Due diligence is not a lawyers' formality between agreement and signature. It is the moment an operation stops being a story we are told and becomes a file we can verify. In our house it follows eight chapters, in an order that is not decorative: each file can stop the ones after it.
I. Title — who sells, and what
Everything starts with the chain of ownership: titles, easements, mortgages, pre-emption rights. Abroad, this chapter doubles in size: local land regime, restrictions on foreign buyers, prior authorisations. An exceptional price on a fragile title is not an opportunity, it is a consideration.
II. Soil — what bears, what pollutes
Geotechnical study, environmental servitudes, historic uses. Soil is rarely repaired on budget.
III. Structure — the date matters as much as the condition
A structural survey by an engineer we appoint ourselves — never the seller's alone. In seismic zones, the design date is confronted with the current code; a building sound under an outdated hazard map may need strengthening under the current one.
IV. Leases — the rental truth
Full reading, lease by lease: actual rents against advertised rents, rent-free periods, works obligations, expiries, deposits. The gap between the presented rent-roll and the signed leases is one of the trade's most frequent sources of bad surprises.
V. Accounts — three years, line by line
Actual charges, past and deferred capex, provisioned and unprovisioned litigation. "Exceptional" charges that recur every year are ordinary charges badly named.
VI. Tax — the history and the exit
The target's filing position, ongoing audits, and — above all — the future exit's taxation: capital gains regime, land-rich rules, the next buyer's transfer duties. An entry well structured that prepares the exit badly is only half structured.
VII. Insurance — the continuity of risk
Current policies, past claims, future insurability. An asset hard to insure is an asset hard to finance — and to resell.
VIII. People — the file no data room contains
Operator, manager, contractors: their previous sites can be visited, their former partners can be called. We have written it before in these pages: an asset can be visited, so can an operator.
Eight files, one rule: what is not documented does not exist. An oral assertion is neither an asset nor a guarantee.
What diligence does not do
It does not remove risk — it names it, prices it and writes it into the contract: warranties, escrows, conditions precedent, price adjustments. The rest belongs to judgement. It is precisely because diligence is methodical that judgement can be free.