Commercial Property Due Diligence

Title search, registered and unregistered interests, easements, covenants, leases and licences, encroachments, survey, and where relevant community title scheme documents, by-laws, sinking fund and administrative fund positions.

Every lease is read in full, together with every variation, side letter, deed of renewal, guarantee and bank guarantee. Summaries prepared by the selling agent are a starting point and nothing more, discrepancies between the tenancy schedule and the executed documents are common and consequential.

The income statement is reconstructed from source: executed leases, rent rolls, bank deposits, outgoings budgets and audited reconciliations for the prior years, arrears ledger, and any incentive amortisation still running.

Outgoings recovery is verified line by line against what each lease actually permits, particularly on retail tenancies where statutory limits apply. Non-recoverable outgoings, structural reserves and management costs are then deducted to produce the defensible net income the acquisition is priced from.

Independent building inspection covering structure, roof, façade, slab, services and plant condition with remaining useful life and replacement cost. Fire safety and essential services compliance, current certificates and any outstanding works. Accessibility compliance. Asbestos register where the building age warrants it.

Every identified defect is converted to a dollar figure and a timing, and those figures are either negotiated off the price, held as a retention, or accepted as a known capital call in the model.

Environmental Management Register and Contaminated Land Register searches, review of historical uses and aerial imagery, flood mapping and flood level assessment, and Phase 1 or Phase 2 environmental assessment where the site history requires it.

Environmental liability is generally uncapped and attaches to the land. It is the one due diligence category where an incomplete answer is not acceptable.

Confirmation that the current use is lawful, that approvals exist and that conditions have been satisfied. Car parking provision against scheme requirements. Existing use rights where the use predates the current scheme. Overlays and any constraint on future use or expansion.

We also test the planning envelope for upside, because the same searches that confirm compliance reveal whether the site is under-utilised.

Due diligence concludes with a written register of every issue identified, its financial quantum, its probability, and the recommended treatment, price adjustment, retention, vendor warranty, contract condition, insurance, or accepted risk.

That register is what the negotiation is built from, and it is what the investor keeps as the record of why the asset was bought at the price it was bought.