- A verbal assurance that equipment is in good working order isn't worth much once you own it and something breaks down in month two.
- - [ ] A physical inspection of major equipment, ideally by someone who understands how it's used in that specific trade.
- Even equipment that works perfectly can come with an unwelcome surprise: a registered security interest that means someone else has a legal claim against it.
If you're buying a business with meaningful physical assets — kitchen equipment, manufacturing machinery, vehicles, salon chairs, whatever the trade requires — the seller's word that "everything works" is not a substitute for actually checking. Equipment condition rarely shows up clearly in financial statements, and a seller motivated to close the deal has little incentive to volunteer that the compressor is on its last legs.
This matters for two separate reasons: what the equipment is actually worth, and whether it's even free of debt the seller hasn't mentioned.
Why "As Seen, As Is" Isn't Good Enough
A verbal assurance that equipment is in good working order isn't worth much once you own it and something breaks down in month two. Two separate questions need answers before you close:
- Condition — does the equipment actually work as represented, and how much useful life does it realistically have left?
- Title — does the seller actually own it outright, or is it leased, financed, or pledged as security for a loan you don't know about?
Both questions need to be answered before closing, not discovered afterward.
What a Proper Equipment Check Covers
- [ ] A physical inspection of major equipment, ideally by someone who understands how it's used in that specific trade.
- [ ] Maintenance and service records — a well-documented history is itself a good sign; an absence of any records is worth asking about.
- [ ] Age and expected remaining useful life of each major item, not just whether it currently turns on.
- [ ] Confirmation of what's actually included in the sale versus what's leased, rented, or owned by a third party.
- [ ] For specialized or high-value equipment, consider an independent appraisal or inspection by someone qualified in that specific type of machinery.
- [ ] A walk-through comparing the seller's asset list against what's physically on-site — items get sold, scrapped, or quietly removed before a deal closes.
Confirming Ownership and Lien Status
Even equipment that works perfectly can come with an unwelcome surprise: a registered security interest that means someone else has a legal claim against it. In Ontario, this is checked through a search under the Personal Property Security Act (PPSA), which shows registered security interests against a company's equipment, inventory, and other personal property.
A PPSA search is inexpensive to run — a search fee was about $8 as of mid-2026 (government fees change periodically, so confirm the current amount before relying on it). Given how little it costs relative to the value of the equipment involved, there's little reason to skip it. If a registration turns up, it needs to be dealt with — paid off, discharged, or specifically addressed in the purchase agreement — before you can be confident you're getting clear title to what you're buying.
Putting Condition Into the Purchase Agreement
Once you know the actual state of the equipment, the findings belong in the deal documents:
- A detailed asset schedule listing exactly what's included, item by item, rather than a vague reference to "all equipment."
- Representations and warranties confirming the seller owns the listed equipment free of undisclosed liens, and that it's in the condition represented.
- Excluded assets carved out explicitly where equipment is leased, third-party owned, or simply not part of the deal.
- A price adjustment or holdback where an inspection uncovers equipment needing near-term repair or replacement, rather than assuming the price already accounts for it.
Step-by-Step: Before You Sign
- Get the full asset list from the seller, including age, and whether each item is owned outright, leased, or financed.
- Physically walk the premises and compare what's actually there to the list.
- Run a PPSA search against the seller (and, where relevant, the specific equipment) to check for registered security interests.
- Arrange inspections or appraisals for major or specialized equipment where condition genuinely affects your offer.
- Resolve any liens or discrepancies before closing — either by having the seller pay them off, or by building specific protections into the purchase agreement.
- Finalize the asset schedule in the purchase agreement to match what you actually inspected and agreed to buy.
Frequently asked questions
Does a PPSA search tell me whether equipment is actually in good working order?
No — a PPSA search only tells you whether someone else has a registered legal claim against the equipment. Physical condition is a separate question, answered through inspection, maintenance records, and, where warranted, a professional appraisal.
What if the seller refuses to let me bring in an equipment inspector?
That reluctance is itself worth noting. A seller confident in the condition of their equipment generally has little reason to object to a reasonable, appropriately scheduled inspection by a serious buyer.
Who pays for equipment appraisals or inspections?
This is negotiated between the parties and varies deal to deal. Sometimes the buyer covers it as part of their own due diligence costs; sometimes it's shared or becomes a point of negotiation.
Does this matter less in a share purchase than an asset purchase?
Not really — the equipment's actual condition and value matter regardless of structure, since you're paying for the business either way. What differs is how ownership and liens are addressed contractually: in an asset purchase, the specific assets and any liens against them are usually spelled out item by item; in a share purchase, you're acquiring the corporation with its equipment (and any attached liens) as-is, unless the agreement requires them to be cleared first.
This is a business purchase or sale question
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