Purchasing a commercial property can deliver strong returns, whether through rental income received from tenants or long-term capital growth.
It does, however, entail a range of legal and practical risks that, if not addressed and managed before exchange of contracts, can significantly affect the property’s value.
Our Commercial Property team outlines the key elements of the due diligence process for a commercial property purchase, what buyers should expect, and why a thorough investigation is critical for managing risk.
Title Investigation
Investigating the seller’s title a fundamental element of due diligence when purchasing a commercial property.
It should be carried out as early as possible to identify any issues that may adversely affect the buyer’s use of the property, their ability to finance, or the property's value.
More than 90% of land in England and Wales is registered at HM Land Registry.
Reviewing title to a property will reveal information on a number of key matters, including:
- Whether the seller is in fact the registered owner of the property;
- Whether the property is freehold or leasehold;
- The extent of the property;
- Whether the property benefits from the necessary rights supporting its use, such as rights of access, and rights to use private service media;
- Whether third parties enjoy any rights over the property;
- Whether a third party has the ability to control dealings with the property; and
- Whether the property is subject to restrictive covenants that may limit its use.
Some of these issues may have a material impact on the value of the property, or the buyer’s intended use, but can often be addressed as a transaction progresses.
For example, where mortgages or other charges are registered against the title, we will ensure to obtain undertakings securing their release on completion.
Where there are historic covenants revealed that impose restrictions on a property, we may consider indemnity insurance to protect against such risk.
If an issue is so fundamental that it cannot be resolved, at least the buyer can withdraw from the transaction at that point, potentially saving them from a costly mistake.
Property Searches
Property searches are another key part of the due diligence process.
They provide information that is often considered public domain (even if not readily accessible by any other means). There are many different types of searches, each of which cover different areas.
We have summarised the most common ones here:
Index map search
An index map search reveals all title numbers within the search area. This is useful for confirming that the property is comprised entirely within the title supplied by the seller’s solicitor, as well as identifying any other titles within that area, such as leases granted for a term of greater than 7 years (leases shorter than that are not registered).
Local land charges search
A local land charges search shows matters that are registered as local land charges, which means they are binding against all property owners even if registered many years before the owner purchased the property.
These can include whether a property is within a smoke control zone or a conservation area, the existence of tree preservation orders, planning enforcement notices and financial charges affecting the property.
Financial charges in this context are not mortgages, but rather are obligations to pay, such as Community Infrastructure Levy, or obligations in statutory agreements like Section 106 agreements, which are commonly encountered on development sites. The local land charges register also reveals planning permissions that have been granted.
Local authority search
A local authority search reveals a variety of important information about a property that is governed or overseen by the local authority. This includes planning permissions and building regulation consents, whether the property is in an area subject to Community Infrastructure Levy, proposals for road schemes, environmental and pollution notices, and whether the property is in an area with elevated radon levels.
There are various optional enquiries that can be added to a local search, which can reveal information about matters such as whether any part of the property is registered as common land or as a town or village green (vital knowledge when buying a site for development), whether there are pipelines within the search area, and whether the property is in a Business Improvement District (known as a BID).
Highways search
A highways search will identify whether roads in the vicinity of the property are maintained at public expense. The general public have rights of way over such roads, known as ‘public’ or ‘adopted’ highways, which means that privately-granted rights of way are not required.
Most highways searches include a plan showing the extent of the public highways. While a local search may specify whether a particular road is a public highway, they often do not include a plan.
Drainage and water search
A drainage and water search show whether a property is connected to the mains water supply and mains foul and/or surface water drainage. They also show the location of public sewers within and in the vicinity of the property. They can show other information that may restrict development, such as whether the property is built over a public sewer.
Environmental, flood risk and climate change searches
These three searches are often combined, with the results being provided as part of a single report.
An environmental search can assist with establishing the risk of the property being considered contaminated land, and therefore at risk of enforcement by the local authority or the Environment Agency.
A climate change search provides an indicative report on the risk that climate change may present to the property. Increasingly, climate change is having a significant effect on real estate, and adverse climate risks may affect a buyer’s ability to insure or finance a property, as well as having negative consequences for a property’s value.
A flood risk search provides an assessment of the risk of flooding to the property presented by river, coastal, groundwater and surface water flooding.
A note of caution – these three searches are all what we call ‘desktop’ searches, which mean they are based on records, not an actual site investigation.
Chancel repair search
This search shows whether the property is within an area that may still be liable to chancel repair liability, although it does not identify whether the specific property is subject to chancel repair liability. Chancel repair liability is a property owner’s responsibility to contribute towards the cost of repairs of the chancel of a parish church.
Mining and ground stability searches
Mining searches provide details of past, present and potential future mining activity at a property. The most common type of mining search is a coal mining search, but in certain areas of the country it is also necessary to carry out a tin mining search or a brine extraction search.
Mining searches can be combined with ground stability searches, which provide information on the likelihood of subsidence and ground movement at the property as a result of natural and/or manmade causes
Occupational lease reviews
If purchasing an investment property, a buyer needs to know that the income advertised is (as) secure (as it can be).
Part of that is knowing what the leases actually say, rather than relying on the seller's schedules. There is no route to this knowledge other than reviewing the occupational leases. Such reviews can reveal amongst other things:
- Who is in occupation. This seems basic, but a lease may have been assigned or the property sublet. In such cases does the seller have copies of the necessary assignment/subletting documents?
- If there has been a rent review and, if so, has the revised rent been documented?
- Has the lease expired? If the lease was originally contracted out of security of tenure under the Landlord and Tenant Act 1954, has expired, and the tenant has remained in occupation, there is a risk the tenant will have secured (pun intended) security of tenure.
- Are there any break dates, and what notice is required to exercise them? This is not just about forewarning the buyer of upcoming breaks, but also reassuring them where the deadline for giving a break notice has passed.
- Whether there are rent deposits. Further enquiries can then establish if the seller has used any of the deposit, which itself is an indication of tenant performance.
- What is the tenant’s repairing obligation, and is it limited by reference to a schedule of condition. Although we won’t be able to confirm whether the tenant has complied. That is for the buyer or, more likely, their surveyor, to carry out an inspection.
- Are there any restrictions on the landlord recovering insurance rent and/or service charge?
Why Thorough Due Diligence Matters
Thorough due diligence is vital on any property purchase. It can uncover a myriad of issues or, hopefully, provide reassurance that the property really is what the buyer expects.
Carrying out due diligence as the first stage of a transaction helps uncover potential issues early, thus resolving problems and preventing delays, allowing a purchaser to make an informed decision.
Contact Our Commercial Property Team
Our Commercial Property team are experienced in providing the correct guidance to purchasers of all types of commercial property, and addressing matters pertinent to a transaction.
For clear and practical advice, contact them at:
0161 941 4000
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Josh Durkin
Trainee Solicitor
Josh joined Myerson as a Trainee Solicitor in September 2025. Prior to joining the firm, Josh obtained his law degree from the University of Sheffield, then completed his LPC LLM at the University of Law in Manchester in 2024, achieving a Distinction.
About Josh Durkin