer who writes weekly for founders and family business owners navigating the deals that define their companies. Questions or topics you want covered? Email Mike

We were 12 days from closing when the lender came back with a new requirement.

That’s the story. Except it’s not just one story — it’s the same story I’ve watched play out more times than I can count, with different buyers, different buildings, and different lenders, but the same underlying pattern. A deal that felt finished wasn’t. And the reason almost always traces back to the same set of failure points, most of which were knowable before they became crises.

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Tell Me About Your Deal

Why commercial deals fall apart

Most deals don’t fail because of bad faith. Sellers aren’t hiding things. Buyers aren’t being careless. Lenders aren’t inventing requirements. Deals fall apart because a commercial real estate transaction requires a dozen independent systems — legal, financial, environmental, physical, regulatory — to align on the same timeline, and those systems don’t communicate with each other in real time.

The buyer has a commitment letter. The commitment letter has conditions. Those conditions require a satisfactory appraisal, clean title, acceptable environmental, a property inspection that doesn’t surface material issues, and documentation the lender’s underwriter is satisfied with. Each of those is its own potential failure point. When one slips, it rarely slips quietly.

Financing contingencies: the most common trigger

Experienced buyers treat the lender commitment letter as a starting line, not a finish line. What the letter actually says is: we will lend you this money, subject to the following conditions. Those conditions are the deal. A buyer who reads the commitment letter carefully on day one — and maps out every condition against the closing timeline — is in a fundamentally different position than a buyer who files it away after the handshake.

One timing question I get regularly: when should I engage the lender? A lot of buyers prefer to get through diligence before formally engaging a lender — they want to know what they’re actually buying before they start the financing process. That’s a reasonable approach. But if that’s your plan, you need to build your closing timeline accordingly. The post-diligence period has to be long enough to accommodate loan processing, appraisal ordering and completion, underwriting review, and the inevitable back-and-forth on conditions. None of that moves quickly, and appraisers in particular run on their own schedule. I’ve seen appraisals take three weeks longer than expected simply because the appraiser’s queue was backed up. If your contract gives you 30 days post-diligence and the appraiser takes 45 days to deliver the report, you have a problem that has nothing to do with the merits of the deal. Build in the buffer before you sign the purchase agreement, not after.

The appraisal itself is the condition that creates the most drama. If the property doesn’t appraise at the purchase price, the lender’s loan amount adjusts down to match. The buyer either covers the gap in cash, renegotiates the price, or loses the deal. Order the appraisal as soon as you engage the lender. If there’s a gap, it’s better to know in week two of financing than in week six.

The second financing failure mode is the last-minute underwriter request. Underwriters review files they didn’t originate. They sometimes see things loan officers didn’t flag, and they ask for additional documentation — a lease amendment, an updated environmental clearance, a tenant estoppel that wasn’t in the file. These requests are usually resolvable. What they’re not is instant. When they arrive at day 35 of a 45-day closing, they become emergencies.

Title objections

The title commitment arrives early in diligence and gets treated as background noise. It shouldn’t. The exceptions section lists the conditions and encumbrances the title company won’t insure over — recorded easements, restrictions, covenants, and occasional gaps in the chain of title that require curative work.

Most exceptions are benign. A utility easement along the back of the property. A drainage agreement from 1987. Standard stuff. But occasionally there’s something that isn’t — an encroachment revealed by the survey, a recorded use restriction that conflicts with the buyer’s plans, an access easement that’s shared and contested. Title curative work takes time. Sometimes it requires a quiet title action. Sometimes the seller needs to obtain a release from a lienholder who is hard to locate. The earlier you identify these issues, the more runway you have to resolve them.

Send the title commitment to your attorney on the day it arrives. Not the day before closing.

Survey issues

A new survey ordered during diligence occasionally reveals something that wasn’t in the listing, wasn’t in the seller’s disclosure, and wasn’t visible during a walkthrough. An encroachment from a neighboring structure onto the subject property. A fence line that doesn’t match the legal description. A shared driveway that crosses the property line in a way nobody had formalized.

These issues are solvable, but not quickly. An encroachment agreement requires negotiation and drafting. A boundary issue may require a corrected legal description. Either can cause a title company to pause on its commitment until the issue is resolved. Order the survey on day one.

Seller disclosure problems

This is where buyers sometimes get a surprise they didn’t see coming — and it’s almost never the roof or the environmental. The issues that surface in seller disclosure disputes almost always involve the financial picture of the property: the rent roll, the profit and loss statement, the actual lease terms versus what was represented, or the occupancy numbers used to underwrite the deal.

A tenant shown as current who is actually in default. A lease renewal option that was exercised but not reflected in the documents provided. Vacancy that was papered over with a short-term occupancy agreement that expires shortly after closing. Expense figures that don’t reflect the property’s actual operating costs. These discrepancies don’t always represent intentional misrepresentation — sometimes sellers are working from stale information, or a broker assembled the package without full visibility into the current state of the leases. But they create real disputes when the buyer closes expecting one set of economics and inherits another.

The protection is in the diligence. Get current estoppels from every tenant. Reconcile the rent roll against actual lease documents. Ask for the trailing 12 months of actual operating statements, not just a pro forma. The seller’s representations give you a legal remedy if something turns out to be false. Your own diligence tells you whether the numbers add up before you close.

What experienced buyers do differently

They order the survey and the Phase I on day one. They send the title commitment to counsel immediately. They think through the financing timeline before signing the purchase agreement — whether they engage the lender during diligence or after, they make sure the post-diligence runway is realistic given appraisal timelines, underwriting review, and the conditions that will need to be satisfied. They reconcile the rent roll against the leases. They don’t assume the financing is done until the wire is confirmed.

And they use the back half of the diligence period for resolution and negotiation, not for starting the checklist. The contingency period isn’t a review window. It’s a resolution window.

Back to my client

He closed — three days late, with a short extension that cost him a negotiated fee. The lender’s last-minute requirement was resolvable. It just took eleven days of rapid document collection that nobody had planned for, two attorneys working over a weekend, and a seller who was gracious enough to grant the extension rather than declare a default.

He got his building. The deal worked.

But I’ve watched the same scenario end differently. The difference, almost always, is when the buyer started — and whether the people around the table had seen enough closings to know that a signed purchase agreement is the beginning of the hard part, not the end of it.

If you’re in diligence on a deal right now and want a transaction attorney reviewing the moving parts, the earlier in the process, the more options you have. Reach out.

Meanwhile, the clock is running.

The due diligence period is the most important phase of a commercial real estate transaction, and it’s the one most buyers treat as a formality. You’ve already decided you want the building. The inspection feels like paperwork standing between you and the closing table. That’s exactly when expensive surprises happen — not because buyers are careless, but because they don’t have a systematic way to work through everything that matters before the contingency period expires.

One thing worth saying up front: the seller’s representations and warranties, and the documents the seller hands over, are not a substitute for your own diligence. Reps and warranties give you a legal remedy after the fact if something turns out to be false. Diligence is what tells you, before you close, whether the property actually is what you think it is. The goal isn’t paperwork compliance — it’s making sure you’re getting the deal you actually signed up for.

What follows is the checklist I use. Save it. The items here are the ones that actually kill deals, delay closings, or create problems you’re still managing two years after you own the building.

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Emai Mike

Environmental

Start here, because environmental issues are the ones with the longest tail. A Phase I Environmental Site Assessment is standard on most commercial transactions, and most buyers order one. Fewer buyers actually read it carefully.

The section that matters most is Recognized Environmental Conditions — the Phase I’s formal term for documented or suspected contamination from current or historical use of the property, adjacent properties, or nearby operations. A dry cleaner next door twenty years ago. A fuel storage tank that was removed but never tested. Underground utility corridors with unknown history. These are the items that lead to a Phase II — actual soil and groundwater testing — and potentially to remediation costs that dwarf the purchase price adjustment you thought you were getting.

Also read the data gaps section, and don’t skip past it. Every Phase I will identify gaps — historical records that couldn’t be located, prior uses that couldn’t be confirmed, time periods with no available documentation. A data gap isn’t automatically a problem, but an environmental professional has to assess whether the gap is significant enough to affect the conclusions of the report. A Phase I with several unresolved data gaps on a property with an industrial history deserves more scrutiny than the clean summary page might suggest. Ask your environmental consultant directly whether any data gaps affected their conclusion, and if so, how.

Order the Phase I immediately. If it flags anything, don’t wait to order the Phase II.

Zoning and use compliance

Confirm that your intended use is permitted under current zoning — not assumed, confirmed. Then confirm that the existing use is legally conforming. These are two different questions.

A nonconforming use may have been operating legally for decades under grandfather status, but that status typically cannot be expanded and sometimes cannot be restored if the use is interrupted. If the building is destroyed and needs to be rebuilt, current zoning may not permit the same use or the same footprint. A zoning compliance letter from the municipality is a standard, inexpensive document that answers both questions definitively.

Don’t stop at use. Confirm the development standards too: setbacks, required open space, yard requirements, parking ratios, height limits, and lot coverage. An existing building can be fully compliant on use and still be a legal nonconforming structure on these standards — meaning if you ever need a variance, an addition, or a rebuild, you may find the building doesn’t meet current requirements even though it’s been sitting there for thirty years without issue. You want to know that going in, not when you’re trying to expand.

And if your transaction involves any change of use, find out whether that change triggers impact fees or development fees from the municipality or utility provider. Many jurisdictions assess these specifically when a property converts to a higher-intensity use — more parking demand, more water and sewer capacity, more traffic generation. These fees can run into real money and are easy to miss because they don’t surface until you apply for permits. Get a number, or at least a methodology, during diligence, not after you’ve closed.

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Access and easements

Does the property have legal access to a public road? Not practical access — legal access. Shared driveways, private access easements, and flag lots can all have practical access while the legal picture is more complicated.

Easements for utilities, drainage, shared parking, and ingress and egress can encumber use significantly and don’t always appear in obvious places. This is one of several reasons you’ll want a title commitment and a current survey — and we’ll spend a full post in a few weeks walking through exactly what to look for in both. For now, the short version: order both early, and review them together rather than separately.

Service contracts

What runs with the building? HVAC maintenance agreements, elevator service contracts, landscaping, security monitoring, pest control — many of these are assignable and survive the sale by default unless terminated. Know what you’re assuming before closing. Some of these contracts have early termination fees. Some are on terms you’d never have agreed to on your own. Request and review every service contract during diligence, not after.

Tax history

Review three to five years of assessed values and tax bills. Understand the trend. Understand whether there are any delinquencies or pending appeals that will survive the closing. And understand what this transaction may trigger going forward.

In Indiana, the sale price is a significant input to the assessor’s next review. If you’re buying at a price substantially above the current assessed value, you should expect upward pressure on the assessment after closing. That’s not a reason not to buy — it’s a number to underwrite. Model the tax scenario that follows a reassessment and make sure your NOI still works.

Estoppel certificates

If the property is tenanted, require estoppel certificates from every tenant before closing. An estoppel is a signed statement from the tenant confirming the lease terms, the rent currently being paid, any landlord defaults the tenant is aware of, and any side agreements or modifications not reflected in the written lease.

What a tenant says in an estoppel binds them. That’s the value of the document. It also tells you, quickly, whether there’s a gap between the lease on paper and the relationship on the ground — which is exactly the kind of thing the seller’s representations about the leases won’t necessarily catch. A tenant who is reluctant to sign an estoppel, or whose estoppel doesn’t match the lease you were shown, is telling you something worth knowing before you close.

If you’re financing the acquisition, ask your lender early whether they’ll require Subordination, Non-Disturbance, and Attornment agreements from tenants. SNDAs and estoppels both require tenant cooperation and signatures, and tenants are more responsive when you only have to go to them once. Request both at the same time rather than circling back a second time after your lender raises it later in the process.

Deferred maintenance

A commercial property inspection will identify deferred maintenance, but ask your inspector specifically about the items most likely to create immediate capital expenditure: roof condition and age, HVAC systems and remaining useful life, electrical service capacity, plumbing, and ADA compliance status.

These are the items that generate year-one surprises for buyers who didn’t price them in. A roof with three years of useful life remaining isn’t a deal-killer — it’s a negotiating point, a reserve line item, or both. The mistake is discovering it after closing when it’s just an expense with no offset, and a seller’s representation that the building is in “good condition” won’t reimburse you for a roof replacement.

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Utility capacity

Confirm that the building has adequate electrical, water, and sewer capacity for your intended use — particularly important if you’re changing the use, such as converting an office building to a restaurant or a warehouse to light manufacturing. Utility upgrades are expensive and often require coordination with the municipality or utility provider on timelines you can’t fully control.

There’s a second utility question that gets missed even more often: confirm where the utility service actually runs to reach the building. Service should come from a recorded easement or from the public right-of-way along the street. It’s not unusual to discover that a water line, sewer lateral, or electrical service physically crosses a neighboring property with no recorded easement protecting that access. If that’s the case, the neighboring owner could theoretically block or disrupt service, and you’d have no recorded right to be there. This is exactly the kind of issue a careful survey and title review will catch — another reason both documents matter as much as the inspection itself.

One final point on timing

Every item on this list is more manageable when you start it on day one of the diligence period. Environmental reports take time. Title curative work takes time. Estoppels and SNDAs require the cooperation of tenants who have their own schedules. Survey scheduling depends on the surveyor’s availability.

Buyers who treat the first two weeks of diligence as runway and the last week as deadline time consistently have worse outcomes than buyers who start everything immediately and use the back half of the period for resolution and negotiation. The contingency period isn’t a review window. It’s a resolution window — and resolution takes time you don’t get back. And it’s your own diligence, not the seller’s paperwork, that tells you whether the deal in front of you is the deal you actually agreed to.

Tell Me About Your Deal

Want a copy of this checklist as a clean PDF you can use during an actual diligence period — with space for notes and status tracking on each item? Reply to this email with “checklist” and I’ll send it over.

Not because the rent increased. Because the rest of the lease was never fully worked through — by either side.

This is the pattern I see most often, and it’s not a landlord-versus-tenant story. Both parties negotiated the headline number carefully and treated the remaining thirty pages as boilerplate. The result wasn’t a landlord “winning” at the tenant’s expense. It was a relationship that became adversarial by year three because nobody had been precise by year zero. That’s bad for the tenant’s budget and bad for the landlord, who now has a dispute, an audit request, and a tenant looking at their renewal option with suspicion.

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Tell Me About Your Deal

Lease term is rarely the biggest issue

Everyone wants to talk about term — length, renewal options, the rate at which those options kick in. Those things matter, and they’re negotiated in the open. The provisions that actually determine how the lease performs over time are the ones in the definitions, the CAM mechanics, and the operational rights sections. These aren’t buried by design. They’re just dense enough that both sides tend to default to market-standard language without thinking through what it means for their specific situation.

Here’s where I’d focus, for either side of the table.

CAM language: clarity benefits everyone

Common Area Maintenance charges are contractually defined — and that definition varies significantly from lease to lease. For landlords, a well-drafted CAM provision means predictable, defensible cost recovery and fewer disputes down the line. For tenants, it means knowing what occupancy actually costs before you sign, not finding out at reconciliation.

CAM provisions commonly include management fees, administrative costs, and amortized capital improvements — these are legitimate components of operating a property and landlords are entitled to recover them. The issue isn’t whether these items belong in CAM. It’s whether they’re clearly defined, consistently applied, and understood by both parties at signing. A landlord who is upfront about what’s included avoids the year-three conversation where a tenant feels blindsided. A tenant who reads the definition carefully avoids being surprised.

The exclusion list matters here too — not as a tenant “win,” but as a clarity tool. A clear list of what’s outside CAM (costs covered by insurance, expenses tied to other tenants’ specific build-outs, capital items above an agreed threshold) reduces the likelihood of a dispute for everyone. Ambiguity is the actual enemy, not recovery itself.

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Expense stops: a tool that works when both sides understand the baseline

An expense stop — where the landlord absorbs costs up to a baseline and the tenant covers increases above it — is a useful structure for sharing risk on a multi-year lease. It gives the landlord a predictable floor and the tenant predictable downside risk.

The key is making sure the baseline reflects a normal, stabilized year of operations. If it’s set during an unusual year — high vacancy, deferred maintenance — the structure stops working as intended for either party. A landlord who sets the base year accurately is protecting the long-term tenant relationship as much as the tenant’s budget. This is a place where getting the number right at signing prevents friction later.

Audit rights: protection for both sides

A tenant audit right is often framed as a tenant protection, but a well-structured audit right protects landlords too. It gives tenants confidence that charges are accurate, which reduces the chance of a tenant withholding payment or escalating a dispute based on suspicion rather than facts. Landlords who bill accurately — which is most landlords — have nothing to lose from a clear, reasonable audit provision with defined notice periods and scope.

What I look for is whether the provision is workable: reasonable notice, a defined scope, and a clear process if a discrepancy is found. A workable audit right is a relationship tool. An unworkable one just means the first dispute goes straight to a harder place.

There’s also a practical litigation point landlords sometimes miss. If a tenant has a real audit right and the landlord cooperates with it, most CAM disputes get resolved through that process — informally, with documentation, no lawyers involved. If a landlord resists a legitimate audit request or stonewalls on backup documentation, the tenant’s next move is often a lawsuit — and discovery in that lawsuit will require the landlord to produce the same records anyway, except now with legal fees, a damaged relationship, and a court involved. A workable audit right isn’t a concession. It’s often the cheapest way for a landlord to keep a CAM dispute out of litigation entirely.

Management fees: a legitimate cost, clearly stated

Property management is real work, and a management fee included in CAM — typically a percentage of gross revenues — compensates the landlord or their manager for that work. This is standard and appropriate. The question for both sides is simply whether the fee is disclosed, capped at a market-reasonable rate, and consistent with what similar properties charge. A landlord who is transparent about this fee from the start rarely has a problem with it later. A tenant who understands it going in can budget for it accurately.

Capital expenditures: protecting the asset, structured fairly

Major building systems — roofs, HVAC, parking lots — eventually need replacement, and that’s a legitimate cost of ownership that landlords often pass through as amortized charges over the useful life of the improvement. This protects the asset’s long-term value, which benefits the landlord’s investment and the tenant’s experience in the space (nobody wants to occupy a building with a failing roof).

The fair structuring question is about alignment: does the tenant’s share of the amortized cost roughly match the portion of the asset’s useful life they’ll actually occupy? A tenant signing a five-year lease shouldn’t necessarily fund the same share as a tenant signing fifteen years. Landlords who think through this proactively — capping pass-throughs, prorating based on lease term — sign easier deals and have fewer renewal-time arguments.

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Assignment and subletting: flexibility and protection, for both sides

Business circumstances change — for tenants and for the buildings they occupy. A tenant may need to sell their business or relocate. A landlord has a legitimate interest in who occupies their property, particularly around creditworthiness and use.

“Consent not to be unreasonably withheld” is standard, but the more useful approach for both sides is defining what reasonable means upfront: creditworthiness standards, permitted use categories, and notice requirements. This gives tenants a clear path if circumstances change, and gives landlords confidence that any assignee will meet the standards they care about. Defined criteria, agreed at signing, prevent the situation from becoming a negotiation under pressure later.

What this means practically

The rent is the easy part — one number, negotiated in the open, understood by both sides from day one. The provisions above are where the lease either works smoothly for years or generates friction that nobody wanted. None of these provisions are inherently good or bad for either side. They’re tools. The outcome depends on whether both parties understood them at signing.

The tenant from the beginning of this piece and his landlord eventually worked through their dispute — but it took a renegotiation that could have been avoided with fifteen more minutes of attention at signing. That’s true whether you’re the one drafting the lease or the one reviewing it.

Read the lease. All of it. Both sides benefit from doing so.

Before signing a lease, understand where the money actually moves. Whether you’re a landlord drafting lease language or a tenant reviewing it, I’m happy to take a look at the financial provisions.

Tell Me About Your Deal

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I’m starting this newsletter with the topic that started it all for me.

In the summer of 2000, I was a college student working what I still consider one of the best summer jobs a young person interested in real estate could land: the Perry Township Assessor’s office in Indianapolis. I spent that summer learning how assessors think, how they value property, and how the process works from the inside. It gave me a perspective on property taxes that I’ve carried into every real estate deal I’ve worked on since. Most people treat an assessment as a fixed fact. After that summer, I never could.

Tell me about your tax issue

I’ve watched owners spend three months fighting over a lease rate, then sign off on an assessment that costs them twice as much over the same period. It happens more often than you’d expect — and the reason is simple. Rent is visible. It shows up in the LOI, it comes up in every phone call, it becomes the proxy for the whole deal. Taxes sit in the background, quietly doing their work.

Here’s the math that should change how you think about this. On a $3 million commercial property, a $15,000 annual tax increase looks modest on its face. But if your cap rate is 7%, that swing in annual expenses reduces your property value by more than $200,000 on paper. A 1-point cap rate compression gets written up in trade publications. A decade of tax escalation that produces the same damage gets almost no attention.

The largest real estate investment trusts in the country understand this. They have entire floors of people — analysts, attorneys, consultants — doing nothing but managing the property tax process across their portfolios. They know that disciplined assessment management is asset management. Most individual owners treat it as paperwork.

Why assessments go unchallenged

Most owners receive the assessment notice, glance at it, and file it. The appeal window is short — in Indiana, you have until June 15 to appeal your assessment for that tax year — and the process feels opaque. Miss that date, and you’ve waived your right to challenge the number regardless of how wrong it is. The deadline is firm. It doesn’t move because you were busy.

The methodology question matters just as much as the deadline. Indiana assessors use three valuation approaches: cost, income, and sales comparison. The approach they choose can swing the outcome significantly. If your assessor valued an income-producing property using the cost approach — replacement value rather than what a buyer would actually pay based on cash flow — you may have a legitimate argument for reduction. But here’s the thing: the assessor is working without your numbers. They don’t know your actual NOI. They’re applying a methodology to limited public information. It is your job to educate them. Bring your rent rolls, your actual operating expenses, your vacancy history. Make the income approach case with real data. An assessor who sees a well-documented income analysis will work with it. One who sees nothing will work with what they have.

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What owners get wrong during the appeal

The first mistake — and it’s a costly one — is filing an appeal without first getting a rough sense of what your property is actually worth. This is not a step to skip. If you file an appeal and your property is currently under-assessed relative to market value, you can end up with an increased assessment. Appeals are not automatically protective. The process is a full review of the assessment, and it can go in either direction. Before you file anything, do the basic work: pull comparable sales, get a rough income-based valuation, and understand where you stand. If the assessment looks high relative to value, file. If it looks low, don’t.

The second mistake is treating the informal conference as the end of the process when it’s really the beginning. Indiana’s appeal ladder runs from the informal conference with your county assessor, to the Property Tax Assessment Board of Appeals, to the Indiana Board of Tax Review, and ultimately to the Indiana Tax Court. Most appeals resolve at the first or second step. But owners who accept an unsatisfying informal result without escalating leave money on the table.

The third mistake is ignoring the cumulative effect of small annual increases. A 3% assessment increase feels manageable. Five consecutive years at 3% is a 16% cumulative jump. On a property with a 7% cap rate, that compounds into a material value reduction that never showed up as a single alarming number — just a slow bleed that nobody flagged because each individual increment seemed reasonable.

A word for NNN landlords and CAM pass-through situations

If you’re a triple-net landlord, or if your leases pass property tax increases through to tenants as part of CAM, you might think this doesn’t affect you directly. It does. A successful appeal reduces the occupancy cost your tenant carries over time — and lower occupancy cost means a healthier tenant, a more competitive space, and a stronger argument for renewal when the lease comes up. Tenants who are stretched by rising CAM costs don’t renew. Tenants with manageable occupancy costs do. The appeal benefits you even when you’re not the one writing the check.

The right time to start is before the notice arrives

Indiana assessment notices typically arrive in the spring. The June 15 deadline follows. That window is enough time to review the notice, pull comparables, get a rough sense of value, and decide whether filing makes sense. The questions to ask: What approach did the assessor use? What is the implied value per square foot relative to comparable sales? Does the assessed value reflect what a real buyer would pay today?

File to preserve your rights when the case is there. Don’t file reflexively when it isn’t. And if you’re not sure, that’s exactly what a quick review is for.

Don’t treat the assessment as fixed. It’s an opening position.

Talk about your assessment

If you’d like a second set of eyes on a property tax assessment, reach out. A short review of the notice, the methodology, and your operating data is often enough to determine whether an appeal is worth pursuing.

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