Due Diligence for Commercial Property Transactions – Our Guide

Due Diligence for Commercial Property Transactions - Our Guide

Written by GLG Legal

GLG Legal is a leading boutique law firm based in Milton, Brisbane Queensland - Our well-established firm boast a range of high profile clients and has developed a reputation for excellence in service and solutions.

07/04/2021

Caveat Emptor: Roughly translated into “buyer beware,” this particular legal concept reminds all of those diving into complex and capital-heavy transactions to exercise caution for pitfalls that are permissible beyond the scope of the law. In fact, this term has evolved and become more prevalent and widely understood by Australian investors and buyers to conduct due diligence, especially in the context of commercial property transactions.

The importance of due diligence in commercial property transactions

Over the years, the importance of exercising or conducting due diligence when purchasing commercial property is a concept that has constantly been echoed in the Australian market for decades.

With hundreds to thousands of transactions being conducted every day, a number of these transactions end up failing because of a buyer’s inability to be mindful of the concept in question. Although persistent to a certain extent, this unfortunate reality causes millions of dollars in damages annually because of various expenses, lost opportunities, and additional processes. 

What is due diligence?

Due diligence is a process of an investigation, audit, or review performed by a party (typically the buyer) to confirm the facts of a matter under consideration before entering a proposed transaction with another party. 

Contrary to popular belief, this process can cover various types of due diligence, such as financial, legal, regulatory, structural, and operational—to name a few. With more property transactions taking place every day, it has become especially important for buying parties to exercise this particular right because of how much valuable protection and foresight it provides!

What encompasses the scope of due diligence?

At GLG Legal, we’ve had our fair share of clients who have run into issues or made their fair share of considerations—all of which equate in various aspects of due diligence that one must be well-aware of. Whether you’re purchasing commercial property as an investment or your future hub of operations, here are various forms of the process that you’ll need to account for throughout the buying process:

1. Mechanical and electrical aspects

With the Building Code of Australia possessing a growing number of regulations to account for potential pitfalls and points of improvement that investors must think about, it’s important to exercise due diligence in these aspects.

When inspecting mechanical and electrical aspects during your purchasing process, you’ll need to conduct various reviews that ensure compliance with the BCA’s current standards. Oftentimes, it is recommended that this facet of modern Caveat Emptor is practised or upheld because it corresponds to some of the most costly and time-consuming mistakes when overlooked.

2. Architectural, structural, and engineering issues

Another facet of due diligence that must be considered and practised during the property buying process is a set of architectural, structural, and engineering issues. Next to mechanical and electrical aspects, this group of factors must be closely inspected and properly dealt with because of how they can make or break a property’s ability to function and measure up to its market listing. 

3. Financial and legal matters

Today, it isn’t unheard of for legal matters and financial factors to be heavily intertwined with the processes of commercial property purchases. This is why they are critical factors of due diligence today. 

Whenever you take care of the financial and legal aspects before you purchase a property and take it upon yourself to be more aware of them, you can help protect your best interests at every point of the transaction. In fact, enlisting the services of an expert like GLG Legal’s experienced property lawyers will help you save tens to hundreds of thousands of dollars with proper expertise and extra care!

Conclusion

As momentous as the process of buying a commercial property may be to anyone looking to uplift their business’s success and operations, it’s important to match excitement with proper care. Suppose you ever find yourself in such a situation where you’ll have to make a significant investment or purchase. In that case, it’s important to consider the aspect of due diligence and practice it as much as possible for your best interest!
We’re a legal firm in Milton that specialises in servicing commercial law, brand protection, and corporate law needs of Australian businesses and entities. Get in touch with us today to learn more about how we can serve your legal needs!

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