What is real estate Due Diligence and why it is essential before purchasing a property

27 November, 2025
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Real Estate
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Neus Vallara


Real estate Due Diligence—also referred to as a legal audit of the property—is an essential process for any investor, fund, family office or entity seeking to acquire a real estate asset with full legal certainty.

Its purpose is to conduct an exhaustive review of the property’s legal, planning and tax situation, identifying risks and contingencies and proposing the measures necessary to prevent or remedy them before the acquisition is finalised.

The findings of the analysis are documented in a legal report, which details:

the contingencies identified,

their potential impact on the transaction, and

the recommendations to mitigate them.

A well-performed Due Diligence enables the buyer to negotiate the contract appropriately and to anticipate potential issues that could compromise the profitability—or even the viability—of the acquisition.

1. Preliminary considerations: understanding the recipient and the type of transaction

Before starting the review, it is essential to clarify two aspects:

1.1. Who the report is intended for

The content must be tailored to the recipient’s profile and interests.
A Due Diligence will differ depending on whether it is prepared for:

an institutional investor,

a private individual,

a financial institution, or

a family office.

Each has different expectations and risk parameters.

1.2. The legal structure of the contemplated transaction

The scope of the analysis varies depending on whether the transaction involves:

a direct purchase,

the acquisition of a special-purpose vehicle (SPV),

the transfer of a business unit,

a sale & lease-back transaction, etc.

The clearer the framework, the more accurate the legal recommendations will be.

2. Documentation required to carry out the Due Diligence

To conduct a complete audit, information must be gathered both about the property and the parties involved in the transaction.

2.1. Information provided by the seller

The seller must provide, among others, the following documentation:

corporate documentation, where applicable,

title deeds,

agreements linked to the property,

the tenancy and occupancy situation,

existing licences and permits,

updated certificates of debts affecting the property (owners’ association, taxes, urban management entities, etc.).

2.2. Information obtained from Registries and Public Authorities

Any information not provided by the seller must be verified through:

the Land Registry,

the Cadastre,

the competent City Council,

sector-specific authorities,

and specialised enquiries (environmental, planning, etc.).

3. Key components of a real estate Due Diligence

Below are the key aspects that must be reviewed in any legal audit:

3.1. Corporate status of the parties involved

The review includes:

the authority and capacity of directors,

the validity and registration of appointments and powers of attorney,

the absence of insolvency or restrictions.

If the selling company is subject to insolvency proceedings, it must be analysed whether court authorisation is required for the transfer.

The aim is to ensure that the seller is legally entitled to dispose of the property.

3.2. Property description and consistency with official records

Verification of the property description, surface area and boundaries.

Consistency between the Land Registry, Cadaster and the physical reality.

3.3. Encumbrances and charges

This section analyses:

mortgages,

easements,

administrative restrictions,

prohibitions on disposal,

tax encumbrances.

The Due Diligence determines the scope of these charges and the possibility of cancelling them to make the property more attractive for the buyer.

3.4. Title deeds

The review confirms that the seller:

holds valid title,

is duly registered,

and is free from restrictions preventing the transfer.

3.5. Planning and zoning status

This is one of the most decisive sections. It includes:

permitted uses,

planning constraints,

applicable planning instruments,

the status of urbanisation works (in the case of land),

potential administrative sanctions.

A planning-related contingency may halt the transaction or impede financing.

3.6. Third-party rights, leases and occupancy

The analysis focuses on:

existing leases,

duration, guarantees and extensions,

the landlord’s obligations,

statutory rights of first refusal and redemption,

actual occupancy.

This is critical for income-producing assets or properties with tenants.

3.7. Owners’ Association

The review must include:

the situation of outstanding community fees (the buyer is liable for the current year and the previous three years),

the articles of association and internal regulations,

any limitations regarding use or exploitation.

3.8. Permits, authorisations and licences

Particularly relevant:

the certificate of first occupation,

activity or operating licences, where a business activity is carried out on the premises,

building permits where construction works are in progress.

A lack of required licences may give rise to significant tax and operational risks.

3.9. Service and utility contracts

Although secondary, these influence the future management of the property and the obligations to be assumed by the buyer.

3.10. Environmental matters

For assets such as land or industrial buildings, it is essential to analyse:

potential signs of contamination,

third-party technical reports,

applicable environmental regulations.

3.11. Insurance and certificates

The review includes:

current insurance policies,

open claims,

energy performance certificates,

technical inspections, with special attention to the Building Technical Inspection (ITE), which may entail financial obligations for the new owner.

3.12. Agreements with third parties and employees

Some properties may be subject to:

prior private agreements,

purchase options not yet executed before a notary,

employees assigned to the property, requiring an analysis of a possible business succession.

For properties with construction in progress, all existing agreements relating to the building process must be reviewed.

3.13. Litigation and claims

It is essential to identify:

ongoing court proceedings,

judgments affecting the property,

administrative claims.

3.14. Tax matters

The tax review should include:

outstanding Property Tax (IBI), which is attached to the property,

municipal capital gains tax, where contractually assumed by the buyer,

indirect taxation (VAT, Transfer Tax and Stamp Duty),

potential application of the reverse charge mechanism when VAT applies.

Conclusions and purpose of the Due Diligence

A Due Diligence allows the buyer to:

understand the property’s legal status with precision,

assess contingencies and their financial impact,

negotiate warranties and specific contractual clauses,

decide with confidence whether to proceed with the purchase,

and anticipate risks that may affect the asset’s future profitability.

In short, it is an indispensable tool for a secure, efficient and professionally managed real estate investment.

If you want to resolve more questions about real estate Due Diligence, you can read this article on our blog.

You can also listen to this episode of our podcast Inmobiliamente, dedicated to real estate Due Diligence.

Our added value

At MES Advocats, we have extensive experience in preparing real estate legal audits.

Our team analyses each transaction with a practical, rigorous approach tailored to the client’s profile, ensuring informed decision-making and a legally sound transaction.

If you are considering the purchase of a property or preparing a future transaction, we can help you review its legal status and anticipate potential risks. Contact us through this link.

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Auditoría legal inmobiliariaCompra de inmueblesReal Estate Lawdue diligence inmobiliariaInversión inmobiliaria

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