Selling a commercial building

Understanding the process

Selling a commercial building rests on verifiable figures and documents: net operating income (NOI), leases, charges, condition of the building and environmental compliance. A complete file before going to market makes the buyers’ analysis and the due diligence period easier.

In commercial real estate there is no mandatory OACIQ form for the brokerage contract: it is drafted to suit the file, then signed. I present it to you and explain it before any signature.

The steps and who does what

• You
• Together
• Me, the broker

1. 1

   Step 1 : Preparation

   indicative When : Before going to market

   We clarify your goals, calculate the current return and gather the financial and legal documents.

   You

   • Tell me about your goals (reinvestment, retirement, tax, exit horizon)
   • Gather the leases, financial statements, rent roll and the other documents on the list below
   • Consult your accountant or tax adviser on the tax consequences of the sale

   Together

   • On-site meeting: physical audit of the building (HVAC systems, roof, structure)
   • Lease analysis: net or gross leases, indexation clauses, renewal options
   • Value by the income approach (capitalization rate) and by the comparative approach
   • Agree on the listing price and on the terms of the brokerage contract (compensation, duration, protections)
   • Validation of the ownership structure (individual or company), identity verification and Law 25 consent
   • Discussion of the legal warranty of quality; seller’s declaration on the property, which I help you complete

   Me, the broker

   • Preliminary remote meeting, preliminary profitability audit (calculation of the current NOI) and timeline of milestones
   • Setting a target capitalization rate according to the sector and the type of asset
   • Checking the zoning and permitted uses with the municipality
   • Measuring, photos, electronic document register and notice of anything missing
   • If the building has residential units: compliance review of the leases and renewal notices against the Tribunal administratif du logement standards
2. 2

   Step 2 : Marketing

   indicative When : After the brokerage contract is signed

   The investment documentation is prepared before distribution, so that qualified buyers find what they are looking for.

   You

   • Validate the fact sheet and the profitability sheet
   • Facilitate access to the premises with as little disruption as possible for tenants

   Together

   • Review of the Centris listing before it is published
   • Choice of optional services (aerial photography, brochure, digital advertising), if any

   Me, the broker

   • Investor information package (confidential information memorandum, as needed)
   • Professional photography and aerial views, depending on the services chosen
   • Listing on Centris, Realtor.ca, the specialized platforms and the eXp Commercial networks
   • Distribution to a network of investors and specialized brokers; digital campaign (LinkedIn, Google, social media)
3. 3

   Step 3 : Negotiation

   indicative When : When a letter of intent or an offer to purchase is received

   Each prospective buyer is qualified before showings; each proposal is presented objectively.

   You

   • Read each letter of intent or offer to purchase: price, possession, conditions, financing
   • Decide: accept, decline or make a counter-offer
   • Consult your lawyer, notary or accountant if needed

   Together

   • Analysis of the proposals and of the options for responding
   • Drafting of counter-offers

   Me, the broker

   • Financial and operational qualification of each prospective buyer
   • Management of showings to limit the impact on tenants in place
   • Objective presentation of the proposals and negotiation of your interests, with no guarantee on the outcome
4. 4

   Step 4 : Conditions and due diligence

   indicative When : Between acceptance of the proposal and signing

   The buyer verifies the building, the leases, the books and the environment. This is often when commercial financing takes shape.

   You

   • Give access to the building for inspections and verifications
   • Provide the requested documents or clarifications promptly
   • Have the tenants sign the statements (estoppels) requested by the buyer or their lender

   Together

   • Environmental audit: explanation of the Phase I and Phase II reports, and the possible follow-up
   • Validation of the leases by the tenants before closing

   Me, the broker

   • Co-ordination of the due diligence period (environment, inspection, leases)
   • Co-operation with accountants to validate the history of income and expenses
   • Follow-up on obtaining commercial financing, often longer and more complex
5. 5

   Step 5 : Notary

   indicative When : Up to the signing of the deed of sale

   The notary and, if needed, legal advisers see to the closing of the transaction.

   You

   • Choose your notary and send them the information requested
   • Ask the lender for the mortgage balance and the discharge terms
   • Prepare the handover of the building, the keys and the operating documents

   Together

   • Check that the commitments of the agreement are met

   Me, the broker

   • Work with the notaries and legal advisers for the closing
   • After-sale follow-up: I remain available to answer your questions

Indicative timeline

The stakeholders

Role and responsibilities of the broker

• Keep you informed in plain terms: the process, the forms, the documents and the deadlines of each stage.
• Advise you with honesty, competence, loyalty and diligence, in line with Quebec’s Real Estate Brokerage Act and OACIQ rules.
• Tell you the important facts I am aware of that may influence your decision.
• Draft, or guide you through, the OACIQ forms, and explain what they mean.
• Verify the identity of the parties and protect your personal information (Law 25 consent).
• Co-ordinate communications, documents and the follow-up of conditions between the parties and the professionals involved.
• Refer you to the right professional — notary, lawyer, accountant, inspector, lender — for any legal or tax advice: a broker does not give it.
• Promise no result: price, timelines, number of showings or offers depend on the market and on the parties.

My brokerage activities are governed by Quebec’s Real Estate Brokerage Act. As a client, you benefit from the Fonds d’indemnisation du courtage immobilier (FICI) and from brokers’ professional liability insurance.

Services provided