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Acquisition due diligence checklist for service contracts
When you buy a commercial building, its janitorial, porter, landscaping, elevator, pest, waste and life-safety contracts come with it unless you act. Each one has its own term, renewal date, assignment clause and insurance requirement, and lenders read them to build their expense numbers. This checklist covers what to collect from the seller, what to look for in each contract, how lender and federal lease rules touch them, and how to time notices around closing. Download the printable checklist to work through it property by property.
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Printable checklist
Why service contracts belong in due diligence
Service contracts set a large share of a building’s operating costs and carry dates that can catch a new owner off guard. Read them before closing, and you know what you are inheriting, what you can end and what the first month will cost. Skip them, and an automatic renewal or an assignment clause can decide for you.
The review also feeds the deal itself. Lenders use the property’s contracts to estimate expenses, and those expenses set net operating income, the figure behind both the loan and the price. Our NOI calculator shows how a change in any one service line carries through.
What lenders and bank examiners collect
Buyers are already gathering most of the deal file, and the service contract review fits into the same request. The OCC’s Commercial Real Estate Lending booklet (Version 2.0, March 2022) lists what an income property loan file typically holds:
- operating statements and rent rolls
- copies of all leases and executed tenant estoppels
- title insurance and the recorded mortgage or deed of trust with lease assignments
- insurance policies and proof the premiums are paid
- the appraisal or evaluation, and a survey showing easements or encroachments
- organizational documents and evidence that property taxes are paid
- environmental reports where warranted
Freddie Mac’s conventional underwriting checklist (Exhibit 1.1, 12/16/25) asks, among other items, for a trailing 12 months of financials, the borrower’s budget, evidence of insurance, the management agreement, zoning and building-code violation records, the property condition report and, for an acquisition, the purchase agreement. Fannie Mae’s underwriting section 203.01 (Guide effective October 26, 2026) tells underwriters to use the property’s contracts, utility bills, tax assessments and insurance policies when estimating expenses, and to include any known contractual increases in the management fee over the next 24 months. In other words, lenders read the escalator clauses too.
Leases and service contracts are not the same thing
Sort the seller’s agreements into two piles before reviewing either. In a lease, someone pays the owner to occupy space; in a service contract, the owner pays a vendor to do work. Freddie Mac’s Chapter 8 treats any non-residential lease where the borrower is the lessor, including laundry rooms, cellular equipment, billboards and retail or office space, as a commercial lease for underwriting. A rooftop antenna agreement belongs with the leases, while the window washing contract belongs with the service agreements.
Management agreements on a Freddie Mac loan
If the purchase is financed through Freddie Mac, the property management agreement faces its own rule. Unless that agreement is assigned to the lender and subordinated to the mortgage, Freddie Mac’s guide requires it to be terminable on no more than 30 days’ notice, without cause and without a penalty or termination fee to the borrower or its successors.
That rule covers the management agreement only, not janitorial, porter or other service contracts. Freddie Mac also turns away management companies that appear on its exclusionary or restricted vendor lists, OFAC sanctions lists or FHFA’s Suspended Counterparty Program, and the lender must interview the property manager and walk the property before an early rate-lock.
Buildings with a federal GSA lease
If a federal agency leases space under GSA’s Global Lease Template L100 (May 2026), the template spells out what an ownership change involves. The lessor must notify the government within five days of the title transfer, and the government, the old owner and the new owner sign a novation agreement under FAR 42.12 that is added to the lease by amendment. Rent to the new owner starts on that amendment’s effective date, and if the contracting officer declines to recognize the new owner, the old owner remains fully liable under the lease.
The same template makes the lessor responsible for keeping the government’s premises and the areas it routinely uses clean, high-touch surfaces included, and for supplying the materials and equipment for the whole term. Performance is judged on results rather than frequency or method, against a task schedule that runs from daily to annual. A buyer of a building with a lease on this template takes on that cleaning duty, so the janitorial contract has to meet it. These clauses apply only to GSA leases.
The service contract review, item by item
Collect every contract the building runs on: janitorial, day porter, security, landscaping, elevator, pest control, waste and recycling, fire and life-safety testing, HVAC, parking and window washing. For each one, check the points below.
| Review point | What to look for |
|---|---|
| The full contract | A signed copy with every amendment, change order and current pricing exhibit, not the seller’s summary |
| Who signed it | The property entity, the management company or a parent company; portfolio-wide agreements may not split off building by building |
| Term and renewal | Start and end dates, any automatic renewal and the last day to give notice to stop it |
| Termination | Who may end it for convenience, the notice required, any fee, and how termination for cause and cure periods work |
| Assignment | Whether it can pass to a buyer, whether the vendor must consent, and any change-of-ownership or change-of-control clause |
| Scope | Tasks, frequencies, hours and staffing, and whether the crew on site actually does that work |
| Pricing terms | Escalators, wage pass-through wording, extra-work rates and holiday terms |
| Insurance | Current certificates, additional-insured status for owner and manager, and whether the buyer must be added at closing |
| Risk terms | Indemnity and limitation of liability, for counsel to review |
| Equipment and access | Who owns the machines, carts and supplies, and where keys, key cards and fobs go at closing |
| Records | Inspection reports, service logs, open work orders, complaints and any open claims or incidents |
| Certificates that ride with the service | Elevator inspection certificates, fire alarm and sprinkler test reports, pest control service reports |
| Money | Prepaid amounts, unpaid invoices and deposits, so the closing statement prorates them |
| People | Who is on site, the key contacts, how staffing would change, and whether a labor agreement covers the site |
Whether a given clause holds up is a question for your attorney; this list only shows where to look. For what a sound cleaning agreement should contain once you write your own, see what belongs in a janitorial service agreement.
Vendor confirmations, modeled on tenant estoppels
Tenant estoppels confirm lease terms directly with tenants, and the OCC lists executed estoppels among the documents in a loan file. Some buyers ask their major service vendors for a similar written confirmation: the contract is in force, neither side is in default, the amount owed, and the term and renewal dates. Whether a vendor has to sign one depends on its contract, so ask early and through the seller.
Notice dates and the contract calendar
Build the calendar on the first day of due diligence, not the last. List every notice date, renewal date and termination window for every contract against the expected closing date, and the conflicts show up at once.
- Decide which contracts to keep, re-bid or end before the purchase agreement’s deadline for assuming contracts, and tell the seller in writing.
- Hold any termination notice until closing is certain, unless the seller agrees otherwise.
- Overlap a new vendor’s start-up with the outgoing vendor’s last weeks so lobbies, restrooms and grounds are never left uncovered.
- After closing, send each vendor you keep the new owner’s billing details, insurance certificate requirements and contacts.
The handover itself, from the joint walkthrough to access and tenant notices, is covered in our guide to switching facility vendors, and the first 30 days with a new cleaning company covers the settling-in period.
The property condition assessment, in brief
The physical review runs alongside the contract review. For a Freddie Mac loan, the property condition report must come before a commitment or an early rate-lock, and Chapter 62 (Guide Bulletin Update 08/25/26) asks the consultant to review maintenance, repair and inspection records along with planned capital work. Freddie Mac sets Priority Repairs within 365 days after origination; for a Fannie Mae loan, its section 405.01 sets critical repairs within 6 months and deferred maintenance within 12.
Hand the consultant the service contracts and maintenance records before the walk-through, and have mechanical rooms, roofs and sample spaces clean and unlocked, since spaces that cannot be reached get noted as not observed. For what the assessment itself covers, see our facility condition assessment guide.
Download the service contract checklist
Download the service contract due diligence checklist from the bar under the page title. It has a document request list, a contract log with term, notice and assignment columns, the review points above, and a closing and post-closing list, all with blanks to fill in for each property.
Get help
If you are buying an office, industrial or retail building and want janitorial, porter and grounds service in place from the day you take over, request a walkthrough. We walk the property during due diligence and send a written quote you can set against the seller’s contracts.
A few useful answers
Common questions
Can a buyer cancel the seller’s janitorial contract after closing?
Only if that contract’s termination and assignment terms allow it. Check for a termination-for-convenience clause and its notice period, and have counsel review whether the contract passes to you at all.
Does Freddie Mac’s 30-day termination rule apply to cleaning contracts?
No. Freddie Mac’s rule covers the property management agreement on a Freddie Mac loan, which must be terminable on 30 days’ notice without cause or fee unless assigned to the lender and subordinated.
What documents should a buyer request for service contracts?
Full signed copies with all amendments and pricing exhibits, current insurance certificates, inspection and service records, open work orders, equipment and key lists, and a statement of prepaid and unpaid amounts.
Is a laundry room agreement a service contract?
For Freddie Mac underwriting it is a commercial lease, because the operator pays to occupy space. Review leases and service contracts as separate groups.
What happens to a GSA lease when the building is sold?
Under GSA’s lease template L100 (May 2026), the seller notifies the government within five days of the transfer, and the parties sign a novation agreement under FAR 42.12 added to the lease by amendment.
When should termination notices go to vendors?
Once closing is certain, unless the seller agrees to earlier notice. Build a calendar of every notice date at the start of due diligence so none passes mid-escrow.