Due diligence

How Should an Investor Assess Title, Permits, and Zoning for a Real Estate Deal?

Short answer. Have qualified professionals review the title commitment, recorded documents, permits, zoning rules, and property use against the deal plan. Confirm ownership and recorded interests through public records and relevant authorities. Check required approvals too. Resolve discrepancies and understand limits on construction or operations, plus transfer limits, before relying on investment assumptions.

By Richard C. Wilson, founder of the Family Office Club

Check that the property can be transferred and used as the investment plan assumes. A seller's description of permitted use does not establish that right. Ask title, land-use, and real estate professionals to tie each claimed right to a recorded document or written confirmation from the relevant authority.

Trace Ownership and Recorded Interests

Request the title commitment, recorded documents behind it, current survey, legal description, and any existing title policy. Have a real estate attorney and title professional compare the legal description with the survey and public property records. Confirm that the seller owns the interest being sold and can convey it.

Review each exception listed in the title commitment, including mortgages, easements, access rights, covenants, restrictions, tax liens, and judgments. Ask which items will be paid off, insured over, or remain after closing, and what practical effect each remaining item has. For example, a recorded access easement may not provide the route or rights the project needs. Investigate boundary conflicts and gaps in legal access before treating the site plan as workable.

Confirm Current and Proposed Use

Request zoning maps, applicable ordinances, prior approvals, variances, conditional use permits, site plans, and written correspondence with planning or building authorities. Check the property's existing use and whether it may continue. Then compare the proposed use with rules on density, height, setbacks, parking, access, signs, and occupancy.

Ask the local authority to confirm in writing which approvals are in place and what remains necessary. A pending application, staff conversation, or seller's interpretation does not establish approval. Find out whether an approval has conditions or an expiration date, and ask about appeal rights or transfer limits. Have land-use counsel interpret legal questions.

Test Permits Against the Project Schedule

Request building permits, occupancy permits, operating permits, inspection records, certificates of occupancy, and notices of violation. Match permits to the actual structures and uses on site. Ask whether each permit is final, whether open conditions remain, and whether it transfers to a buyer. Compare the approved plans with the property as built. Unpermitted additions or an occupancy mismatch can affect use, financing, insurance, and renovation options.

Build a schedule of approvals needed for the planned work. For each one, record the responsible authority, application status, dependencies, expected sequence, and consequence of delay or denial. Ask: "Which approval is still outstanding?" "Can the project proceed if it is denied?" "What work must stop until approval is issued?" If the project depends on a discretionary approval, model a delay and a lower-value use.

Compare confirmed rights and permits with the construction scope, operating plan, financing conditions, and forecast. If access, density, occupancy, or a key use is uncertain, quantify the cost and schedule impact. Keep unresolved items visible and assign each to a named professional, specifying the document or authority response needed to close it.

For property condition issues, review inspection findings that could affect an acquisition. Check environmental matters separately through environmental risk diligence.

Checklist

Go deeper: What assumptions in a property's forecast deserve independent validation?.

The main points of deal structuring are (a) to assemble all the resources needed to operate the intended business (usually people and tangible/intangible property) and then (b) to finance these resources.

Richard C. Wilson, The Single Family Office

Sources: Capital Raising, Family Office Club investor due diligence framework, The Single Family Office. Informational only, not financial, legal or tax advice.