Buying a home is one of the biggest financial decisions most people will ever make. It is equal parts exciting and overwhelming. Knowing exactly what you are buying is crucial. Hidden defects, unconsented building work, flooding risks, financial issues or other unforeseen problems can become costly surprises after settlement.

To protect your interests and your investment, including a well-drafted due diligence condition in your agreement can be invaluable.

What is Due Diligence?

Simply put, due diligence is the process of doing your homework before purchasing a property. It involves investigating the property, your finances, and any legal or practical issues before fully committing to the purchase. The aim is to identify any risks, unexpected costs, or complications before you are legally bound. As it often carries a general review and discretion to cancel if unsatisfied, a vendor can be put-off especially when considering an offer from a purchase conditional on say finance only, versus a purchaser who has made a conditional offer subject to a general due diligence so you must consider the commercial aspects of this, but the viability of such conditions will depend on the market and the vendor’s appetite.

Every property is different, but focusing on the following key areas can help buyers make informed decisions.

1. Understand the Property's History

A property's past can tell you a great deal about its future. Ask yourself (with consultants):

• Has the property been well maintained?

• Have any renovations or repairs been completed? If so, were they properly consented?

• Is the property located in an area prone to flooding or other natural hazards?

Good due diligence may include obtaining a LIM Report, Property File or Toxicology Report, and discussing any concerns with the real estate agent, the vendor, and your lawyer. Given the recent number of cyclones and floods, checking the Property for flood risk and insurance will be a critical part of the due diligence.

2. Arrange a Building Inspection

While the age of a property may indicate the types of issues it could have, you should never assume it is either free from defects or full of defects simply because of its age. A professional building inspection is strongly recommended for every property, regardless of whether it is a new build or an older home. Often a new build can have more defect liability issues in the first year.

3. Consider the Location

The old saying remains true, location matters.

Think about whether the property suits your lifestyle now and in the future. Consider:

• School zones and childcare.

• Public transport and motorway access.

• Shops, parks, and other local amenities.

• Parking availability.

• Whether the property is located on a busy road or in a quiet cul-de-sac.

• The projected growth and future development of the area.

• Any planned developments in the area that could change any of the above.

These practical considerations can significantly affect both your enjoyment of the property and its future resale value.

4. Count Your Coins

Buying a property involves far more than simply obtaining mortgage approval.

Confirm with your bank or mortgage broker that finance is available on acceptable terms. You should also carefully consider the ongoing costs of ownership, including mortgage repayments, insurance, rates, utilities, maintenance, and other regular expenses.

Some properties come with additional costs. For example:

• Leasehold properties may require substantial annual ground rent.

• Unit title properties generally involve body corporate levies and, in some cases, special levies for major maintenance or repairs.

• Regular maintenance costs of upkeeping a lawn and property are often overlooked.

Understanding these costs before committing to the purchase can help avoid financial stress later.

5. Complete the Legal Checks

Your solicitor plays an essential role during the due diligence process.

Legal due diligence commonly includes reviewing the record of title, identifying easements, covenants, or encumbrances, checking whether building work has the necessary council approvals, confirming compliance with relevant legislation, and identifying any issues that may affect your ability to insure or finance the property.

These investigations can uncover problems that are not immediately apparent during a physical inspection.

Every property transaction is different, and the wording of a due diligence condition should be tailored to your particular circumstances. Remember a due diligence condition is different to a solicitor’s approval condition!

How Queen City Law Can Help

We cannot predict every issue that may arise during a property purchase, but we can help you identify potential risks before you become committed. Bearing in mind that a property is likely to be the biggest asset you buy in your lifetime, you should ensure proper due diligence is conducted before or during the conditional agreement phase.

At Queen City Law, we regularly assist purchasers by reviewing sale and purchase agreements, negotiating effective due diligence conditions, reviewing titles, advising on LIM Reports, and helping clients understand exactly what they are buying before they commit. Obtaining sound legal advice before signing an agreement is one of the best investments you can make.