Question: I am an experienced landlord in a small town in Ontario. I'm looking at making an offer for a building (a store front with four residential apartments attached). Before making an offer I want to review the current tenancy agreements, ensure fire codes are up to date, view the utility expenses and the property tax statement. The listing agent has refused to divulge this information until an "accepted" offer has been completed. Shouldn't I be able to review all this documentation before making an offer?
Answer: I understand your frustration, but the truth is it's up to the property owner as to what specifics they disclose prior to an offer. This holds especially true for information that includes private data, such as finances and tenancy agreements. That being said, if general questions are asked, both the listing broker and owner have a duty to provide an honest answer to the best of their knowledge. For example,a question about whether the buillding meets fire code can be answered with a straightforward yes or no, and should be disclosed without hesitation.
There are exceptions, but in the majority of cases, the property owner is doing themselves a disservice in marketing their property by not providing prospective buyers with an overview of how their property is operating. You should ask yourself (or them), why they may be withholding this information. They may have a good reason, which would usually be related to privacy. Otherwise, it could be a red flag. Why aren't they providing pertinent information that could aid in selling their property? What are they hiding? There could be a host of reasons, ranging from poor business performance, an ongoing dispute with a tenant, or a lien registered against the property. It could be anything, and instead of causing yourself a heap of frustration by guessing – it would be wise to get the facts.
You can uncover some facts by accessing publicly-available information. A visit to your local municipal office could unearth some general information related to property taxes, registered liens and potential work orders. Keep in mind that the information available to you will vary from city to city. A simple Internet search may reveal more information about the property. But a strong word of caution: Even if you find out some details about the tenants occupying the building, DO NOT under any circumstances contact them directly.
Once you've exhausted public avenues for information, and still have interest in the property, you can consider putting in an offer. In situations like you have described, it is fairly common to put in a conditional offer. These conditions could include review of tenancy documents, income and expense statements, property inspection and any other documentation and due diligence you see fit. Moving forward with a firm offer would only be on the basis of the conditions being met "satisfactory to the buyer in the buyer's sole and absolute discretion" and within a finite time period.
This approach allows a buyer to move forward with complete confidence and minimal risk. If the conditions aren't met satisfactory to the potential buyer, then all deposit money is returned in full – provided the deal was structured in that way. You may expend time and effort, but you shouldn't suffer any financial loss as a result of a deal that falls through.
Ricky Chadha is a broker with Royal LePage Estate Realty in Toronto, and specializes in applying social media and other digital tools to the business of real estate. You can find Ricky on Twitter @your416 or at his website RickyChadha.com.
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