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2.4.4 Due Diligence Process

The technical due diligence and the subsequent property valuation must be followed by a wider due diligence process, the purpose of which is to:

(a) carry out an administrative check, ascertaining whether the necessary commercial permits (if required) in order to manage real estate assets with rent agreements or going concern leases have been obtained, or verifying the status of the application to obtain those permits;

(b) review the compliance with the town planning requirements and building regulations, including consultation of the general city plan, building regulations and any town planning accords and/or plans, as well as an analysis of the relevant permits (building permit and works building notice); in several countries the sale of a property is prohibited under the town planning and building law if it has been built without the necessary consent;

(c) review mortgage and land registry documents in order to ensure that the documentation filed with the land registry corresponds to the property in its actual state;

(d) carry out a structural and technical plants check on the building and its facilities as well as of the state of maintenance;

(e) carry out an environmental check to ascertain whether there are any sources of pollution, including in the land, and hazardous material (e.g. asbestos, fuel tanks);

(f) check the energy certification documents and certificates.

2.4.5 Legal Due Diligence

The legal due diligence comprises the following stages:

1. verification of full ownership of the property to be mortgaged by the party offering the security;

2. verification that the property is not subject to any other securities or charges, or any other formality specified in the public land registers which may be otherwise detrimental to the mortgage security;

3. verification of the legal capacity of all individuals involved in the loan agreement and in the issue of the relative guarantees;

4. verification of the lease agreements in which the claims are granted/assigned/pledged to the lender;

5. for some transactions (for example in case of the acquisition of the property by way of a share deal), a corporate and tax due diligence are also requested.

Depending upon the legislative arrangements, these stages of the review will generally be conducted by the solicitor or barrister responsible for the drafting of the loan agreement or for authenticating the signatures, who will then draw up the reports attesting ownership of the properties provided as security and the fact that they are free from other charges.

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