When you invest in commercial property for your business, it is essential that you get a full overview of the property to protect your assets and avoid legal disputes.
Conducting due diligence is one of the most important steps of any commercial property acquisition, helping you to identify any issues with the property before making a significant investment.
Our experts are here to take a look at how to conduct due diligence and get the most out of it.
Review title documents
The title deed should be your starting point for due diligence.
It shows the ownership of the property and ensures the seller has the legal right to transfer ownership to you. If they do not, this could significantly delay or stop the purchase.
A title search will reveal anything which could impact you, such as easements or outstanding mortgages – showing you whether you will be able to use the property as you intend without restriction.
Confirm planning permissions
Before purchasing commercial property, you need to ensure that any work that has been done to the property has the appropriate permissions.
You should also check that your intended use is permitted for the property you are buying, as some have restrictive covenants which prevent use for certain commercial activities, such as for a retail business.
Failing to do so could result in significant delays and costs if you need to seek retroactive planning permission, which is not always guaranteed.
Is the area right?
A substantial part of due diligence is making sure that the property is not at unreasonable risk due to its surroundings or environmental conditions.
Land with an associated flood risk or contamination, for example, can incur large costs to make it safe to occupy and use as intended.
This is particularly important for land that is, or was previously, industrial, as this is at higher risk of contamination.
Will you be a landlord?
Many businesses purchase commercial property for their own use, but many others will buy a site as an investment or to use only part of it, with tenants in the other areas.
If this is the case for you, you should review all tenant leases in detail, including:
Checking this will help you to maximise the benefit you receive from your property without entering into lengthy and costly legal disputes with tenants.
Confirm safety
A qualified surveyor should conduct a detailed site survey, checking for any structural issues, defects or maintenance requirements that may not be visible upon viewing.
This inspection should include the roof and foundations, as well as a basic check of essential utilities such as plumbing and electrics.
Identifying structural defects early on allows you to negotiate repair costs with the seller or factor the cost of repairs into your budget, preventing costly surprises!
Legal considerations
In addition to the physical condition of the building, it is important that you assess its legal and financial implications.
You should confirm that the property is not subject to ongoing legal claims or disputes, such as boundary issues, rights of way, or past tenant litigation.
Conducting all elements of due diligence will give you a holistic overview of the property and whether it will benefit you, or whether the purchase could be more costly than you initially thought.
For advice on purchasing commercial property, please contact our team today.
