How does buying a mixed-use building with ground-floor retail and residential units above change my due diligence?

A mixed-use building layers residential due diligence on top of commercial due diligence, rather than replacing one with the other. You still need everything you'd check on a commercial building, including reviewing the retail tenant's lease, estoppel certificate, and any exclusivity or percentage rent terms, but you also need to look at the residential component the way you would for a rental property: existing tenancies, whether units are properly and separately metered, compliance with building and fire code requirements for mixed occupancies, and whether the residential portion is legally permitted under zoning.

HST treatment is also more complicated, since the retail and residential portions of the same building can be taxed differently, which can mean apportioning the purchase price between the two uses. Insurance, financing, and property management also tend to be more complex for mixed-use buildings than for a single-use property, since lenders and insurers look at both income streams and both sets of risks.

Because the compliance layers multiply rather than average out, buyers should budget for a broader due diligence team, someone comfortable with both commercial leasing and residential tenancy issues, rather than assuming a single-use checklist will cover it.