Commercial Property Due Diligence in Texas

By Hank FasthoffJuly 5, 2026

A commercial purchase contract provides a defined period, often called a feasibility period, to investigate the property and decide whether to proceed. Your rights during that period depend on the contract, because Texas law supplies no general right to cancel a commercial acquisition and recover earnest money when an inspection produces an unwelcome result.

Your contract should provide enough time, access, and document rights to investigate the risks that affect your intended use and investment. It should also state the consequences of a timely termination, the conditions that survive the feasibility deadline, and the seller's remedies if you default after your termination right expires.

The Contract Controls the Investigation

Your feasibility period may permit termination for any reason, only for specified reasons, or only when a stated condition fails. Depending on the contract, the deadline may run from the effective date, delivery of seller documents, or another event. Those differences determine when earnest money becomes nonrefundable and whether an unresolved issue supports termination.

You should identify every deadline before ordering reports. Title objections, survey review, financing approval, environmental review, tenant estoppel delivery, and general termination rights may expire on different dates, so if your calendar shows only the end of the feasibility period, an earlier objection deadline can pass unnoticed.

Access rights require equal attention. Your contract should authorize inspections and document the notice procedure, insurance requirements, invasive testing restrictions, restoration duty, lien protection, and responsibility for injuries or property damage. Environmental sampling, roof cuts, and destructive testing usually require separate consent.

An As Is Clause Increases the Stakes

Texas courts may enforce a negotiated as is provision against a sophisticated commercial buyer. In Prudential Insurance Co. of America v. Jefferson Associates, Ltd., 896 S.W.2d 156 (Tex. 1995), the Supreme Court of Texas enforced a clause under which the buyer accepted a commercial office building with all latent and patent defects and relied on its examination of the property. The Court held that the clause negated causation after the buyer discovered asbestos more than two years after closing.

The Court also identified limits, because fraudulent inducement, concealment, seller conduct that impairs an inspection, unequal bargaining power, and the totality of the circumstances can all defeat enforcement. Both sides allocate the same risk through the contract and the investigation, so you should verify any condition important enough to affect the purchase before the deadline or address it through a representation, covenant, closing condition, indemnity, escrow, or price adjustment.

Texas Title Review Uses Schedules A Through D

Texas uses the Department of Insurance's Form T-7 commitment. Schedule A identifies the proposed policies, insured parties, estate or interest, record owner, and legal description, while Schedule B lists exceptions from coverage. Requirements appear in Schedule C, and Schedule D covers estimated premiums and related disclosures.

Your title review should compare Schedule A's legal description with the purchase contract and survey. A short exception label rarely shows a restriction's practical effect, so Schedule B review means reading the underlying recorded documents. Easements, restrictive covenants, mineral reservations, access rights, leases, tax items, and survey conditions can limit development or use without preventing the title company from issuing a policy. Title insurance covers title risks only, so zoning, physical condition, environmental liability, and operating economics require separate review.

Schedule C often lists liens, ownership issues, taxes, required instruments, and other conditions that require action before closing. Your written objections must comply with the contract's deadline and procedure, and seller cure rights, deemed approval provisions, and termination deadlines determine whether an objection ends in a cure, an endorsement, a price concession, or your decision to end the transaction.

Survey Scope Requires Written Instructions

The 2026 ALTA and NSPS standards took effect February 23, 2026, and superseded the 2021 standards. A survey ordered under the current standards includes the required fieldwork, a plat or map, a certification, and only the optional Table A items selected in the written request.

Flood zone classification appears as optional Table A Item 3. Item 6 covers zoning and depends on a zoning report or letter supplied to the surveyor. Parking counts, underground utility evidence, building dimensions, and several other useful items also require selection or a separately negotiated scope, so if you order an ALTA survey without the needed Table A items, the surveyor may deliver an accurate plat that omits information your lender, title company, or development plan requires.

You should review title and survey together. Recorded easements should appear in the correct location when they can be plotted, and observed encroachments or access conditions may require a title endorsement, an agreement with an adjoining owner, or a contract response. A legal description discrepancy requires resolution before the same description appears in the deed and title policy.

Environmental Review Extends Beyond a Phase I Report

CERCLA can impose strict liability on a current property owner, and one responsible party may face the entire cleanup cost when the harm can't be divided among the parties. The statute also provides liability protections for qualifying innocent landowners, contiguous property owners, and bona fide prospective purchasers, but each protection has statutory conditions.

EPA states that a Phase I environmental site assessment conducted under ASTM E1527-21 can satisfy the federal all appropriate inquiries rule. The inquiry must occur before acquisition, and the buyer must also satisfy continuing obligations after closing, so a report alone provides no automatic defense.

A Phase I assessment reviews records, site conditions, interviews, and other evidence without sampling soil or groundwater. When the environmental professional identifies a recognized environmental condition, your response may require targeted testing, agency records, cost estimates, environmental insurance, a cleanup agreement, or a revised deal structure, and the contract must provide enough time and access for that subsequent work.

Land Use Review Tests Your Intended Use

Current occupancy provides only one piece of the land use analysis. Your review should confirm zoning classification, permitted uses, parking requirements, setbacks, height and density limits, platting status, certificates of occupancy, building permits, fire requirements, and any development or special use approvals, because recorded restrictions and easements can impose limits beyond municipal zoning.

A lawful nonconforming use depends on the local ordinance and the property's history, and renovation, expansion, abandonment, casualty, or a change in use may affect that status. A zoning letter helps when the jurisdiction offers one, but the opinion should cover your proposed use instead of repeating the current classification.

Utility capacity and access can control redevelopment even when zoning permits the project, so you should confirm water, wastewater, drainage, electricity, gas, telecommunications, curb access, and fire flow at the level the proposed use requires. A conceptual site plan can reveal conflicts among setbacks, easements, parking, detention, and building area before you acquire the land.

Physical Review Depends on the Property

ASTM E2018-24 describes a reasonable baseline process for property condition assessments and explains that the appropriate scope varies with the user's objectives, risk tolerance, schedule, and budget. The guide applies voluntarily, involves a moderate level of uncertainty, and shouldn't serve as a universal inspection checklist.

Your consultants should examine the systems central to the property and business plan. For any given asset, that review may include structure, roof, exterior walls, paving, drainage, elevators, fire protection, mechanical systems, electrical capacity, plumbing, accessibility, and deferred maintenance, and specialist review may be necessary for roofs, façades, foundations, vertical transportation, or equipment outside the baseline scope.

Cost estimates require timing as well as dollars, because immediate repairs affect closing negotiations while replacements expected during the hold period affect reserves and projected returns. Warranty documents, maintenance records, permits, open code items, and prior inspection reports can show whether a visible defect reflects isolated damage or a recurring failure.

Leases and Operating Records Test the Income

For a property that produces income, your lease review should compare every lease, amendment, guaranty, side letter, and assignment with the rent roll. It should confirm rent, escalations, concessions, security deposits, expense obligations, renewal rights, termination rights, expansion rights, exclusive uses, purchase options, and rights of first refusal, because tenant defaults and unresolved landlord obligations can affect both value and financing.

Estoppel certificates provide each tenant's statement about the lease and current disputes. Your contract should identify the required form, delivery deadline, minimum tenant coverage, and consequence if a key tenant refuses or qualifies its certificate. Subordination, nondisturbance, and attornment agreements require the same review when lender rights could affect tenant occupancy.

You should tie historical operating statements to leases, invoices, bank records, tax bills, utility bills, service contracts, and insurance information, because rebuilding net operating income from source records can reveal temporary concessions, deferred repairs, seller subsidies, unpaid receivables, or expenses that will increase under new ownership. Termination rights, assignment, pricing, and renewal dates require a separate check for every service contract.

Texas Property Taxes Require Independent Underwriting

Texas Tax Code Section 23.01 requires appraisal at market value as of January 1 and directs appraisal districts to consider available evidence specific to the property. The Texas Comptroller identifies sales comparison, income, and cost as common appraisal methods, and while a purchase price may provide evidence of market value, Texas law doesn't impose an automatic reset to that price upon sale.

Your underwriting should account for the current market value, taxable value, exemptions, special appraisal, pending protests, tax rates, and the effect of a change in ownership. Existing limitations or exemptions may expire or operate differently after closing, so the seller's current bill supplies historical information rather than a reliable forecast of your tax expense.

Insurance pricing depends on the property and the intended operations. Loss runs, claims history, flood exposure, wind and hail deductibles, replacement cost, vacancy, and lender requirements affect price and availability, and an early quote can identify a physical or operational condition that makes the acquisition more expensive before your termination right expires.

Turning Findings Into Contract Terms

Each material finding should connect to a contractual response before the applicable deadline. Available responses may include a title objection, seller cure, price reduction, closing credit, repair escrow, environmental indemnity, representation, closing condition, insurance endorsement, feasibility extension, or termination, and the contract determines which responses remain available.

You should resolve extension requests before the deadline, because continued discussion rarely suspends a contractual date. A written amendment should identify the extended right, any added deposit, and the effect on related title, financing, estoppel, and closing deadlines. If you proceed with an unresolved condition, the closing documents should state who assumes it and what remedy applies after closing.

Commercial due diligence succeeds when everyone working on the acquisition, from the consultants to the lender to the title company, follows one calendar and one property plan. Your final decision should reflect confirmed title, use, condition, income, and operating cost, with each unresolved risk assigned in the purchase agreement or closing documents.