Commercial Real Estate Due Diligence Checklist

Due diligence is the period between signing a purchase and sale agreement and closing where the buyer confirms the property is actually what the seller and the marketing package said it was. It’s also the last real off-ramp: most contracts let a buyer walk away and get the earnest money deposit back if something material turns up during this window, and lose that right once it expires. Rushing it, or treating it as a formality because the deal “feels right,” is how buyers end up owning a roof they didn’t know needed replacing or a tenant that was never actually paying rent.

This checklist covers the five categories that matter on almost every commercial deal: title and survey, financial, physical condition, environmental, and legal/zoning. It’s written for buyers doing their own diligence or checking a broker’s or attorney’s work, not as a substitute for either one. Nothing here is legal or tax advice; verify anything jurisdiction-specific with your own attorney and CPA before you rely on it.

How much time do you actually have

Most commercial purchase agreements give the buyer a defined due diligence period, commonly somewhere in the 30 to 45 day range for a single asset, with larger or more complex deals (multi-tenant retail, portfolios, anything with environmental red flags) often negotiated out to 60 days or more. The contract usually spells out what happens to the earnest money deposit at the end of that window: in most structures it goes “hard,” meaning it’s no longer refundable to the buyer except for a short list of carved-out reasons (title defects discovered after the deadline, seller default, and similar).

If you’re buying with a 1031 exchange in play, your due diligence timeline has to work inside the exchange clock, not the other way around. Under IRC Section 1031, a buyer completing an exchange has 45 days from the sale of the relinquished property to identify replacement property and 180 days total to close. Line up your due diligence period with those deadlines before you sign, not after.

Build in a few extra days of buffer before the DD deadline to review whatever the last vendor report turns up. A Phase I environmental report or property condition report that lands two days before your deposit goes hard doesn’t give you time to negotiate a price reduction, request an extension, or walk.

Title and survey

• Order a preliminary title report (title commitment) as soon as the contract is signed, not after other reports come back. It takes time and everything else references it.
• Review every listed exception line by line: recorded easements, liens, judgments against prior owners, mineral or water rights reservations, and any restrictive covenants.
• Order or update an ALTA/NSPS survey. It confirms boundary lines, easement locations, encroachments (a neighbor’s fence over the line, your own building over a setback), parking counts, and flood zone designation, all against what the title report claims.
• For retail centers, pull any reciprocal easement agreements (REAs) or CC&Rs governing shared parking, common area maintenance obligations, and use restrictions between outparcels. These often outlive the original developer and bind every future owner.
• Decide between a standard and extended coverage title policy. Extended coverage (based on the ALTA survey) removes the standard survey exception and covers matters the survey would have shown, which matters most on infill or oddly-shaped parcels.
• Run a UCC lien search if personal property, fixtures, or equipment are being conveyed as part of the sale.

Financial due diligence

This is where buyers get burned most often on income-producing property, usually because the seller’s numbers were never independently checked against the underlying documents.

• Get the trailing 12-month (T-12) operating statement at minimum; ask for trailing 24 months if the property has any seasonality (student housing, hospitality-adjacent retail, coastal markets).
• Compare the rent roll against the actual signed leases, not the seller’s summary. Confirm rent amounts, escalation dates, free rent periods still owed, security deposits actually held (ask for bank confirmation, not just a stated balance), and any unpaid tenant improvement allowances.
• Pull CAM (common area maintenance) reconciliation history for the past two to three years. Under- or over-billed tenants are a common source of post-closing disputes and can mean real dollars either way.
• Get current real estate tax bills and confirm the assessed value. In states that reassess property tax value at transfer (California’s Proposition 13 basis reset is the best-known example), your post-closing tax bill can be meaningfully higher than the seller’s trailing number. Model the post-sale assessment, not the seller’s current one.
• Request tenant estoppel certificates. Each tenant confirms in writing their lease terms, rent paid to date, any landlord defaults, and any side letters or amendments not in the lease file. Estoppels are how you catch the verbal side deal the seller “forgot” to disclose.
• If there’s existing debt being assumed, or a new lender requires it, get subordination, non-disturbance, and attornment (SNDA) agreements in place for major tenants.
• Inventory every service contract (landscaping, elevator, security, waste, HVAC maintenance) and check which are assignable versus terminable at closing. A contract locked in at above-market rates for another three years is a liability you’re inheriting, not a convenience.

Once you have real numbers instead of the seller’s pro forma, run them through your own underwriting rather than trusting the offering memorandum’s cap rate. Our free CRE calculators will get you to NOI, cap rate, and DSCR quickly using the verified T-12 and rent roll instead of the marketing version.

Physical and property condition

• Commission a Property Condition Assessment (PCA) from a licensed engineer, typically performed to the ASTM E2018 standard. It covers structural elements, roof, HVAC, electrical, plumbing, parking surfaces, and life safety systems, and gives you an estimated remaining useful life and near-term capex reserve for each major system.
• Get the roof report and any transferable warranty in writing. Roofs are one of the most expensive line items buyers underestimate, and a warranty that doesn’t transfer to a new owner is worth noting in your capex reserve, not assuming it’s covered.
• Walk the property for ADA compliance issues: accessible parking ratios, path of travel, restroom clearances, entrance thresholds. Non-compliance doesn’t necessarily kill a deal, but it’s a cost to budget, not a surprise to discover post-closing.
• On buildings constructed before the early 1980s, budget for an asbestos survey if any renovation or demolition is planned; asbestos-containing materials were common in insulation, flooring, and ceiling tile through that era.
• Reconcile the seller’s disclosed capex reserve and any deferred maintenance list against what the PCA actually finds. Sellers under-disclose deferred maintenance more often than they over-disclose it.

Environmental due diligence

• Order a Phase I Environmental Site Assessment (ESA), performed to the ASTM E1527 standard. It covers a site history review, adjoining property use, regulatory database search, and a physical site reconnaissance, without any soil or groundwater sampling.
• A properly scoped and timely Phase I is also how a buyer establishes the “all appropriate inquiries” standard needed to preserve innocent landowner and bona fide prospective purchaser protections under CERCLA if contamination is later discovered and wasn’t your doing. Skipping it, or ordering it too far in advance of closing, can undercut that protection.
• If the Phase I identifies a recognized environmental condition (a REC), don’t close around it hoping it’s minor. Order a Phase II ESA, which involves actual soil and/or groundwater sampling, before you make a final go/no-go call.
• Check for underground storage tanks, especially on any site with a history of automotive, industrial, or fueling use; confirm registration and closure status with the applicable state agency if any are found or were previously removed.
• For sites near wetlands, waterways, or in coastal markets, confirm whether a wetlands delineation or additional permitting is needed before any planned site work.

Legal, zoning, and regulatory

• Get a zoning verification letter directly from the municipality confirming the current use is a permitted use under current zoning, not a legal nonconforming (“grandfathered”) use. The distinction matters: many zoning codes limit an owner’s right to rebuild a nonconforming structure or resume a nonconforming use if it’s damaged or discontinued past a certain point, so know which one you’re buying.
• Confirm a valid certificate of occupancy is on file for the current use and configuration.
• Check with the local building department for open permits, unresolved code violations, or expired permits tied to prior work.
• Run a litigation search on the property and the selling entity for active or threatened claims, mechanic’s liens, or code enforcement actions.
• If you’re acquiring the ownership entity rather than the real property directly (an equity deal instead of an asset deal), diligence the entity itself: organizational documents, good standing certificate, any other assets or liabilities inside that entity, and outstanding guaranties.

Lease and tenant due diligence

• Abstract every lease yourself, or have your attorney do it, rather than relying on the seller’s rent roll summary. Capture term, renewal options and notice deadlines, rent escalations, exclusivity and permitted-use clauses, co-tenancy provisions (common in retail), radius restrictions, early termination rights, and any expansion or right-of-first-refusal rights.
• Confirm actual physical occupancy matches the rent roll. A tenant can still be “on the books” and paying rent from a location they’ve quietly vacated, which changes the real leasing risk you’re taking on.
• Cross-check estoppel certificates against the lease abstracts. Any discrepancy, an amendment the seller didn’t disclose, a side letter reducing rent, a verbal agreement about a future buildout, needs to be resolved in writing before closing.

Insurance and risk

• Request the loss run (claims history) from the seller’s insurance carrier, typically the past five years, and review it for patterns: repeated water damage, slip-and-fall claims, or anything suggesting a maintenance issue rather than one-off bad luck.
• Get the FEMA flood zone determination directly rather than relying on the listing description.
• Get a real insurance quote from your own broker before your deposit goes hard, not after closing. In coastal and wind-exposed markets in particular, insurance availability and pricing have moved enough in recent years that a deal underwritten on last year’s premium can be underwritten wrong.

Category	Core documents to request	Typically provided by
Title & survey	Title commitment, ALTA survey, REAs/CC&Rs	Title company, surveyor
Financial	T-12/T-24, rent roll, CAM reconciliations, tax bills, estoppels	Seller, property manager, tenants
Physical condition	PCA/PCR, roof report, capex/deferred maintenance list	Licensed engineer, seller
Environmental	Phase I ESA, Phase II if triggered, UST records	Environmental consultant
Legal & zoning	Zoning letter, certificate of occupancy, permit history, litigation search	Municipality, attorney
Insurance	Loss runs, flood determination, insurance quote	Seller’s carrier, buyer’s broker

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Where this checklist fits into the bigger picture

A checklist tells you what to ask for. It doesn’t tell you what a good cap rate looks like for the asset class, how to size a debt service coverage ratio, or how to read a sensitivity table on a 10-year hold. That’s underwriting, and it’s a separate skill from diligence, though the two feed each other constantly: the numbers you pull in financial due diligence are only useful if you know what to do with them once you have them.

Run the verified rent roll and T-12 through our free CRE calculators to check NOI, cap rate, cash-on-cash return, and DSCR before you finalize an offer or move past your due diligence deadline. They’re free to use and built to match the way underwriting actually gets done on a live deal, not a simplified textbook version of it.