What is a due diligence condition?
A due diligence (DD) condition is a special clause added to the ADLS Sale & Purchase Agreement that allows you to do all your research and inspections after you’ve agreed on the price, before you fully commit to buying the property. It gives you the chance to cancel the agreement if something doesn’t meet your expectations.
Think of it like tasting wine before buying the bottle—you get to check everything before the final decision.
Why Is It Important?
This condition protects you, the buyer, by allowing you to:
- Agree on a price first, then complete your investigations (finance, building report, LIM, neighbourhood, future developments, etc.)
- Decide later if you want to proceed or cancel, based on what you find.
Unlike other conditions (finance, building report), the due diligence clause is subjective—it’s your call whether to proceed or cancel.
How Does It Work?
- Submit your offer conditional on due diligence.
- Seller countersigns the agreement.
- You conduct your investigations with your lawyer and experts.
- After finishing your due diligence, you either:
- Declare the agreement unconditional and proceed, or
- Cancel the agreement if you’re unhappy with what you found.
Can I Use a Generic Due Diligence Clause?
Yes, but:
- Make sure to clearly state your offer is conditional on due diligence and remove overlapping general conditions on the agreement’s first page to avoid confusion.
- Tailor the clause to cover all investigations you want, rather than relying on a narrow, generic condition.
- Be realistic—while a wide due diligence condition offers more protection, some sellers may prefer a more straightforward finance-only condition or unconditional offer.
Important Considerations
- You cannot make a bid at auction conditional on due diligence—it must be unconditional.
- You can submit tenders conditional on due diligence.
- If you want to make your offer more attractive (especially for competitive or once-in-a-lifetime properties), consider:
- Doing your due diligence before making an offer
- Making an unconditional offer
- Offering a larger deposit
- Matching the seller’s preferred settlement date
- Submitting your highest reasonable price
Final Advice
- Using a due diligence condition is a great way to protect yourself, especially if you’re a first-home buyer or uncertain about the property.
- However, be prepared to negotiate and don’t rely solely on a generic clause—make sure it fits your specific concerns.
- Remember, real estate agents represent the seller’s interests, so don’t let pressure push you into an unconditional offer before you’re ready.
