Due Diligence Explained!

A due diligence is an essential process that needs to be conducted before acquiring any property. It involves a detailed investigation of all aspects of the property to ensure that it meets the purchasers investment objectives, is legally compliant, and is financially viable. It is often a clause written into a sale agreement to give the purchaser time to understand and review all aspects that surround the property.

To conduct a comprehensive due diligence, an buyer would require the following information, but not limited to, from the seller:

Copy Title Deed: This is the legal document that confirms ownership of the property. It contains information on the property's location, size and ownership history.

Building Plans and Zoning Certificate The seller needs to provide a copy of the building plans and zoning certificate to ensure that the property was constructed legally and complies with all relevant building codes and usage regulations.

Tenant Leases (If Applicable): If the property is already tenanted, the purchaser needs to review the tenant leases to understand the rental income stream, length of the leases and any obligations or liabilities the purchaser may inherit.

Financial Statements: The purchaser needs to review the financial statements of the property to understand its cash flow, operating expenses, and potential profitability, should it be a pure investment and not for owner occupation.

Rates and Utilities: ask for a copy of  the property's rates and utilities to ensure that there future obligation and that there are no outstanding items or liens against the property.

Insurance Policies: review the property's insurance policies to understand the level of coverage and any possible exclusions or limitations.

Maintenance Records: obtain maintenance records to understand the property's condition and identify any potential maintenance or repair issues.

Legal Disputes: Make sure you understand if there are any legal disputes or pending litigation that could impact the property's value or future prospects.

Obtaining the due diligence information as above, the purchaser can start to conduct a comprehensive due diligence that will allow them to make an informed decision about the property's viability as an investment. The "DD" clause can be a saving grace should you be exposed to an item that falls outside of your purchase expectation.