Commercial Property Due Diligence Checklist
Houston & the Lake Houston Corridor
Fifteen items to clear before your earnest money goes hard — with the Houston-specific traps that generic national checklists miss.
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Why a Houston-Specific Checklist
Generic commercial diligence checklists are written for zoned markets. They tell you to confirm zoning, check the comprehensive plan and verify permitted use with the planning department. In Houston, none of those steps exist in that form, and a buyer who works through a national checklist will finish it having never opened the document that actually controls what can be built on the site.
This checklist is written for the market Stacy Sherman actually transacts in: the City of Houston, unincorporated Harris County, and the Montgomery County side of the Lake Houston corridor. It assumes no zoning, assumes MUD-provided utilities are likely, assumes detention will be a real cost, and assumes the flood question is a first-order underwriting input rather than a footnote. It is the fourth resource in the Houston commercial resource library, which also carries a plain-English lease glossary and a working guide to NNN and CAM lease structures.
Use it as a work list to negotiate the feasibility period against. The most common and most expensive mistake in this market is agreeing to a thirty-day period out of habit, discovering in week three that the site needs a replat and a detention study, and then either going hard on an unpriced risk or losing the deal to a buyer who scoped the work properly up front.
The 15-Item Checklist
Title commitment and every Schedule B document
Order the underlying instruments, not just the commitment. Easements, restrictions, mineral reservations and prior conveyances all live in Schedule B and none of them summarise themselves.
Recorded deed restrictions and any amendments
In a city with no zoning this is the primary use control. Read the full chain and identify who has standing to enforce.
Current ALTA/NSPS survey certified to you and your lender
Maps Schedule B onto the ground. Reveals encroachments, access failures, building-line conflicts and floodplain boundaries.
Plat, reserve designation and replat requirements
The plat carries building lines, easements and reserve restrictions. Ask whether your intended use triggers a replat, and what the city will demand in exchange.
Phase I environmental site assessment
ASTM E1527 records and site review. Required by virtually every commercial lender and the basis of the innocent-landowner defence.
Floodplain, detention and drainage analysis
Confirm the effective and pending flood maps, the detention obligation and the outfall. Frequently the largest hidden cost on a Houston site.
Utility availability and capacity letters
Water, sewer, storm, electric and gas — availability is not capacity. Get written confirmation from the provider or the MUD, including tap fees and impact fees.
Property tax analysis including MUD and special districts
Pull the current combined rate for the specific parcel. MUD, ESD, management district and TIRZ layers materially change the underwriting.
Leases, estoppels, SNDAs and the rent roll behind it
Read the documents. Verify the summary against them. Require estoppel certificates and, where financed, subordination and non-disturbance agreements.
Operating expense history and CAM reconciliations
Three years where available. Reconcile actual expenses against what has been billed to tenants, and identify any under-recovery you would inherit.
Property condition assessment and roof/MEP age
A PCA prices deferred maintenance and near-term capital. Roof and HVAC age drive the largest single-line surprises in the first three years of ownership.
Insurance quote on the actual asset
Windstorm, flood and general liability quoted on the specific property. Coastal-adjacent Texas insurance pricing has moved sharply; a stale assumption will break a pro forma.
Zoning-equivalent overlays: historic, management district, TIRZ, thoroughfare plan
None of these appear in the deed restrictions and all of them can impose obligations or fund improvements.
Access, curb cuts and TxDOT or county permitting
Frontage is not access. Confirm the permitted curb cuts and whether a change of use triggers a new driveway permit.
Exit assumptions tested against comparable sales
Underwrite the sale, not just the hold. Confirm the cap rate assumption against actual closed comparables in the same submarket and property type.
Diligence Standards and Timelines at a Glance
The Four Houston Traps
Trap one: treating Schedule B as a summary. The title commitment lists recorded exceptions by volume and page. It does not tell you what they say. The single most consequential document on most Houston commercial sites is a recorded restrictive covenant that nobody read because it appeared as one line in a list. The reasoning behind this is covered in more depth in the article on what deed restrictions actually control in a city with no zoning.
Trap two: assuming utility availability means utility capacity. A MUD serving a fast-growing area of Porter or New Caney may have a line at your frontage and no remaining capacity commitment. Availability letters and capacity commitments are different documents. Get the second one.
Trap three: underwriting the tax rate from the county average. Combined rates in this corridor vary widely parcel by parcel once MUD, ESD and management district levies are layered on. Pull the actual rate for the actual parcel from the appraisal district and confirm whether any exemptions in place will survive the sale.
Trap four: leaving detention until after feasibility. Detention is set at platting and sized to your impervious cover. On a small pad site it can consume enough of the tract to change the building footprint and therefore the whole pro forma. A civil engineer’s preliminary opinion during feasibility costs a fraction of what discovering it later costs.
Sequencing: What to Order in What Week
Week one. Order the title commitment and all Schedule B instruments, order the ALTA survey, order the Phase I, request three years of operating statements and every lease. Pull the appraisal district record and the current combined tax rate. Nothing here is expensive and everything here shapes the rest of the work.
Weeks two and three. Attorney review of restrictions and leases. Survey delivered and reconciled against Schedule B. Utility availability and capacity letters requested. Preliminary civil engineering opinion on detention and access. Insurance quoted on the actual asset. Estoppel certificates circulated to tenants.
Weeks four to six. Property condition assessment. Phase I delivered and, if a recognised environmental condition appears, a scoped Phase II. Lender’s counsel review. Reconcile CAM history against the lease definitions. Test the exit cap rate against closed comparables rather than asking prices.
Before earnest money goes hard. Every one of the fifteen items above is either cleared or priced. If an item is unresolved, the correct move is to extend, to reduce the price by the cost of the unknown, or to walk. Going hard on an unresolved diligence item is how investors lose money in this market, and it is entirely avoidable. If you would like this run on a specific asset, the commercial brokerage team can scope it, and tenant representation is available on the leasing side.
Related Pages
Frequently Asked Questions
How long is a typical feasibility period on a Houston commercial contract?
Thirty to ninety days is the common range, driven by how much third-party work is needed. A simple single-tenant building with a clean survey and no environmental history can be done in thirty. A development tract needing a Phase I, a geotechnical report, a wetlands determination and a replat conversation with the city will need ninety and often an extension option. Negotiate the period against the actual work list, not a habit.
What is the difference between a Phase I and a Phase II environmental assessment?
A Phase I is a non-intrusive records and site review performed to the ASTM E1527 standard, designed to identify recognised environmental conditions and to establish the innocent-landowner defence under CERCLA. It involves no sampling. A Phase II is intrusive — soil borings, groundwater monitoring wells, laboratory analysis — and is commissioned only when the Phase I identifies something that needs to be quantified.
Do I need a new survey if the seller provides one?
Usually yes for commercial. A current ALTA/NSPS Land Title Survey certified to you, your lender and the title company is what maps the Schedule B easements onto the ground and reveals encroachments, access problems and building-line conflicts. An old survey certified to a prior owner does not give you those protections and will generally not satisfy a commercial lender.
What should I check on tenant leases before closing an investment purchase?
Read every lease in full, not the rent roll summary. Confirm commencement and expiration dates, escalations, renewal and termination options, exclusive-use clauses, co-tenancy provisions, the operating expense definition and any caps, security deposits held, and whether any concessions or free rent remain unamortised. Then require estoppel certificates from each tenant and an SNDA where a lender is involved.
How do detention requirements affect a development tract in Houston?
Detention is often the largest single hidden cost on a Houston site. The City and the county require on-site detention sized to offset the increase in runoff from new impervious cover, and that requirement is imposed at platting. It can consume a meaningful percentage of a tract’s developable area. Establish the detention obligation with a civil engineer before the feasibility period ends, not after.
What is the single most commonly skipped diligence item?
Actually reading the recorded deed restrictions rather than noting their existence on Schedule B. Houston has no zoning, so private restrictions are the primary control on use — and they are the item most often deferred until after the money goes hard, which is exactly when there is no longer anything to be done about them.