Depending on the property development strategy, the final stage of the development process is either operation, including the renovation, rehabilitation and reconstruction and re-lease of the constructed buildings, or disposition (sale) of the developed property. For operation or disposition of the property, lease agreements and purchase contracts need to be finalized.
A certificate of occupancy, which is a document certifying that a building is in compliance with applicable building codes and other laws and suitable for occupancy, generally marks the end of the construction phase and commencement of property operations. This is when tenants begin to occupy the property, such as a hotel or apartment complex, and the owner/developer starts collecting rent or the property is sold to another party and also when the warranty and security periods begin. The rent roll lists a property’s current tenants and vacant units and reports the total rental income and the key terms for each lease, including the rental rate, amount of rent payable, length of the lease term (expiration date), square area (footage), and the total rental income.
Property disposal is the sale of property, where the value of the real estate is realized by converting the asset into cash to be redeployed for other purposes. Property disposal is part of the normal life cycle of property. To facilitate the sale of developed property, project documents and supplements must be made available to investors to enable them to perform their due diligence on the transaction.
Many of the parties involved in the sale of developed property are the same who are involved in the planning, acquisition/production and operational phases of a property development project.