New York commercial real estate — office buildings, retail properties, multifamily residential, industrial facilities, and mixed-use developments — represents one of the world's most liquid and transparent investment markets. For Turkish investors and international buyers, New York real estate offers portfolio diversification, dollar-denominated returns, and access to one of the world's most dynamic urban economies.

The legal due diligence process for a New York commercial real estate acquisition is, however, substantially more complex than in most other jurisdictions. New York's unique property law, its dense regulatory environment, and the sheer volume of potential legal issues in a mature urban market require systematic, expert review before any capital is committed.

This checklist identifies the critical legal due diligence items for a New York commercial real estate acquisition and explains the significance of each.

A title search examines the chain of ownership of the property and identifies any encumbrances, liens, or defects that affect the seller's ability to convey clear title. In New York, title searches are conducted by title insurance companies and their agents.

Key items to verify:

• Chain of title going back at least 40 years (New York's standard search period)
• Outstanding mortgages, deeds of trust, and other liens
• Judgment liens against the seller
• Mechanic's liens from unpaid contractors
• Tax liens for unpaid real property taxes or assessments
• Easements, rights-of-way, and restrictive covenants
• Encroachments identified in the survey

Title insurance: Foreign investors should obtain an owner's title insurance policy at closing. Title insurance protects against losses arising from title defects that were not discovered in the title search. The premium is paid once at closing and provides coverage for as long as the investor owns the property.

A current survey of the property identifies the boundaries, improvements, easements, encroachments, and other physical characteristics of the property. Foreign investors should obtain an ALTA/NSPS survey — the most comprehensive survey standard — for any significant commercial acquisition.

Key items to verify:

• Property boundaries match the legal description in the deed
• No encroachments by neighboring properties onto the subject property
• No encroachments by the subject property onto neighboring properties or public rights-of-way
• Location and dimensions of all easements affecting the property
• Building setbacks and compliance with zoning requirements

New York City's Zoning Resolution is one of the most complex land use regulatory frameworks in the world. Properties outside New York City are subject to local zoning ordinances that vary by municipality.

Key items to verify:

• Current zoning classification and permitted uses
• Whether the existing use is permitted as-of-right or requires a variance or special permit
• Floor Area Ratio (FAR) — the ratio of building floor area to lot area — and whether the existing building is at, below, or above the permitted FAR
• Parking requirements and whether the existing parking complies
• Any pending zoning changes or rezoning applications affecting the property
• Landmark or historic district designations that restrict alterations

Key items to verify:

• Current Certificate of Occupancy (CO) and whether it accurately reflects the current use
• Any open building permits or violations
• Any outstanding Department of Buildings (DOB) violations
• History of prior permits for alterations and whether all work was properly permitted and closed out

A Phase I Environmental Site Assessment (ESA) is a standard due diligence requirement for commercial real estate acquisitions. The Phase I identifies recognized environmental conditions (RECs) — evidence of past or present contamination that could affect the property's value or create liability.

Key items to review:

• Historical use of the property and neighboring properties
• Prior industrial, manufacturing, or dry cleaning operations
• Underground storage tanks (USTs) — present or historical
• Asbestos-containing materials (ACMs) in buildings constructed before 1980
• Lead-based paint in buildings constructed before 1978
• Mold and moisture issues

If the Phase I identifies RECs, a Phase II ESA — involving soil and groundwater sampling — may be required before closing.

For acquisitions of income-producing properties, lease review is among the most critical due diligence items.

Key items to verify for each lease:

• Lease term, including options to renew and options to purchase
• Base rent, escalation provisions, and percentage rent (for retail leases)
• Tenant improvement allowances and landlord obligations
• Assignment and subletting rights
• Termination rights — including early termination options and termination triggers
• Security deposit amount and form (cash, letter of credit)
• Tenant's financial condition and creditworthiness
• Any side letters, amendments, or modifications to the lease
• Estoppel certificates — written confirmations from tenants of the lease terms

New York City real property taxes are among the highest in the United States. The tax assessment and the effective tax rate should be verified, and the buyer should understand the basis on which the property will be reassessed following the acquisition.

Key items to verify:

• Current assessed value and annual tax bill
• Any pending tax certiorari proceedings (challenges to the assessment)
• Special assessments for local improvements
• Tax abatements or exemptions and their expiration dates

As discussed in our companion article on FIRPTA compliance, foreign sellers of U.S. real property are subject to FIRPTA withholding. The buyer must withhold 15% of the gross purchase price and remit it to the IRS unless an exemption applies.

Key items to verify:

• Whether the seller is a foreign person subject to FIRPTA
• Whether any FIRPTA exemptions apply (e.g., the property is the seller's principal residence, or the purchase price is below $300,000 and the buyer intends to use the property as a residence)
• The withholding amount and the mechanics of the withholding at closing

New York imposes multiple transfer taxes on real estate sales:

• New York State Real Estate Transfer Tax: 0.4% of the consideration
• New York City Real Property Transfer Tax: 1% (for consideration up to $500,000) or 1.425% (for consideration above $500,000) for residential; 1.425% for commercial
• New York City Mansion Tax: 1% to 3.9% for residential properties above $1,000,000 (graduated based on price)
• New York State Mansion Tax: 1% for residential properties above $1,000,000

Foreign investors should budget for the following closing costs in addition to transfer taxes:

• Title insurance premium (approximately 0.5% to 1% of purchase price)
• Attorney's fees
• Survey costs
• Environmental assessment costs
• Mortgage recording tax (if financing the acquisition)
• Escrow fees

1. Engage New York real estate counsel before signing a letter of intent — the due diligence period is typically 30-60 days and begins running from contract execution
2. Order a title search and ALTA survey immediately upon contract execution
3. Commission a Phase I ESA for all commercial acquisitions
4. Review all leases in detail for income-producing properties — lease terms directly affect value
5. Analyze FIRPTA obligations before closing — withholding must be arranged in advance
6. Budget for New York transfer taxes and closing costs — they are substantial and non-negotiable

• New York commercial real estate due diligence is complex and time-sensitive — begin immediately upon contract execution
• Title insurance is essential for foreign investors — it protects against title defects not discovered in the search
• Zoning compliance review is critical — non-conforming uses create significant risk
• Phase I environmental assessment is standard practice and should not be waived
• Lease review is among the most important due diligence items for income-producing properties
• FIRPTA withholding must be planned in advance — it cannot be arranged at the closing table