Checklist: What should your legal and physical due diligence involve?
By Brendan Maier
To come to a view on the true value of a project before you sell, buy or advance finance, it is important to carry out appropriate legal and physical investigations.
We have prepared this simple checklist as a preliminary scope of what you and your consultant team should be considering as part of any legal or physical due diligence.
1. Prepare a simple summary checklist (like this one) to define the scope clearly internally and with your consultants.
2. Properly engage consultants and ensure that they have appropriate professional indemnity insurance.
3. Review title documents, including easements and covenants.
4. Review service agreements with public authorities and private companies.
5. What access do you have to and from the property?
6. Consider matters related to tenancies, including building occupants, car parking, overhead walkways or other rights - consideration should be given to payments, breaches, review rights, securities, arrears, disputes, subtenancies, assignments, outgoings, floor areas, rent abatement and incentives and other similar matters.
7. Financial modelling.
8. Tax implications of the proposal need to be understood (GST, CGT, income tax, stamp duty etc).
9. Any dispute relating to the property should be identified and any risks eliminated or mitigated.
10. Strata title rights and liabilities need to be understood.
11. Intellectual property rights relating to building operations need to be understood and assigned as appropriate.
12. Insurances need to be put in place on suitable terms.
13. Key contractual terms (price, deposit, completion date, etc) need to be identified and understood.
14. Appropriate performance guarantees need to be obtained from the counterparty.
These are only some of the matters that you may need to consider.
To perform a thorough due diligence, you will need to work through a much more detailed checklist, taking into account the nature of the particular project and all the relevant assets and liabilities, both current and contingent.
We can help you with that.