WHENEVER YOU embark upon a physical Due Diligence for any Commercial property, there are five key issues on which you should focus. And all of them need to be fully explored.
Depending on the size and type of the building, you may well require a more-detailed analysis. But for the time being, this will provide you with a basic checklist.
Council & Authorities
- Is the zoning applicable for the building’s use and ongoing occupation?
- Has the building been constructed under a building permit?
- Is it occupied in accordance with the appropriate occupancy permit?
- Does the building meet current code requirements?
- If not, what upgrades may be required to meet current standards?
- And could these upgrades be enforceable?
- When and how was the building constructed?
- Was it well constructed; and was the construction suitable when built?
- Is the building suitable for modern occupation?
- Are there any defects requiring rectification, or capital expenditure?
- Is the building effectively “maintenance free”?
- Has it been designed with this in mind?
- Has the building been well maintained?
- Are the contractors maintaining the building reputable?
- Do any funds need to be allowed for future repairs & maintenance?
- Has a life-cycle review of the building been conducted?
- What is the condition of the major plant and equipment?
- Where is the building positioned in the leasing market?
- Will refurbishment provide for greater leasing opportunities?
- Are the common areas suitable, and providing appropriate amenity?
- What could be upgraded now, to enhance its appeal to the leasing market?
- Could the building be easily split into multiple tenancies or titles?
- Can the building be re-developed or extended, to provide additional space?
Bottom Line: Having negotiated the commercial terms of the deal (allowing for due diligence), you then need to set about verifying that you have purchased is exactly what you expected the property be.
Therefore the time, effort and money invested into this analysis … will probably end up being your cheapest insurance.