Commercial Property Due Diligence Checklist for California Buyers
Commercial due diligence is the buyer’s investigation of a property’s title, survey, zoning, environmental condition, physical systems, leases and finances before the contingency period ends. In California a commercial buyer gets far less from the seller by statute than a home buyer does, so most of what you learn comes from what you ask for and pay to have checked. The checklist below lists the items, what to request and why each one matters.
Use it to plan the contingency period in a purchase agreement, to assign tasks to your attorney, lender, inspectors and broker, and to track what’s still outstanding. It’s general, and each property type adds its own items. The rows describe common commercial practice; only the items tied to a named statute are legal requirements. For the wider buying process, see our commercial real estate hub.
Before you open escrow: set up the investigation
- Negotiate the due diligence period. It must be long enough for a survey, a Phase I and lender appraisal, and should start only when the seller has delivered the documents you asked for.
- List the seller deliverables in the contract. Leases, rent roll, operating statements, service contracts, permits, prior reports and the title commitment, with a delivery deadline.
- Line up your team. A real estate attorney, title officer, surveyor, environmental consultant, building inspectors, lender and insurance broker.
- Decide how you’ll take title. An LLC or other entity should be formed early enough to sign loan documents and appear on the title commitment.
Title and survey
| Item | What to get | Why it matters |
|---|---|---|
| Preliminary report or title commitment | The report plus copies of every recorded exception | Shows liens, easements, CC&Rs, access rights and anything that must be cleared before closing |
| ALTA/NSPS land title survey | A survey to the 2026 ALTA/NSPS standards, with the Table A items your lender and title insurer need | Locates boundaries, improvements, easements and encroachments, and supports extended title coverage |
| Title insurance endorsements | A list from your title officer of the endorsements available for the property | Endorsements can cover zoning, access, contiguity and other risks the base policy excludes |
| Entity and authority documents | Proof the seller entity exists and its signer is authorized | Title won’t insure a sale signed by someone without authority |
The current ALTA/NSPS Land Title Survey Standards took effect February 23, 2026, superseding the 2021 version, and govern surveys begun on or after that date, according to the American Land Title Association. If the seller offers an older survey, ask whether the title company will accept an update. Our guide to title insurance in California explains the policy itself.
Zoning, permits and use
| Item | What to get | Why it matters |
|---|---|---|
| Zoning verification | A written answer from the city or county planning department on the zoning, your intended use and any use permits; ask whether it issues a formal zoning verification letter | Confirms the use is allowed, needs a permit, or is legal nonconforming |
| Use permits and conditions | Copies of any conditional or administrative use permits and their conditions | Conditions can limit hours, occupancy, parking or expansion, and they often stay with the property after a sale |
| Building permit history | Permit records and certificates of occupancy compared with what’s on site | Unpermitted work can mean a forced correction, a lender problem or an insurance gap |
| Code violations | Open code enforcement cases and fire inspection reports | An open case can become the buyer’s problem after closing |
| Utilities and capacity | Will-serve or capacity information from the water, sewer and power providers | A change of use can trigger connection or capacity fees |
Local rules differ by city and county. Our guides to commercial property in Sonoma County and Napa County describe who regulates what in those markets.
Environmental review
A Phase I Environmental Site Assessment reviews the site’s history, government records and current condition for signs of contamination. The U.S. EPA recognizes ASTM E1527-21 as consistent with its All Appropriate Inquiries rule, along with ASTM E2247-23 for forestland or rural property. Completing AAI is part of qualifying for federal Superfund liability protections as an innocent landowner, contiguous property owner or bona fide prospective purchaser.
- Timing: EPA says AAI must be conducted or updated within one year before acquisition, and some parts, including interviews, records review, the site visit and the lien search, within 180 days before you take ownership.
- Older reports: a seller’s old Phase I is useful background but usually won’t satisfy those time limits or your lender.
- Phase II: if the Phase I finds a recognized environmental condition, a Phase II with soil, groundwater or vapor sampling may follow, so leave time in the contingency period.
- Seller’s hazardous-substance notice: under Health and Safety Code section 78700, a nonresidential owner who knows of a hazardous substance release on or under the site, or has reasonable cause to believe there is one, must tell the buyer in writing before the sale. Ask for it, but run your own Phase I either way.
- Other items: asbestos and lead paint surveys for older buildings, and mold or radon where conditions suggest them.
Physical condition and accessibility
| Item | What to get | Why it matters |
|---|---|---|
| Property condition assessment | An inspection covering structure, roof, paving and site drainage, with cost estimates | Sets the capital budget and supports price or credit negotiations |
| Building systems | HVAC, electrical service, plumbing, fire sprinklers and alarms, elevators | Major system replacements are among the largest capital costs a new owner can face |
| Seismic review | An engineer’s opinion on older concrete, masonry or soft-story structures | Retrofit needs affect lending, insurance and value |
| Accessibility (CASp) | Any Certified Access Specialist report and disability access certificate | Access barriers are a buyer’s cost to fix and a source of claims |
| Hazard maps | FEMA flood zone, CAL FIRE fire hazard zone and state earthquake zone checks, or a hazard report | Drives insurance cost and lender requirements |
California Civil Code section 1938 requires every commercial lease or rental agreement executed on or after January 1, 2017, to state whether the premises have had a CASp inspection, and sets rules for sharing the report with tenants. As a buyer, ask for every CASp report and see what your leases say about it. Our CASp and ADA guide covers the rules.
Hazard-zone disclosure works differently from a home sale. Government Code section 8589.3 requires the seller’s agent, or a seller without one, to tell a buyer of real property that it lies in a FEMA special flood hazard area when either knows it or the local agency has posted a parcel list. The statute isn’t limited to homes. Its form rules, though, point to transfers covered by Civil Code section 1103, the residential hazard disclosure law, so commercial buyers commonly order their own hazard report.
Leases and tenants
| Item | What to get | Why it matters |
|---|---|---|
| All leases and amendments | Every lease, amendment, side letter, guaranty and commencement memo | The lease documents, not the rent roll, define what you are buying |
| Lease abstracts | A one-page summary per tenant: rent, term, options, expense terms, rights of first refusal, co-tenancy, exclusives | Makes it possible to compare the leases with the rent roll and the seller’s figures |
| Rent roll and aging | Current rent roll, security deposits and a delinquency report | Shows who actually pays and what deposits transfer at closing |
| Tenant estoppel certificates | Signed estoppels from each tenant, or the major ones | Tenants confirm rent, term, deposits and defaults in writing |
| SNDAs | Subordination, non-disturbance and attornment agreements, if your lender requires them | Sets the order of the loan and leases and protects tenants if the lender forecloses |
| Expense reconciliations | Recent year-end operating expense reconciliations for net leases | Reveals billing disputes and expenses the owner can’t recover |
Our guides to tenant estoppel certificates and commercial lease types explain the documents and how expenses are split.
Financials, tax, insurance and financing
- Operating statements: two or three years of income and expense statements plus the current year to date, matched to bank deposits and the rent roll where possible.
- Service contracts: property management, landscaping, elevator, security and other contracts, with notice periods to cancel.
- Property tax: under Proposition 13, a change in ownership is reassessed to fair market value as of the date of the change. Model taxes on your price, and expect a supplemental bill; see our page on the supplemental tax bill. Buying an entity rather than the property has its own reassessment rules, covered in our guide to property tax for investors.
- Insurance: current loss runs and a quote for your own coverage, including flood or earthquake if needed, before contingencies end.
- Valuation: test the price against income and comparable sales; our guide to commercial property valuation explains the approaches.
- Financing: the lender’s appraisal, environmental and survey requirements, and for owner-users, the SBA program rules; see SBA 504 vs 7(a).
At closing, file the Preliminary Change of Ownership Report with the deed, or the assessor may require a separate change in ownership statement. Diamond may refer you to partners we work with; you’re free to choose any provider.
Property-type add-ons
- Industrial and warehouse: clear height, loading, power capacity, floor load and fire sprinkler design; see our guide to industrial and warehouse space.
- Wineries: use permits, TTB and ABC licenses, water and wastewater; see the winery due diligence checklist.
- Retail and restaurants: grease interceptors, hood systems, signage rights and co-tenancy clauses.
- Medical and lab space: licensing-related build-out, plumbing and specialty systems.
Questions people ask
How long is a typical commercial due diligence period?
There’s no legal standard; it’s negotiated. It needs to be long enough for the survey, the Phase I and any Phase II, the lender’s appraisal and lease review, so set it after you know how long those vendors need.
What is a Phase I environmental site assessment?
A review of a property’s history, records and condition for signs of contamination, usually done to ASTM E1527-21. EPA recognizes that standard as consistent with its All Appropriate Inquiries rule.
Do I need an ALTA survey?
Usually, if a lender is involved or you want extended title coverage. The 2026 ALTA/NSPS standards apply to surveys begun on or after February 23, 2026.
What is a zoning verification letter?
A written statement from the city or county about a parcel’s zoning and, sometimes, whether a use is allowed. Ask the planning department what it will put in writing for your intended use.
What is the difference between an estoppel and an SNDA?
An estoppel is a tenant’s signed statement of the lease facts. An SNDA is an agreement among the tenant, landlord and lender that sets the order of the lease and the loan and what happens to the tenant if the lender forecloses.
Does the seller have to give me disclosures on a commercial property?
Far fewer than on a home. California’s standard transfer disclosure statement is written for residential property, but some duties still apply, such as the hazardous-substance notice in Health and Safety Code 78700 and the flood-zone disclosure in Government Code 8589.3. Most of what you learn still comes from your document requests and inspections.
Will my property taxes go up after I buy?
Usually. A change in ownership is reassessed to fair market value as of the date of the change, and the county may send a supplemental bill for the difference.
Planning a commercial purchase? We can help you build the contingency schedule, collect the seller’s documents and keep each item on track through escrow. Contact us to talk through the property.
This checklist is general information, not legal, environmental or tax advice. A commercial purchase agreement allocates risk differently from a home sale, so have a California real estate attorney draft or review it and an environmental professional scope the site assessment.
Sources & notes
- U.S. EPA: Brownfields All Appropriate Inquiries (updated May 7, 2026)
- American Land Title Association: ALTA/NSPS Land Title Survey Standards
- California Public Law: Civil Code section 1938 (CASp statement in commercial leases)
- California Public Law: Health and Safety Code section 78700 (hazardous substance notice, nonresidential property)
- California Public Law: Government Code section 8589.3 (special flood hazard area disclosure)
- California State Board of Equalization: Change in ownership FAQs
Note: the checklist reflects common commercial practice; your lender, title insurer and attorney may require more.
Last reviewed October 2026 by Matthew Martinez.
