Property due diligence for corporate deals

Carrying out property due diligence within a corporate deal is a critical step in ensuring that any acquisition, merger, or investment involving property proceeds smoothly. Our team of expert Commercial Property Solicitors, work closely with our Corporate team, to provide comprehensive support for businesses during transactions involving the acquisition of property in any type of corporate deal.

Whether you’re acquiring shares in a company that owns commercial property or directly purchasing premises as part of a business expansion, conducting thorough commercial property checks is imperative to ensure there are no surprises post-completion that would otherwise have been revealed during such investigations.

In this guide, we explain why legal due diligence is essential and what it involves.

What is property due diligence?

The phrase ‘property due diligence’ refers to the legal and practical investigations undertaken by a buyer’s solicitor to assess the legal status of property involved in a corporate transaction. It helps to uncover risks such as title defects, planning breaches, restrictive covenants, or environmental issues.

This process is particularly important in mergers and acquisitions where real estate assets may be a significant part of the overall deal. Failing to identify legal issues during due diligence can lead to post-deal litigation or financial losses.

Why it matters in corporate transactions

When a company is being bought or sold, its real estate holdings often account for a substantial part of its value. Inadequate due diligence on these properties can result in:

• Unexpected liabilities (e.g., payments due to third parties, enforcement action being sought by the local authority etc).
• Restrictions on property use.
• Ongoing disputes.
• Planning permission or building regulation non-compliance.

Conducting property due diligence for corporate deals ensures that any risks are identified before contracts are signed in order that a buyer can make an informed decision as to any risks and how they wish to proceed.

Key elements of commercial property due diligence

1. Title review – Confirm legal ownership, identify any restrictions or other incumbrances.
2. Lease analysis – For tenanted properties, review lease terms, tenant obligations, and rent arrears.
3. Planning and building consents – Ensure all necessary approvals are in place and compliant.
4. Environmental reports – Submit an environmental search to assess for contamination risk, especially in industrial properties.
5. Survey and valuation – Instruct a surveyor to evaluate the physical condition and fair market value.

Legal due diligence in M&A (mergers and acquisitions)

In share purchases, buyers acquire not just the property, but the company’s liabilities and obligations. Legal due diligence must therefore examine not just property title, but also:

• Service contracts related to property management.
• Existing insurance and maintenance obligations.
• Litigation or disputes involving real estate.
• Compliance with landlord and tenant law.

Our Commercial Property Solicitors work closely with our Corporate Law team to integrate property checks within wider M&A due diligence packages.

Case scenario

A manufacturing group acquiring a logistics firm engaged us for full property due diligence. The target company’s distribution centre was under a long lease with significant service charge arrears and unregistered subletting arrangements. By identifying these issues early, the buyer negotiated a price reduction and included specific indemnities in the share purchase agreement, saving future costs and litigation risks.

Expert insights

• Start due diligence early – delays can disrupt deal timelines.
• Don’t rely on seller-provided documents alone – conduct independent searches.
• Use experienced property solicitors who understand corporate structures.
• Ensure that the final suite of documents reflects the issues which have been identified.

Benefits and drawbacks

Benefits:

• Identifies risks or liabilities which may not otherwise be apparent.
• May provide leverage in price negotiations.
• Ensures legal compliance and peace of mind.
• Protects directors from post-deal exposure.

Drawbacks:

• Depending on the nature and extent of the enquiries and issues revealed, may be time-consuming process.
• Increases short-term legal costs.
• May delay completion if major issues arise.

Future outlook and advice

The main concept to note in property transactions in the UK is caveat emptor i.e. buyer beware. A buyer will acquire a property subject to all matters which affect it and relate to it even if they did not know about them as they did not instruct solicitors to carry out the necessary and recommended due diligence. Therefore instructing legal experts early is of paramount importance.

Contact us for more information about our Commercial Property services.

Frequently asked questions

Is property due diligence mandatory in a company acquisition?

It’s not legally required, but it’s highly recommended to avoid financial exposure and legal disputes post-completion.

What documents are reviewed during property due diligence?

Title deeds, leases, planning permissions, environmental reports, surveys, and service contracts are commonly reviewed.

How long does property due diligence take?

Typically 6 to 8 weeks depending on property complexity and whether third-party searches or reports are needed.

Can property issues delay a corporate deal?

Yes. Unresolved property risks can stall completion, especially if title defects or non-compliance with planning laws are found.

This article was produced on the 16th December 2025 for information purposes only and should not be construed or relied upon as specific legal advice.