Investor Guide
2026-10-10 08:32

Due Diligence (pre-purchase review): What the Buyer Knows at Signing, It Cannot Claim for Later

Due diligence is the buyer's structured review of a property before signing, in four workstreams — legal, financial and tax, technical, and location — and in our experience costs €30,000–50,000 for a single supermarket. German law adds a twist: a buyer loses its statutory rights for a defect it knew of when signing, so what the review finds must be priced or written into the purchase contract before the notary appointment.

What it is

No statute prescribes due diligence for a property purchase, but the law attaches consequences to what the buyer knows. A buyer who knows of a defect when the contract is concluded has no rights for it. A defect that remained unknown through gross negligence can be claimed only if the seller concealed it fraudulently or guaranteed the quality concerned (§ 442(1) BGB). Rights registered in the land register are the exception: unless the contract provides otherwise, the seller must remove them even if known (§ 442(2) BGB). A contractual exclusion of liability does not protect a seller who fraudulently concealed a defect or gave such a guarantee (§ 444 BGB).
In a property transaction the term has a second meaning. Notaries, brokers and banks must carry out anti-money-laundering due diligence: identifying the parties and their beneficial owners and, where required, clarifying the source of funds. If they cannot complete it, they may not proceed (§§ 10, 11 GwG; Part 8).

Why it matters to investors

The review is cheap relative to what it protects. Full due diligence on a single supermarket costs €30,000–50,000 in our experience — 0.3–0.5% of a €10 million price and a fraction of the real estate transfer tax of 3.5–6.5% (Part 7). The lease deserves the closest reading: in the Mannheim case in Part 7, a new Netto lease let the landlord recover no costs at all. Every 10% of the rent a landlord absorbs takes 0.6 percentage points off a 6.0% headline yield.
Most buyers underestimate the legal effect of the findings. In our experience, contracts for existing stores largely exclude the seller's liability for defects. And a defect the review uncovers is one the buyer knows of at signing (§ 442(1) BGB). Each material finding therefore needs an answer in the deed — a price adjustment, a specific guarantee or indemnity, an assignment of claims against the developer — or a decision to walk away. Every such agreement belongs in the notarised contract (Part 8).

What to check

• A land register extract with the deeds behind section II, plus the public-law encumbrances register (none exists in Bavaria) and the contaminated-sites register.
• The complete lease file, every addendum included, and three years of service-charge statements.
• The building permit, approved plans and acceptance protocol.
• A list of findings, each tied to a price change, a contract clause or a decision not to proceed.
• Source-of-funds documents for the notary, broker and banks.
Related terms: Baulast · Erbbaurecht · Schriftform (§ 550 BGB)
Sources: BGB §§ 442, 444; GwG §§ 10, 11; Gordon Real Estate Group, "German Prime Retail", Parts 7 and 8. Legal position as of 10 October 2026.
Photo: Annie Spratt / Unsplash
This entry is general information and not legal or tax advice.