What to Know About Ground Due Diligence in Colombia
Real estate is an attractive, lucrative space for investors considering Colombia. And knowing how to perform proper due diligence locally can ensure a safe and productive experience.
In this guide, we’ll cover the essentials of ground due diligence—essential investigative procedures that protect real estate investments.
What is ground due diligence?
Ground due diligence, also known as land due diligence, refers to the process of investigating a piece of land to be bought to ensure a free and legal transaction.
Ground due diligence generally involves visiting the site of the land or property in question to confirm its physical qualities, like the size, borders, access points, and condition. The idea is to ensure that these qualities are in-line with those advertised (and to be contractually acquired).
Related: real estate due diligence
Ground diligence can bleed into real estate due diligence, as inspecting a property’s physical properties isn’t the only concern for a potential buyer. Investors should also ensure that the property’s title is free and clear and that the space is adequately zoned for the proposed residential or business activities. Investors should also investigate a property’s purchase and sale history with an eye for suspicious transactions.
The Colombian context
In order to enjoy a safe and successful real estate transaction in Colombia, investors must be aware of common risks the country’s context presents.
While vetted transactions (for which proper due diligence has been performed) can result in seamless purchases and sales, other moves can be ill-advised. Colombian real estate transactions can surface incomplete or overlapping paperwork, contested claims, and—at worst—the workings of bad actors like illegal organizations.
Rural land acquisitions can be especially tricky, as titles are often irregular or absent. At the same time, agriculture and agri-tech investments in Colombia are particularly attractive—and these investments can often imply acquiring rural land. It’s especially important that investors in this sector practice excellent ground due-diligence at every step.
Securing public records and getting professional help assessing their validity can protect an investor from an unsavory (or, even, illegal) real estate deal.
Tips for performing land due diligence in Colombia
Thorough due diligence can be painstaking, but the rewards far outweigh the risks, which can range from a failed investment to property seizure. Before purchasing land or other types of real estate in Colombia:
- Conduct a land survey and/or building inspection: Have a professional surveyor conduct an on-site assessment of the land or building to be purchased and detail it’s current state and size and other key aspects, like it’s access points and physical limits. If buying a building, have an inspector check for signs of damage, like pests, leaks, and mold.
- Do a title search: A title search will surface the status and history of a property, pulling up potential red flags like liens, legal disputes, and encumbrances. Investors or their third-party advisors can perform a title search at the Colombian Oficina de Registro de Instrumentos Públicos (the Registry of Public Instruments).
- Inspect documentation: After performing a title search, review the information for details like the current legal owner, the ownership history, and the aforementioned red flags (liens, legal disputes, and encumbrances). Look for inconsistencies like incomplete or erroneous documentation, information on active or past legal proceedings, and physical property descriptions that don’t align with the surveyed size, boundaries, or conditions of the piece of real estate. Proceed with caution if your documentation review turns up unsavory elements; the consequences could be disastrous for your investment.
- Watch for property scams: Look out for properties with multiple overlapping titles, forged documents, unauthorized sellers, and undisclosed information (i.e., a seller might not mention an encumbrance, but a properly-performed title search will bring it to light). It also can’t hurt to work with safe KYC practices in mind. KYC is an acronym meaning “know your consumer” or “know your customer,” and in this context, these procedures might be employed as “know your seller.” Research the seller in order to avoid dealings with illicit actors.
- Research zoning: Colombian urban planning laws stipulate how real estate may be used. When performing your due diligence, ensure the property is correctly zoned for the intended use. This implies researching potential environmental regulations that could curtail certain types of activities or developments, height and density regulations (in the case of urban properties), and other policies that limit land use.
- Consider environmental concerns: Investors in the agricultural or extraction industries will need to perform their due diligence proceedings with special attention to Colombian environmental laws that govern land use. These laws include regulations that an operation will need to follow to reduce negative environmental impacts, and in some cases, mitigate human rights violations.
- Get local advising: Local legal and investing experts can help you inspect title documentation with a keen eye for details you might miss but that imply major red flags. Plus, locals have a better handle on Colombian nuances and may be privy to information and cultural cues that a foreigner isn’t. Finally, experts can help you navigate local zoning, urban planning, and environmental laws that could impact your plans for the real estate to be acquired.
Secure your investment with professional help
Purchasing property in a foreign country is an involved process—not an impossible one.
You can enjoy a safe, lucrative experience by working with an investment expert at LaGrande Global, who can guide you through due diligence processes. LaGrande Global offers rigorous risk assessments and thorough investigations that ensure your investment is safe and compliant.