Commercial Due Diligence NSW

Buying commercial property in New South Wales can involve more than reviewing the purchase price and settlement date. Before committing to a transaction, a purchaser should understand the title, permitted use, planning controls, existing leases, physical condition, environmental issues and the commercial obligations that may continue after settlement.

Start Due Diligence Before You Commit

The scope and timing of due diligence depend on the transaction. Where possible, important legal and commercial issues should be investigated before contracts are exchanged or within any negotiated due diligence period. Once a contract becomes unconditional, the purchaser’s ability to withdraw or renegotiate may be limited.

1. Review the Contract for Sale

The contract should be reviewed carefully for the purchase price, deposit, settlement period, inclusions, adjustments, GST treatment, existing tenancies, special conditions and any obligations that continue after completion. Commercial contracts are often negotiated more extensively than standard residential contracts.

2. Check the Title and Encumbrances

A title review can identify registered interests affecting the land, such as easements, restrictions on use, covenants, leases, mortgages and other dealings. The practical effect of an easement or restriction can be significant if the purchaser intends to redevelop, extend or change the use of the property.

3. Confirm Zoning and Permitted Use

A purchaser should not assume that an existing or proposed business use is permitted simply because the property is currently occupied for a similar purpose. Zoning, environmental planning instruments, development approvals and conditions of consent should be checked against the intended use.

The NSW Planning Portal Spatial Viewer provides access to planning maps and spatial information. Council records, planning certificates and development consents may also need to be reviewed depending on the property and proposed use.

4. Examine Existing Leases

If the property is tenanted, the leases can affect value, income and future flexibility. Important matters may include rent, review mechanisms, options, outgoings, incentives, security, repair obligations, make-good provisions, assignment rights and any arrears or disputes.

Our Commercial Leases page and Commercial & Retail Lease Checklist NSW explain many of the issues that may arise in commercial leasing.

5. Consider Building Condition and Compliance

Legal due diligence should be supported by appropriate building, engineering or other specialist inspections where required. Depending on the property, issues may include structural condition, fire safety, access, services, unauthorised works and compliance with approvals.

6. Investigate Contamination and Hazardous Materials

Past industrial or commercial use can create environmental risk. The NSW Environment Protection Authority maintains public information about notified and regulated contaminated land, but the public registers are not a complete record of every potentially contaminated property. Site history, council records and specialist environmental advice may be required.

Purchasers can review the NSW EPA contaminated land information. For older commercial buildings, asbestos may also require investigation. See our Asbestos Register information.

7. Check Outgoings, Land Tax and Adjustments

The purchaser should understand recurring property costs and how they are dealt with under the contract and any leases. Depending on the property, this may include council rates, water charges, strata or community levies, insurance, land tax and other outgoings. Tax treatment, including GST and transfer duty, should be considered with appropriate legal and taxation advice.

8. Consider Future Development Plans

If the acquisition is linked to redevelopment, subdivision or a change of use, due diligence should address planning controls, access, easements, services, approvals and any restrictions that could affect the proposal. Our Property Development page discusses these issues in more detail.

9. Review the Ownership and Finance Structure

The proposed purchaser should consider the ownership structure before exchange. Company, trust, partnership and personal ownership can have different legal, tax, financing and succession consequences. Finance conditions and lender requirements should also be understood before the transaction becomes unconditional.

How Russell Kelly & Associates Can Assist

Russell Kelly & Associates advises purchasers and vendors of commercial property in New South Wales, including contract review and negotiation, title and due diligence issues, leasing, settlement and related commercial matters.

Read more about our Property Law and Conveyancing services and Business & Commercial Law services. For clients in Norwest and surrounding suburbs, see our Hills District property law and conveyancing information.

This information is general in nature and does not constitute legal, financial, taxation, planning or environmental advice. Appropriate due diligence depends on the property, the contract, the proposed use and the purchaser’s circumstances.