Commercial Property Due Diligence

Download the title register from gov.uk (£3). Check the registered owner matches the seller. Note any restrictions, charges, or cautions on the title.

Absolute freehold or leasehold title is standard. Possessory or Qualified title indicates a defect in the title history — seek legal advice before proceeding.

Any outstanding mortgages or legal charges must be discharged on completion. Confirm with the seller's solicitor that all charges will be cleared.

Covenants may restrict use (e.g. no retail, no alterations, no HMO). Check these against your intended use. Some covenants are unenforceable but require legal opinion. Budget for indemnity insurance if needed.

Check for rights of way over the property (footpaths, drainage, services). Also confirm you have all necessary rights over adjacent land (access routes, utility connections).

Local authority search (planning history, road adoption, enforcement notices), drainage search, environmental search, chancel repair liability search, coal/mining search if relevant. Budget £350–600.

Check the planning use class (Use Classes Order 2020): C3 (dwelling), E (commercial/office/retail), C4 (HMO), Sui Generis. Any use outside the lawful class requires planning permission.

Access via the local planning authority's online planning portal. Look for refused applications, enforcement notices, Article 4 directions, and conditions on any permissions granted.

Article 4 Directions remove permitted development rights. Common in conservation areas and some residential areas (removing rights to convert to HMO). Check with the LPA.

Planning permissions that have not been commenced within their time limit have lapsed. Check commencement and completion of any extensions, conversions, or changes of use.

A desktop study of the site history, historical maps, and nearby land uses. Required by most commercial lenders. If risk is identified, commission a Phase 2 (intrusive) investigation. Budget £800–2,500 for Phase 1.

Search Environment Agency flood map (flood-map-for-planning.service.gov.uk). Zone 2 or 3 properties require a flood risk assessment before planning. Check whether current insurance is available and at what cost.

Any commercial building built before 2000 may contain asbestos. A Management Survey is required by law. A Refurbishment/Demolition Survey is required before any structural works.

Commercial properties must have an EPC rating of E or above to be let (MEES regulations). Planned increase to B by 2030. Factor EPC improvement costs into your budget.

For commercial property, instruct a chartered building surveyor (RICS). A full building survey identifies all structural defects, maintenance issues, and potential liabilities. Budget £1,500–5,000 depending on size.

Flat roofs, parapet walls, and gutters are common problem areas. Get a roofer's report if the surveyor flags concerns. A roof replacement on a commercial property can cost £30,000–200,000+.

Confirm all services are connected, legally adopted, and adequate for your intended use. Obtain connection sizes — undersized services may need upgrading at significant cost.

Required before any commercial letting. Identifies remedial electrical work needed. Budget £400–2,000 depending on building size and complexity.

All commercial buildings require a fire risk assessment by a competent person. Check adequacy of fire detection, suppression, escape routes, and signage against the Regulatory Reform (Fire Safety) Order 2005.

Get a schedule of all tenants, lease terms, rents, rent-free periods, and break clauses. Verify against actual signed leases — not just what the agent says.

Check: term length, break clauses, rent review mechanism (upward only? RPI? Open market?), service charge obligations, repairing obligations, alienation restrictions, permitted use.

Research each tenant's financial health. Check Companies House filings, credit ratings, turnover, and profit. A property let to a financially weak tenant is worth less — and risks void periods.

Request a rent arrears schedule. Any arrears at completion become your problem. Negotiate a reduction in price or a rent deposit/retention to cover outstanding amounts.

Based on the building survey and service charge history, estimate major capital works required in the short term (roof, boiler, lift, cladding). Factor these into your offer price.

If the seller has opted to tax the property for VAT, the sale is subject to 20% VAT — unless it qualifies as a Transfer of a Going Concern (TOGC). Take specialist advice immediately if VAT is an issue.

Obtain comparable evidence of similar properties sold (by yield and capital value per sq ft) in the last 12 months. CoStar, EGi, or a commercial agent can assist. Validates your entry price.

What is the void rate for this type of property in this location? Talk to 2–3 local commercial agents. A property with long void risk needs a much higher yield to compensate.

Get a credit-approved DIP from your lender before exchanging contracts. Commercial lenders frequently decline or change terms at offer stage based on survey and legal findings.