Commercial Real Estate Escrow
California commercial deals look smooth at the LOI stage and then sprout surprises once escrow opens. A disciplined checklist keeps the surprises off your closing statement and the champagne on ice. Below is the field-tested sequence Secured Trust Escrow uses on every office, retail and industrial transaction from San Diego to Sacramento.
Start with title and survey. Order the preliminary title report the same day the purchase agreement is fully executed, not when you “get around to it.” A 200 page industrial report can take 14 business days to compile, and any unrecorded easement or mechanic lien discovered at day 40 will push closing by at least a week. Concurrently request an ALTA survey so encroachments are flagged early; lenders will reject a survey older than 90 days, so do not recycle the seller’s 2022 drawing.
Environmental work comes next. A Phase I Environmental Site Assessment must be completed within 30 days to meet most lender timelines. If the report finds historic dry-cleaning solvent or a former gas station, budget an extra 25 days and $18,000 for a Phase II subsurface study. Build the contingency into your PSA so the clock pauses while soil borings are analyzed.
Financing items move in parallel. Deliver the lender’s complete checklist—rent roll, trailing 12 profit and loss, copies of all leases—within 72 hours of escrow opening. Delayed documents cascade: the appraiser cannot start, the appraiser cannot finish, and the loan committee cannot meet. On a $20 million CMBS loan, each missed committee date adds $2,400 in daily extension interest.
Critical Milestones to Track
- Day 1: Open escrow, wire earnest money, order title and survey
- Day 5: Deliver tenant estoppels to landlord for signature
- Day 15: Receive Phase I ESA; order Phase II if required
- Day 25: Lender orders appraisal and UCC search
- Day 35: Obtain city transfer tax certificate
- Day 45: Clear all title exceptions; secure payoff statements
- Day 55: Sign loan documents; buyer wires balance
- Day 60: Record deed; release funds
Tenant estoppels are the silent killer. California commercial leases usually contain a clause requiring the landlord to provide an estoppel certificate within 10 days of request. If you wait until week five to ask, and one tenant refuses to sign, you will blow past the closing date and trigger per diem penalties of $250 to $500. Request estoppels on day 5 and follow up every 48 hours.
City transfer tax certificates can also derail timing. Los Angeles, San Francisco and San Diego each require a separate certificate showing taxes are current; if the city backlog is 10 business days, you cannot record without it. Escrow can expedite the request for an extra $175, but only if you ask early.
Insurance certificates must name the new owner and the lender as additional insureds before the deed is recorded. A last minute call to your broker can still take 48 hours to process, so order the certificate at least a week before closing.
Finally, rehearse the settlement statement 72 hours before funding. Confirm prorations for taxes, utilities and tenant security deposits match the lease abstracts. A $12,000 utility credit miscalculation discovered at 4 p.m. on a Friday will delay recording until Monday and cost another three days of extension interest.
Bottom line: commercial escrow in California is a relay race, not a sprint. Use the checklist, hit each milestone on time, and your deal closes on schedule. Secured Trust Escrow assigns a dedicated coordinator to every file and sends automated reminders so nothing falls through the cracks. Download our editable Excel checklist or request a guided walkthrough today.
