Year 15 transfers, acquisitions and resyndications are a constant in the LIHTC world. Due diligence on these deals is thorough when it comes to physical condition, financials and compliance history. Insurance, by contrast, is often handled in the final weeks as a closing checklist item.
That’s a risk. A property’s insurance program can carry problems that affect the deal’s value, the new financing and the buyer’s exposure from day one. Finding them after closing means the buyer owns them.
Here’s what buyers, syndicators and lenders should review before the deal closes.
What to review before closing
• Loss history and open claims. Request at least five years of loss runs. Past claims shape future premiums, and open claims need a clear answer on who handles them after closing.
• Property values. Confirm insured values reflect current replacement cost. If the deal includes a rehab, values will change, and builder’s risk coverage may be needed during construction.
• New lender and investor requirements. The new financing and investor partnership will bring their own insurance requirements. Compare them to the existing program early, since the gap may affect the operating budget you’re underwriting.
• Continuity of coverage. The seller’s policies typically end at closing. The buyer needs a complete program in place on day one, including liability coverage that addresses claims tied to events before the sale.
• Vendor and contractor agreements. If contracts transfer with the property, review their insurance and indemnification terms, and confirm every vendor’s coverage is current.
• Wind and flood exposure. For Florida properties especially, understand wind deductibles, flood zone status and what storm-related losses the new owner would actually carry.
Why Timing Matters
Insurance findings can change a deal. A higher premium changes the operating budget. An undervalued building or a pattern of water damage claims can affect price and terms. A coverage requirement the market can’t meet can delay closing.
Reviewing insurance early, alongside physical and financial due diligence, gives buyers time to negotiate, budget accurately and bind the right coverage without a last-minute scramble.
How The ALS Group Helps
The ALS Group provides pre-closing insurance due diligence for buyers, syndicators and lenders. We review the existing program, identify gaps and hidden costs, and help structure coverage that meets the new deal’s requirements from day one.
As an independent, fee-based firm, we don’t sell insurance and we don’t take commissions. Our findings are driven by one thing: what’s best for the deal.
Have a LIHTC transaction in the pipeline? Contact The ALS Group to talk through a pre-closing insurance review.
