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Every problem found during the conditional period is a negotiation. Every problem found after closing is yours. We run the full search programme and report on what it actually means.
Arrange a Call →The parcel register tells you who owns the land and what is registered against it. It will not tell you whether the use is permitted, whether a work order is outstanding, or whether the soil is contaminated. Those answers come from off-title searches, and they take weeks to obtain.
It includes title searches of the parcel register and every registered instrument, off-title searches for zoning compliance, open permits, work orders, fire orders, tax and utility arrears, environmental and conservation authority matters and heritage status, execution and corporate searches, PPSA searches, lease abstraction and estoppel certificates, plus consultant-led environmental, building condition and survey work.
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Ontario commercial purchases run on caveat emptor. Outside of fraud, active concealment and any express representations the vendor has given, a vendor is generally not obliged to volunteer that the zoning does not permit the buyer's intended use, that a work order is outstanding, that a tenant has stopped paying, or that a former occupant left a contamination problem behind. There is no statutory disclosure form and no consumer protection regime. The conditional period exists so that the buyer can find these things while the deposit is still recoverable.
Due diligence divides into three streams. Legal due diligence covers title, off-title, tenancy, corporate and security matters and is run by counsel. Technical due diligence covers environmental site assessment, building condition, structural, mechanical, roof and survey work and is run by consultants. Financial due diligence covers the rent roll, operating cost reconciliations, tax history and the lender's requirements. The three streams inform each other constantly, which is why the results should be reported together rather than in isolation.
Our reporting sorts every issue into three tiers: matters that must be resolved before closing, matters that can be managed by a price adjustment, holdback or indemnity, and matters you are simply accepting as ordinary risk. That structure is deliberate. The purpose of due diligence is not to produce a list of everything that is imperfect about a building. It is to tell you which imperfections should change the deal.
Title searching begins with the parcel register for each Property Identifier Number, obtained electronically through Teraview. Under the Land Titles Act the register is a statement of title maintained by the province and backed by the Land Titles Assurance Fund, subject to statutory exceptions. Where the land is still under the Registry Act, a full forty-year chain of title must be searched from a good root, and there is no state guarantee behind the result. Some older downtown Toronto parcels remain in Registry.
Every registered instrument affecting the property is then obtained and read. Mortgages and charges must be identified for discharge. Easements for hydro, gas, telecommunications, storm and sanitary servicing are reviewed for their effect on the buildable area and on existing structures. Restrictive covenants can prohibit uses that the zoning permits. Site plan agreements registered under section 41 of the Planning Act, subdivision agreements and development agreements bind successors and can impose ongoing maintenance and securities obligations. Notices of lease disclose tenancies. Construction liens preserved under the Construction Act, certificates of pending litigation and executions against the registered owner must all be cleared.
Two title issues recur on commercial files. The first is the adequacy of legal access, a property that appears to front a street may in fact rely on a right of way that was never registered, or on a laneway the City has not assumed. The second is the relationship between the registered description and what is physically on the ground, which is why an up-to-date reference plan or survey matters. Buildings encroaching onto neighbouring land, or neighbouring structures encroaching onto the subject land, are common in older Toronto industrial and retail stock and are addressed by encroachment agreements, title insurance endorsements or price adjustment.
Off-title searches are letters and enquiries to municipalities, ministries, utilities and agencies. They take time, several weeks in many municipalities, which is the single most common reason conditional periods run out. They should be sent on the first day of the conditional period, not the second week.
| Search | What it reveals |
|---|---|
| Zoning and building compliance letter | Permitted uses, legal non-conforming status, parking and loading compliance, applicable by-law and site-specific exceptions |
| Open building permits and work orders | Permits taken out and never closed, and outstanding orders the new owner inherits |
| Fire department records | Fire orders, inspection deficiencies, sprinkler and alarm compliance |
| Realty tax certificate | Arrears, current assessment, tax class and any pending assessment appeal |
| Utility arrears | Water, hydro and gas arrears that can become a lien or a service interruption risk |
| Environmental ministry records | Orders, approvals, spills records and registrations relating to the site |
| Conservation authority | Regulated area, floodplain and valley constraints, permit requirements |
| Heritage status | Designation under Part IV, heritage conservation district under Part V, or listing on the municipal register |
| Committee of Adjustment and planning applications | Pending or historical variances, consents and development applications affecting the land or its neighbours |
| Executions | Writs of seizure and sale filed against the registered owner’s name |
| Corporate profile and status | That the vendor exists, is in good standing, and that the signatories have authority |
| PPSA search | Registered security over chattels, fixtures and equipment included in the sale |
| Litigation and bankruptcy searches | Proceedings involving the vendor that could affect its ability to close or convey clear title |
| WSIB clearance | Outstanding assessments where the vendor operates a business at the property |
Municipal responses to zoning, open permit and work order enquiries routinely take three to six weeks. If the searches are not ordered in the first days of the conditional period, the buyer ends up choosing between waiving blind and asking for an extension from a vendor who now has the leverage.
Order title searches, send every off-title enquiry, request the full document package from the vendor, and instruct the environmental and building condition consultants. Nothing waits for anything else.
Parcel register and instruments reviewed, easements and agreements analysed, leases abstracted into a rent roll comparison, survey obtained or ordered.
Environmental Phase One and the building condition assessment are delivered. If Phase One recommends a Phase Two, decide immediately whether to instruct it or seek an extension. This is the fork that most often needs more time.
Estoppel certificates requested from tenants, SNDAs circulated where the lender requires them, and the lender’s appraisal and environmental requirements addressed.
Municipal responses are reviewed against what the vendor represented. Discrepancies become requisition points or price negotiations.
Written due diligence report tiering the issues, then waive, renegotiate on the strength of the findings, or terminate and recover the deposit.
The timetable compresses or extends with the asset. A vacant single-tenant building with no environmental history can be done in thirty days. A multi-tenant plaza with twenty leases, an older industrial site, or a property where the Phase One escalates will need sixty days or more. The agreement should include an express right to extend the conditional period where a Phase Two is recommended, because that is the single most predictable cause of a timeline failure.
On an income-producing property, the leases are the asset. Every lease, amendment, renewal, assignment, consent, side letter and indemnity agreement must be obtained and abstracted: commencement and expiry dates, base rent and escalations, additional rent obligations and any caps or exclusions negotiated by the tenant, free rent and inducement obligations that have not yet been satisfied, deposits held, renewal and expansion options, rights of first refusal, exclusivities, co-tenancy conditions, restoration obligations and any landlord termination rights.
The abstract is then reconciled against the rent roll the vendor supplied. Discrepancies are common and material: rent charged at a different rate from the lease, a renewal exercised but never documented, an unrecorded abatement granted during a difficult period, or a deposit the vendor cannot account for. Estoppel certificates are how those discrepancies are surfaced and fixed, because the tenant certifies the position independently of the vendor. Where a lease does not oblige the tenant to deliver an estoppel certificate, obtaining one becomes a matter of tenant goodwill, which is itself a diligence finding.
Exclusivities and co-tenancy conditions deserve separate attention on retail assets because they constrain future leasing across the whole property. An exclusivity granted to one tenant binds the landlord in respect of every other unit, and a purchaser inherits it. Similarly, unsatisfied landlord work obligations, unpaid tenant improvement allowances and outstanding leasing commissions are liabilities that must be identified and dealt with in the adjustments rather than discovered afterwards.
A purchaser needs to establish that the vendor exists, is in good standing, owns what it is selling, and that the people signing have authority to bind it. Corporate profile and status searches confirm incorporation, registered office, directors and officers and whether the corporation has been dissolved for failure to file. Where the vendor is a partnership, trust, estate or a nominee holding for a beneficial owner, the chain of authority has to be traced through the partnership agreement, trust instrument, certificate of appointment of estate trustee or nominee agreement, and the appropriate authorising resolutions obtained.
Security and enforcement searches complete the picture. Execution searches disclose writs of seizure and sale filed against the registered owner's name, and must be run against every version of the name in the chain. Personal Property Security Act searches disclose registered security over chattels, fixtures and equipment included in the sale, and must cover the tenant as well as the vendor where tenant equipment is being acquired. Bankruptcy and litigation searches disclose proceedings that could affect the vendor's ability to convey clear title, and should be repeated shortly before closing rather than only at the outset.
Tax-related diligence runs in parallel. The realty tax certificate confirms arrears and the current assessment and tax class. Where the vendor is a non-resident of Canada, section 116 of the Income Tax Act requires the purchaser to withhold unless a clearance certificate is delivered, so residency must be established early enough for a certificate application to be made. HST registration status must be verified where the purchaser will self-assess, because relying on an invalid registration number leaves the tax unpaid and the parties exposed. Where the vendor carries on a business at the property, a Workplace Safety and Insurance Board clearance certificate is commonly obtained as well.
The due diligence report should tell you three things. What you are buying: the legal description, the registered interests that will survive closing, the tenancies and their material terms, and the permitted uses. What is wrong: the defects, discrepancies and risks found, with an assessment of how serious each one is. And what to do: which items must be cleared as requisitions before closing, which should be reflected in price, holdback or indemnity, and which are ordinary risk to be accepted or insured.
Title insurance is a tool used at the end of this process, not a substitute for it. A commercial policy can be extended by endorsement to cover zoning compliance, survey and encroachment matters, access, and contiguity of assembled parcels, and it can allow a transaction to close over certain historical irregularities that would otherwise require a court application. What it cannot do is tell you that the roof has two years of life left, that a tenant is about to leave, or that a Phase Two will find solvent in the groundwater.
Whatever is not resolved before the condition is waived becomes yours to manage. That is the reason for the discipline: order everything on day one, escalate the moment the Phase One flags a concern, reconcile the leases against the rent roll rather than trusting it, and use the findings while you still have the right to walk. To scope a due diligence programme on a commercial acquisition in Toronto or elsewhere in Ontario, contact Lexaltico LLP.
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