Commercial real estate due diligence in Alberta requires more than reviewing a purchase price and inspecting a building. Buyers need to examine registered interests, land use restrictions, leases, financing, environmental obligations, corporate structures, taxes, and contractual rights before waiving conditions.
This latest guide from the commercial real estate lawyers at Bosecke LLP offers comprehensive insight into the due diligence process for commercial real estate buyers.
Start With the Alberta Land Title
The Land Titles Act, RSA 2000, c L-4 establishes Alberta’s Torrens land registration system. Alberta Land Titles records ownership and registered interests, including mortgages, caveats, easements, builders’ liens, and other registrations.
Your lawyer should obtain and review the current title, then examine the underlying registered documents.
| Registration | Buyer Should Determine |
| Mortgage | How and when will it be discharged? |
| Easement | Does it affect access, parking, utilities, or development? |
| Restrictive covenant | Does it restrict use or construction? |
| Builders’ lien | Is there an unresolved construction claim? |
| Right of way | Who has legal access or other rights? |
Alberta’s land titles system also includes the Pending Registration Queue, which can affect priority when documents have been submitted for registration.
Examine Easements, Rights of Way and Property Boundaries
A commercial property may have physical access without having unrestricted legal access. Review registered easements, rights of way, utility corridors, restrictive covenants and survey plans.
This matters particularly for properties that depend on shared driveways, reciprocal parking arrangements, loading areas, or access across neighbouring parcels.
If development is planned, the legal description should also be compared with the survey and proposed development plan. Boundary discrepancies or encroachments should be addressed before closing.
Confirm Zoning Under Alberta’s Municipal Government Act
The Municipal Government Act, RSA 2000, c M-26, provides the legislative framework for municipal planning and land use regulation. Municipalities implement those powers through statutory plans and land use bylaws.
Consider whether the proposed business or development is permitted on the property.
Key questions include:
- What is the property’s current land use district?
- Is the intended use permitted or discretionary?
- Are development permits required?
- Are there parking requirements?
- Are there setback or height restrictions?
- Are there outstanding compliance issues?
- Is subdivision or consolidation required?
- Does a statutory plan or regional plan affect the property?
A purchase agreement should provide sufficient time to investigate these issues before you commit funding.
Review Every Commercial Lease
For an income-producing property, leases are a major part of the legal due diligence.
Review the leases themselves alongside your legal team rather than relying solely on a rent roll. Important provisions include rent, operating costs, renewal rights, assignment provisions, default remedies, tenant inducements, security deposits, guarantees, exclusivity provisions, purchase options, and termination rights.
| Lease Provision | Legal Significance |
| Renewal option | May affect future possession and income |
| Assignment clause | May restrict future transactions |
| Operating costs | Determines recoverable expenses |
| Default provisions | Establishes landlord remedies |
| Exclusivity | May restrict future tenants |
| Purchase option | May affect the owner’s ability to sell |
| Tenant improvements | May create continuing obligations |
Compare the leases against the seller’s rent roll, financial records, and disclosure documents.
Investigate Environmental Liability
Environmental due diligence can be critical for properties previously used for industrial, automotive, fuel, manufacturing, agricultural, or other potentially contaminating activities.
The Environmental Protection and Enhancement Act, RSA 2000, c E-12, contains Alberta’s regulatory framework for environmental protection, contaminated sites, conservation and reclamation. Alberta legislation can impose obligations on persons responsible for contaminated sites and provides mechanisms for environmental protection orders and remediation.
Speak with your legal team to consider whether a Phase I Environmental Site Assessment is appropriate. Where potential contamination is identified, a Phase II assessment may be necessary.
The purchase agreement should address who bears responsibility for investigation and remediation and what happens if contamination is discovered before closing.
Search for Personal Property Security Interests
Commercial transactions frequently include equipment, machinery, fixtures and other assets in addition to land.
The Personal Property Security Act, RSA 2000, c P-7, governs security interests in personal property in Alberta. The Personal Property Registry allows searches for registrations against personal property. Alberta explains that the PPSA governs many secured transactions involving personal property and establishes rules concerning registration and priority.
If you’re acquiring equipment as part of a commercial property transaction, ensure you and your team determine whether third parties have registered security interests against those assets.
This is particularly important where the transaction includes:
- Manufacturing equipment
- Restaurant equipment
- Commercial vehicles
- Machinery
- Furniture and fixtures
- Specialized operating equipment
Review the Seller’s Corporate Structure
The legal structure of the transaction matters.
An asset purchase and a share purchase create different legal risks. When a buyer acquires shares of a corporation that owns commercial real estate, the buyer may acquire the corporation together with its existing contractual, financial, and other liabilities.
Corporate due diligence may include:
- Articles and corporate records
- Share ownership
- Shareholder agreements
- Existing financing
- Material contracts
- Litigation
- Tax obligations
- Security registrations
- Corporate reorganizations
Bosecke LLP’s corporate and commercial practice is directly relevant to this part of a transaction. Our lawyers have vast experience advising on corporate reorganizations, shareholder agreements, land acquisitions, financings and joint ventures, including projects involving developers, lenders and multiple parties.
Understand Financing and Registration Requirements
Commercial financing can involve mortgages, guarantees, general security agreements, assignments of leases and rents, corporate resolutions and other security documents.
The lawyer should coordinate the lender’s requirements with the purchase agreement and closing process.
For transactions involving significant development or financing structures, Bosecke LLP’s Charles Bosecke brings more than four decades of legal experience. He began practising in Alberta in 1984 and has worked extensively in commercial financing, commercial transactions, project development, corporate structuring and real estate transactions, including major projects in Canada and internationally.
Address Builders’ Liens and Construction Issues
Construction-related registrations require careful attention where a commercial property has recently undergone construction or renovation. Determine whether builders’ liens or other construction claims have been registered and whether outstanding contractor obligations could affect closing.
Conduct a title search alongside construction records, invoices, releases, and other relevant documentation.
Structure the Purchase Agreement Around Due Diligence
The purchase agreement should establish specific conditions and deadlines for your investigation.
| Due Diligence Condition | Purpose |
| Title | Identify unacceptable registrations |
| Zoning | Confirm intended property use |
| Environmental | Identify contamination risks |
| Leases | Confirm contractual income |
| Financing | Obtain lender approval |
| Corporate | Verify ownership and authority |
| Building condition | Identify physical defects |
| Documents | Verify permits and material contracts |
The agreement should also address seller representations, document delivery, inspection rights, access to tenants and property records, termination rights, indemnities, and the consequences of inaccurate representations.
A lawyer should review these provisions before the agreement is signed.
Bosecke LLP: 40+ Years of Experience Guiding Alberta Commercial Real Estate Transactions
Bosecke LLP carries forward an Edmonton legal practice established by Charles Bosecke in 1988. The current firm combines that long-standing Alberta experience with the practices of partners Manwinder Pal Singh and Branden Messier.
Charles Bosecke has practised law since 1984 and focuses on commercial transactions, financing, project development, corporate structures and real estate. His experience includes major commercial projects and transactions in Canada and internationally.
Why Alberta Commercial Property Buyers Choose Bosecke LLP
- Four decades of Alberta legal experience
- Direct experience with commercial financing and real estate transactions
- Knowledge of land acquisitions, subdivisions and development structures
- Experience with developer, lender, and joint venture matters
- Edmonton-based counsel familiar with Alberta land and commercial law
If you are purchasing commercial real estate in Alberta, have Bosecke LLP guide the due diligence and transaction analysis. Early legal review can identify title, land use, lease, financing, and environmental issues while there is still an opportunity to address them.
Schedule a consultation with the Bosecke LLP team today.
Commercial Real Estate Due Diligence – Frequently Asked Questions
What legislation governs commercial real estate in Alberta?
Several statutes may apply depending on the transaction. Important legislation includes the Land Titles Act, Municipal Government Act, Environmental Protection and Enhancement Act, Personal Property Security Act, and other provincial and municipal laws.
What does the Alberta Land Titles Act protect?
The Land Titles Act establishes Alberta’s Torrens registration system and provides the framework for registering ownership and interests in land.
Can zoning prevent a buyer from operating a business?
Yes. Municipal land use bylaws determine which uses are permitted or discretionary on a property. A buyer should confirm the intended use before waiving conditions.
What should I investigate before buying an industrial property?
Review title, zoning, historical property use, environmental records, leases, municipal requirements, construction history, and potential contamination.
Can a buyer inherit environmental problems from a previous owner?
Environmental liability can extend beyond the party that originally caused contamination. The applicable facts and legislation must be reviewed carefully, which makes environmental due diligence particularly important.
Should commercial buyers search the Personal Property Registry?
Yes, when equipment or other personal property forms part of the transaction. A PPR search can identify registered security interests affecting those assets.
Why should a lawyer review commercial leases before closing?
The leases establish the buyer’s rights and obligations as the new landlord. They also determine rental income, renewal rights, operating-cost recovery, and other important economic terms.
What is the difference between an asset purchase and a share purchase?
An asset purchase generally involves acquiring specified assets. A share purchase involves acquiring ownership of the corporation itself, which can expose the buyer to the corporation’s existing obligations and liabilities.
When should I hire a commercial real estate lawyer?
Ideally, before signing the purchase agreement. Early involvement allows the lawyer to negotiate appropriate due diligence conditions and identify legal issues before the buyer becomes committed.
Contact our Edmonton Offices:
9440 49 St NW Unit 230, Edmonton, AB T6B 2M9
Phone: (825) 535-0522
Email: ac.walekcesob@nimda
