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FRELA provides assistance in real estate law for business acquisitions with a significant real estate component. We conduct a legal audit (due diligence) of your targets.

Are you planning to purchase a company with a significant real estate component? The legal due diligence of your target is a key element in your decision-making process.

An effective due diligence process should aim to uncover key details about the prospective company, including:

Verifying the seller’s legitimate rights to the target company’s shares and confirming the target company’s legal ownership of its assets. Identifying any hidden or unforeseen liabilities, such as environmental concerns, pension obligations, or litigation. Understanding whether the transaction could trigger change of control or non-assignment clauses. Discovering any commercial restrictions or non-competition agreements. Identifying the regulatory approvals required for the transaction, such as antitrust and foreign direct investment authorizations. Understanding the labor law-related procedures.

Benefits of conducting due diligence before any acquisition

Having a deep understanding of the target company allows the buyer to negotiate more effectively with the seller, plan for the integration of the target company’s operations, decide on the corporate structure of the transaction, identify if additional documents are required, such as transitional services agreements, understand the scope of asset acquisition including assets, liabilities, and contracts, and make a well-informed final decision on the acquisition and its price.

Furthermore, it is crucial to determine if consents or approvals are necessary for the transaction. This could include foreign investment authorization, mandatory consultations with employee representative bodies, tax authorities, competition authorities, shareholders, or key customers of the target company.

In scenarios where customer contracts are a key asset, it is essential for the buyer to determine through due diligence whether there are contractual transfer restrictions or termination rights triggered by a change of control.

The level of information available directly impacts the buyer’s comfort in concluding the deal. The less information available, the higher the risk, which may lead the buyer to withdraw from the investment or propose a reduced price to the seller.

Usual scope of due diligence in France

In a legal due diligence procedure, the key areas often examined are:

  • Corporate information.
  • Significant contracts.
  • Intellectual property.
  • Real estate.
  • Environmental factors.
  • Employment issues.
  • Litigation.
  • Information technology.

The extent of the due diligence is also likely to be influenced by practical factors such as time constraints, cost, and the imperative need to finalize the agreement. It is advisable to determine a limit to the information provided and what can be realistically reviewed. Therefore, it is crucial to decide what an appropriate “materiality threshold” would be for the examination, typically indicated in terms of Euros.

While contractual warranties cannot replace a thorough audit, they can provide some comfort in scenarios where time is limited and due diligence is restricted. In such cases, the buyer should strive to investigate key issues and take other measures to protect themselves. For example, they should:

Ensure that warranties and indemnities are sufficiently broad. Consider negotiating a retention on the purchase price to cover potential warranty claims. Propose a price adjustment. Provide for certain types of issues to be resolved as conditions precedent to closing. For example, obtaining consents for the change of control or waivers to other provisions in key commercial contracts.

Data rooms in France

Data rooms, typically virtual, are often set up by sellers where relevant information about the target company is made available.

Seller’s Due Diligence Report (VDD)?

Seller’s due diligence reports aim to minimize the time that buyers have to dedicate to the due diligence of the target company. They also offer several benefits, such as:

Enabling prospective buyers to gain a deeper understanding of the target company, as the reports are prepared by those who know the company best. Accelerating the due diligence phase by providing an overview of the target company and its sector, thus maintaining competitive tension among the candidates. Reducing the time spent by management in responding to due diligence queries from candidates, allowing them to focus on other aspects of the transaction process.

Although the preparation of VDD reports entails additional initial costs for the seller, the potential reduction in buyer’s due diligence costs can attract more candidates to the competitive process.

Our methodology for legal due diligence in acquisitions of companies with a significant real estate component

We assist you in implementing a legal due diligence for your acquisitions of companies where real estate plays a significant or complex role. Initially, we will compile a list of strengths and weaknesses resulting from the internal and external analysis of your target.

Due diligence is a crucial step in acquisitions of companies with a significant real estate component. It involves assessing the risks related to the real estate and verifying the validity of documents pertaining to the property. Here is a part of FRELA’s methodology for legal due diligence in acquisitions of companies with a significant real estate component:

  • Examination of property documents: It is important to verify the property documents, including sales deeds, leases, property titles, and cadastral documents. This step ensures that the real estate is legally owned by the target company.
  • Assessment of environmental risks: Analysis of environmental risks associated with the real estate, such as soil pollution, flood risks, or risks related to hazardous substances.
  • Evaluation of legal risks: Verification of any ongoing disputes related to the real estate or the ownership of the target company.
  • Evaluation of lease agreements: If the real estate is leased, it is important to review the lease agreements to determine the conditions and any obligations that fall upon the tenant and the landlord.
  • Examination of urban planning documents: Checking urban planning documents, such as local development plans, building permits, and work authorizations, to ensure that the real estate complies with the current regulations.
  • Assessment of the quality of real estate assets: Assessing the quality of real estate assets to determine their maintenance status and potential for value appreciation.
  • Examination of insurance contracts: It is important to review insurance contracts related to the real estate to determine the coverage and exclusions.
  • Review of maintenance contracts: Conducting a verification of maintenance contracts related to the real estate to ensure that regular upkeep is carried out.
  • Evaluation of real estate costs: Property taxes, condominium fees, and maintenance costs.
  • Assessment of regulatory compliance: Verification of the target company’s regulatory compliance, including the required permits and certifications for operating the real estate.
  • Evaluation of transaction costs: Assessing the acquisition-related transaction costs, including notary fees, registration fees, and advisory fees.
  • Review of tax documents: It is important to verify the tax documents related to the real estate to ensure that the target company is up-to-date with its tax obligations.


In conclusion, due diligence is a vital step in acquisitions of companies with a significant real estate component. We will provide you with advice to secure and optimize the tax aspects of your acquisition of a company with a significant real estate component.

Contact us and present your project for the acquisition or divestment of real estate or businesses.


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