PROPERTY SEARCHES DURING DUE DILIGENCE
I can safely say that the most important task your solicitor will conduct during the shop purchase process is due diligence, that is to ensure the asset you are buying has no encumbrances, will not be impacted by caveats, zoning changes or future government acquisition. Thorough due diligence is achieved by performing a series of statutory and non-statutory searches on the property you are buying. Each search has a specific use from ensuring the person selling you the property actually owns it, to checking future road widening will not encroach on your property causing it to be acquired by the government.
Some of the recommended searches are explained in Engines of Wealth Chapter 9 ‘Due Diligence”, but as you will see from the list below there are numerous searches your lawyer can run to verify your prospective property is in good order prior to taking possession.
Recently my lawyer provided me a detailed list of 84 discrete searches that are available for any specific property. As your advisor, your lawyer should take into account your particular property’s situation when recommending the list of searches to perform during due diligence. For example, if your property is next door to a chemical plant or petrol station then it might be a good idea to run a contaminated land search. If it is in the path of a major highway you may want to run a Department of Mains Roads search to see if there’s any planned road widening.
One thing is for sure, you can spend more money than you need to if you are not careful. Be guided by your lawyer and ask questions, if you don’t think a particular search is needed then ask your lawyer to explain and state his reasons why it adds value or minimises risk in your purchase process.
From this long list of 84, my lawyer recommended 13 searches during the due diligence of a small 25 square metre hairdressing salon in Maroochydore, Queensland. Those 13 searches cost $1,065, which is not a lot of money for your peace of mind compared to the $135,000 purchase cost of the shop. You will note in the extensive list of searches below that there are some expensive searches, so be careful not to waste money on unnecessary work. For example $529 for a “Declared Pest Plant Search” may be applicable for a 25 acre farm but would not be required on a commercial shop with an asphalt car park. So be guided by your lawyer and ask questions.
Searches indicated with a red asterisk on the pages below highlight the 13 searches that were carried out on the purchase of the hairdressing salon. You should be confident that this is the minimum for any shop and select others to suit the situation for your shop.