Real Estate Due Diligence is the thorough analysis of the documentation and regulations relating to the property under consideration, compared against its actual condition, with the aim of determining the economic value of the asset.
Any Real Estate Valuation should be preceded by a thorough Due Diligence process, capable of clearly, comprehensively and appropriately defining the type of property being valued, highlighting the positive and negative elements relevant to a real estate valuation, as these represent the sum of the characteristics that distinguish one property from others on the market; for this reason, a thorough analysis is a preliminary and essential requirement for any real estate valuation, also taking into account the differences between the various properties.
By way of example, urban planning analysis may make it possible to establish whether a plot of land is suitable for development, and subject to which procedural or geometric restrictions. Building compliance analysis will make it possible to determine whether the property complies with the approved plans or whether any unauthorised building works can be regularised or not. This Analysis must conclude with a detailed definition of the type of intervention and non-compliance, and therefore of the costs of regularisation, or alternatively, the costs of demolition and reinstatement works.
For a more in-depth valuation, it will always be the urban planning analysis, together with other Due Diligence matters, that will help identify alternative uses, or higher and better uses, through the highest and best use (HBU) valuation approach.
In the property redevelopment process, Due Diligence will make it possible to identify and economically assess the range of regulatory compliance issues involved in adapting a property undergoing renovation or a change of use. By way of example, a change of intended use could entail significant issues relating to structural compliance, earthquake resistance, building systems or fire safety, with costs so high as to undermine the entire investment.
An analysis of the ownership of the property, or a mortgage search, will also make it possible to identify the existence of rights in rem conferring rights of enjoyment ( right of habitation, right of use, or usufruct ) and security rights ( pledge or mortgage ), across the wide range of cases recognised under the civil law of our country. In this way, easements may also come to light, where registered and recorded, or, alternatively, apparent easements.
Finally, a general analysis of Due Diligence matters will make it possible to identify well in advance any circumstances that may result in the nullity of legal deeds, allowing them to be assessed and remedied ex ante, thereby ensuring that the property is fully compliant on the eve of the deed transferring ownership or creating rights in rem conferring rights of enjoyment.
For this reason, investigations are conducted on an interdisciplinary basis, involving professionals such as a Lawyer specialising in administrative law and a Notary.
