When drafting a due diligence report on certain Property you need to set a certain level of detail.
I wanted to share a couple of examples.
When I was revieweing a potential acquisition by an investor of a number of apartments in an apartment building that was under the construction, we decided to review the so-called technical requirements for the electricity, which is a document issued by a provider in which it outlines what needs to be done before the building can have permanent electricity supply. Normally it is about the fees that need to be paid to the supplier and certain construction and technical work that needs to be performed by both the provider and the developer (requirements that need to be met hence the name of the document).
In that particular transaction the technical requirements expressly mentioned that the permanent supply would be made available after a certain technological piece is constructed by the electricity provider. The problem was that due to the provider's schedule, the completion of that piece was expected within a time limit that was totally different from the investor's expectations and from what the developer was promising.
In practice that means delays with the commissioning of the property and registration of title to it because the local authorities no longer allow the commissioning of apartment buildings for which technical requirements have not been completely met.
In another example, a recent statement (extract) from the State Property Register (the short for the Unified State Register of Titles to to Real Estate) mentioned a different total area of a building that was to be purchased by an investor than that indicated in the title document. Further review revealed that this discrepancy also showed in the cadastral passport of the property.
What happenned was that the owner of the building performed some internal modifications / alterations which resulted in the change of the total area. Without further legalization of these alterations, leases signed in respect of individual premises in the building became invalid because from the point of view if Russian legislation the initial property (i.e. premises) ceased the existence when the area changed.
I wanted to share a couple of examples.
When I was revieweing a potential acquisition by an investor of a number of apartments in an apartment building that was under the construction, we decided to review the so-called technical requirements for the electricity, which is a document issued by a provider in which it outlines what needs to be done before the building can have permanent electricity supply. Normally it is about the fees that need to be paid to the supplier and certain construction and technical work that needs to be performed by both the provider and the developer (requirements that need to be met hence the name of the document).
In that particular transaction the technical requirements expressly mentioned that the permanent supply would be made available after a certain technological piece is constructed by the electricity provider. The problem was that due to the provider's schedule, the completion of that piece was expected within a time limit that was totally different from the investor's expectations and from what the developer was promising.
In practice that means delays with the commissioning of the property and registration of title to it because the local authorities no longer allow the commissioning of apartment buildings for which technical requirements have not been completely met.
In another example, a recent statement (extract) from the State Property Register (the short for the Unified State Register of Titles to to Real Estate) mentioned a different total area of a building that was to be purchased by an investor than that indicated in the title document. Further review revealed that this discrepancy also showed in the cadastral passport of the property.
What happenned was that the owner of the building performed some internal modifications / alterations which resulted in the change of the total area. Without further legalization of these alterations, leases signed in respect of individual premises in the building became invalid because from the point of view if Russian legislation the initial property (i.e. premises) ceased the existence when the area changed.
This post first appeared on Business Lawyer, St. Petersburg, Russia, please read the originial post: here
