Residential Due Diligence vs Commercial Due Diligence
Residential due diligence focuses on building condition, title, and council records. Commercial due diligence adds layers of complexity — zoning and permitted use verification, lease agreements, seismic assessment, environmental contamination, and commercial body corporate obligations.
Side-by-Side Comparison
| Attribute | Residential Due Diligence | Commercial Due Diligence |
|---|---|---|
| Building inspection | Standard building report ($400-$800) | Detailed commercial inspection + potential seismic assessment ($2,000-$10,000+) |
| Zoning check | Residential zoning confirmation | Permitted use verification critical — must confirm your intended use is allowed |
| Tenant considerations | Typically owner-occupied or simple residential tenancy | Existing commercial lease review — terms, expiry, rights of renewal, tenant obligations |
| Seismic assessment | Rarely required (unless pre-1970s or unreinforced masonry) | Essential — earthquake-prone building notice can limit use and require strengthening |
| Environmental contamination | LIM shows contaminated land register status | May need Phase 1 or Phase 2 environmental site assessment |
| Body corporate | Only for unit title properties | Commercial strata/body corporate with different rules and higher levies |
| Typical timeframe | 10-15 working days | 20-40 working days or longer |
| Professional team | Lawyer + building inspector | Lawyer + commercial inspector + valuer + accountant + potentially environmental consultant |
Residential Due Diligence Explained
Residential due diligence in New Zealand follows a well-established pattern. You order a LIM report from the council, commission a building inspection, have your lawyer review the title and sale and purchase agreement, and arrange finance approval. Most residential buyers also include conditions for these checks in their agreement.
The focus is on the property's physical condition (weathertightness, structural soundness, moisture levels), council compliance (consented work, Code Compliance Certificates), and legal title (ownership, easements, covenants). The process is well understood, and timeframes are predictable — typically 10-15 working days.
For standard residential properties, this level of due diligence is sufficient to identify most material risks.
Commercial Due Diligence Explained
Commercial due diligence covers everything residential does, plus several additional layers. Zoning is critical — you must confirm that your intended use of the property is a permitted activity under the district plan. A property zoned for retail may not allow an office, and vice versa. Resource consent may be needed for certain uses.
Seismic assessment is essential for commercial buildings, particularly older ones. Under the Building (Earthquake-prone Buildings) Amendment Act, buildings rated below 34% of the New Building Standard (NBS) are classified as earthquake-prone. This can restrict use, require costly strengthening (potentially hundreds of thousands of dollars), and affect insurance and lending.
Environmental contamination is another major consideration. If the property has a history of industrial or commercial use (petrol stations, dry cleaners, workshops), contamination may exist. A Phase 1 environmental site assessment reviews the site history, and a Phase 2 assessment involves physical testing. Remediation can be extraordinarily expensive.
Do You Need Both?
If you are buying a commercial property, you need the full commercial due diligence process. Residential due diligence is not sufficient — it does not cover the additional risks that are unique to commercial property. Even if you are buying a commercial property for conversion to residential, you still need the commercial-level checks initially.
Which Should You Get First?
For commercial property, start with zoning verification and a high-level seismic assessment before investing in detailed inspections. If the zoning does not permit your intended use, or the building is earthquake-prone, you may want to walk away before spending thousands on detailed reports.
Frequently Asked Questions
Do I need a seismic assessment for every commercial building?
Not legally required for every purchase, but strongly recommended. Your lender may require one, and your insurance company will want to know the building's seismic rating. Buildings constructed before the 1970s or built with unreinforced masonry are highest risk.
What is an earthquake-prone building notice?
Under New Zealand law, a building rated below 34% NBS (New Building Standard) can be classified as earthquake-prone by the local council. The owner must then strengthen or demolish the building within specified timeframes, which vary by seismic risk zone. This notice is recorded on the LIM.
How long does commercial due diligence take?
Typically 20-40 working days, but complex properties (multi-tenant, contaminated sites, earthquake-prone buildings) can take longer. Negotiate a sufficiently long due diligence period in your agreement — rushing commercial due diligence can be very costly.
Related Terms
Resource Consent
GlossaryPermission from the local council to carry out an activity that affects the environment, required under the Resource Management Act 1991.
Building Consent
GlossaryOfficial council approval required before you can carry out most building work in New Zealand.
Body Corporate
GlossaryThe legal entity made up of all unit title owners in a multi-unit development, responsible for managing common property and shared affairs.
Private Sale vs Auction
ComparePrivate sale (treaty/negotiation) lets you include conditions like finance and building inspection to protect yourself. Auction requires you to bid unconditionally — once the hammer falls, the deal is binding with no way out.
Buying Existing Property vs Buying Off the Plan
CompareBuying an existing property lets you inspect what you are getting before you commit. Buying off the plan means purchasing a new-build before it is constructed, with risks around delays, material changes, and developer solvency — but also the potential for a brand-new home at a locked-in price.
Conditional Offer vs Unconditional Offer
CompareA conditional offer includes clauses that let you cancel if certain checks fail — like finance, building report, or LIM. An unconditional offer has no conditions and is immediately binding. Conditions protect you; going unconditional means accepting all risks.
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