Commercial Property Due Diligence Checklist for NSW Investors

Why commercial due diligence is different

Residential due diligence is primarily a legal and physical exercise: confirm title, check for encumbrances, inspect the building, review the strata report if applicable. Commercial due diligence is substantially more complex — because the value of a commercial asset is derived from its income, and the income depends on factors that don't appear on a certificate of title.

A commercial property with a below-market lease, a weak tenant covenant, or a building services obligation due in year three is worth meaningfully less than the same property with a market-rate lease, a strong corporate tenant, and a recently completed capital expenditure program. These are not details — they are the substance of the investment.

The following checklist covers the key categories of commercial due diligence that every serious NSW investor should complete before exchange of contracts.

Legal and title due diligence

• Title search: Confirm registered proprietor, title type (freehold/leasehold), and any caveats, charges, or mortgages encumbering the title
• Section 10.7 planning certificate: Confirms the land use zone, applicable planning constraints, and any notations relevant to the land
• Lease review (full document): Read the entire lease — rent, rent review mechanism (fixed, CPI, or market), options, make-good obligations, assignment provisions, and any side deeds or variations
• Outgoings schedule: Confirm what the landlord is responsible for versus what is recoverable from the tenant. Gross leases vs net leases have fundamentally different cost implications
• Survey/deposited plan: Confirm boundaries, easements, and any rights of way affecting the property
• Strata plan (if applicable): Review strata by-laws, sinking fund, and any pending special levies
• Body corporate records (if applicable): Confirm financial health, any pending litigation, and capital expenditure history

Financial and income due diligence

• Passing rent vs market rent: Is the current rent at, above, or below market? Below-market leases create risk at renewal; above-market leases create risk at renewal in the other direction
• Tenant financial health: For private company tenants, request financial statements. For listed entities, review public reporting. Understand who is actually paying the rent
• Rent arrears history: Request arrears records for at least 24 months. Persistent late payment or arrears history is a covenant risk indicator
• Outgoings reconciliation: Confirm what outgoings are actually being recovered from the tenant versus what is being absorbed by the landlord
• GST status: Confirm whether the property is being sold as a going concern (potentially GST-free) or subject to GST. This has material impact on acquisition cost
• Land tax exposure: Understand the land tax position and how it flows through the lease

Physical and building due diligence

• Building condition report: Engage an independent building consultant to assess structural integrity, roof condition, HVAC, electrical, plumbing, and fire services
• Asbestos register: Buildings constructed before 1987 should have a documented asbestos register. If not, engage a hygienist
• NLA verification: Measure net lettable area independently. Discrepancies between vendor-quoted NLA and actual NLA affect yield calculations materially
• Capital expenditure history: Request records of all capital expenditure in the past 5 years and any anticipated major expenditure items
• Compliance certificates: Confirm occupation certificate, fire safety statement, and any outstanding council orders or notices
• Disability access compliance (DDA): Assess compliance with the Disability Discrimination Act — particularly relevant for retail and office assets

Planning and zoning due diligence

• LEP zone confirmation: Confirm the land use zone and what uses are permitted — with consent, without consent, and prohibited
• Current use compliance: Confirm that the current tenancy operates within its permitted use. An unpermitted use may have no DA protection and creates compliance risk post-acquisition
• Approved DA conditions: Review any current development approvals and their conditions — particularly any imposed operational conditions on the tenant's use
• Planning proposals and rezonings: Check whether any planning proposals in the Local Planning Panel or DPHI pipeline could affect the site — positively or negatively
• Infrastructure contributions: For sites with development potential, understand any applicable section 7.11 or 7.12 contribution requirements

Environmental due diligence

• Phase 1 environmental site assessment: Desktop review of historical land use, site inspection, and preliminary contamination assessment. Essential for any industrial acquisition
• Phase 2 (if Phase 1 triggers): Soil and groundwater sampling where Phase 1 identifies potential contamination sources
• Flood affectation: Review flood mapping from the relevant council and confirm insurance implications and any development constraints
• Bushfire risk (if applicable): For properties in or adjacent to bushfire-prone land, confirm BAL rating and implications for any development or rebuilding obligation
• Acid sulfate soils: Relevant for coastal and low-lying sites — confirm ASS mapping status and implications for any excavation or development

Insurance and risk

• Landlord insurance: Confirm current coverage and review whether it is adequate for the building's current replacement value
• Public liability: Confirm adequate coverage given the property's use and tenant profile
• Business interruption (if relevant): For owner-occupied or mixed-use assets, confirm coverage for rental income loss during rebuilding periods

This checklist is not exhaustive — specific assets will require additional investigation based on their particular characteristics. An independent buyers agent with commercial property expertise will identify the due diligence items most relevant to your specific acquisition and coordinate the specialist professionals required to complete them thoroughly.