Property due diligence in Texas: what buyers and sellers check in 2026

Texas commercial property has three checks that surprise buyers from other states: the mineral rights split (surface rights and mineral rights are separate estates in Texas and the mineral estate is dominant), Houston's catastrophic flood history beyond FEMA maps, and annual property taxes that regularly run 2-3% of assessed value with no state income tax offsetting the burden.

Texas has no state transfer tax on commercial real estate - one of the very few US states at commercial scale with no transfer tax. Recording fees run less than $100 for most transactions. That's the good news. The counterweight is Texas's high annual property tax burden, levied by county appraisal districts (CADs) at assessed market value; commercial property tax rates in the major Texas metros often run 2-2.5% of assessed value annually, with some suburban MUD (Municipal Utility District) overlays pushing total rates above 3%.

Mineral rights in Texas can be severed from the surface estate and sold or leased separately. When mineral rights have been severed from the property being purchased, the buyer receives only the surface estate. The mineral estate is dominant in Texas: mineral rights holders have the right to access the surface for exploration and production, including drilling and pipeline easements. For any commercial property in a Texas oil-producing area, confirm the mineral rights status before bidding.

Houston is the flood risk case study for the US commercial real estate market. Hurricane Harvey (2017) inundated approximately 130,000 structures in Harris County - including thousands of commercial properties that were outside the FEMA 100-year floodplain. Prior major flood events (Memorial Day 2015, Tax Day 2016, Tropical Storm Imelda 2019) reinforce that Houston's flood risk is systematic and recurring, not exceptional.

Set up an Ellty data room before diligence opens. Load ALTA title, mineral rights documentation, TCEQ environmental records, and lease files before advisors arrive.

Where Texas property deals go wrong

Not every check carries the same weight. The table below sorts risks by deal impact - dealbreakers first, then what moves the price, then basic hygiene - so your Texas attorney and technical advisor know what to clear first.

Texas CRE checklist

The table ranked risks by severity. This is the full list to work through, grouped by area.

Title - ALTA and mineral rights

• Order the ALTA owner's title commitment from a Texas-licensed title company on day one
• Texas title insurance rates are set by the Texas Department of Insurance (TDI); all insurers charge the same rate schedule; the difference is service quality, not price
• The title search must cover both the surface estate and the mineral estate chains; in Texas, these can have completely separate conveyance histories
• Pull all deeds in the chain of title and identify any mineral reservations or conveyances; a seller who "reserved" the minerals in a prior deed does not convey them unless expressly included
• Order a separate mineral abstract from a Texas landman if there is any oil and gas history in the county; mineral rights research requires a specialist
• Texas Railroad Commission (RRC): search the RRC database for any active oil and gas permits, wells, or pipeline easements on or near the property
• Order an ALTA/NSPS Land Title Survey; confirm the survey includes any pipeline easements or well pad locations

Houston flood risk - Harvey corridors

• For any Harris County, Fort Bend County, Brazoria County, or Galveston County commercial property: pull both the current FEMA FIRM and the Hurricane Harvey actual inundation mapping
• Harvey inundation mapping is available from Harris County Flood Control District (HCFCD); it shows actual flooding extent from Harvey rather than modeled FEMA flood zones
• Properties inside Harvey's inundation area but outside FEMA Special Flood Hazard Areas: were flooded despite having no mandatory flood insurance; do not rely on FEMA maps alone
• MUD (Municipal Utility District) and LID (Local Improvement District) drainage systems: confirm the MUD's detention pond capacity and its maintenance status; underfunded MUD drainage is a recurring Houston commercial property issue
• Confirm whether any flood damage occurred during Harvey, Memorial Day 2015, Tax Day 2016, or Imelda 2019; obtain the insurance loss run and any flood damage remediation documentation

Houston deed restrictions - no zoning

• Houston is the only major US city without a traditional zoning ordinance; permitted commercial use is governed by private deed restrictions (covenants running with the land) recorded in the county deed records
• Pull all deed restrictions and subdivision plats from the Harris County Appraisal District and Harris County Clerk's deed records
• Deed restriction terms: identify any use restrictions (residential-only, commercial type restrictions, operating hour restrictions, signage limits) that could affect the intended commercial use
• Deed restriction enforcement: private deed restrictions in Houston are enforced by neighboring property owners or civic club associations; confirm whether there is an active civic club or property owners' association and whether the current use is compliant
• Areas outside Houston with traditional zoning (Austin, Dallas, Fort Worth, San Antonio): pull the zoning certificate from the city and confirm the current use and intended use are permitted in the zoning district

Environmental - TCEQ and petrochemical

• Search TCEQ databases: LUST (Leaking Underground Storage Tank) database, Spills and Remediation database, State Superfund registry, and Virtual File Cabinet for records on the specific address
• Commission Phase I ESA meeting ASTM E1527-21 from an environmental professional with Texas TCEQ database access
• Houston Ship Channel and Texas City petrochemical corridor: Deer Park, Pasadena, La Marque, Texas City, and Galveston Bay area have significant petrochemical industry legacy contamination; Phase I ESA and likely Phase II intrusive investigation are required for any industrial or former industrial site in this corridor
• Texas Voluntary Cleanup Program (VCP): TCEQ's program provides liability determination for contaminated site remediation; for brownfield acquisitions assess VCP eligibility; VCP is widely used in Texas commercial redevelopment
• Leaking USTs: Texas has a significant UST legacy from gas stations, fleet facilities, and oil-related operations; search TCEQ's petroleum storage tank database for any UST registrations at the property

Give each advisor a scoped link in Ellty. Your Texas attorney and landman see the title and mineral rights documents. Environmental consultants see TCEQ records and Phase I ESA. Flood risk engineers see Harvey inundation data and HCFCD records. No overlap.

Property tax - CAD assessment and MUDs

• Pull the current county appraisal district (CAD) record for the property; confirm the current assessed value and the current tax rate
• Texas permits do not cap commercial property tax increases; after a sale at a higher price, the CAD typically increases the assessed value to the sale price at the next annual reassessment; model the post-closing property tax at the acquisition price
• Municipal Utility Districts (MUDs): suburban Houston commercial properties often lie within MUD jurisdictions that levy additional property taxes for water, sewer, and drainage infrastructure; total MUD plus city/county rates can exceed 3% annually
• Tax Increment Reinvestment Zones (TIRZs): confirm whether the property is in a TIRZ; TIRZs capture incremental property tax to fund infrastructure but do not typically exempt the base tax burden
• Confirm whether any pending property tax protest (Appraisal Review Board or district court appeal) is outstanding against the seller; pending protests must be assigned to the buyer or resolved before closing

Oil and gas lease surface use

• If mineral rights have been severed from the surface: confirm whether any active oil and gas lease is in effect
• An active oil and gas lease gives the lessee the right to access the surface for exploration and production, including surface use, roads, pipelines, and well pads; these rights are superior to the surface owner's rights in Texas
• Search Texas Railroad Commission records for any active wells or pipeline permits on or near the property
• For properties in the Permian Basin, Eagle Ford Shale (South Texas), Barnett Shale (North Texas/DFW area), or Haynesville Shale (East Texas): mineral rights and surface use review is a first-day diligence item, not a secondary check

Winter Storm Uri building resilience

• For any Texas commercial building constructed before 2022: review the building mechanical inspection for freeze protection
• Uri (February 2021) caused an estimated USD 195 billion in Texas property damage; burst pipes, frozen HVAC systems, and failed building envelope insulation were the primary commercial damage types
• Buildings in West Texas (Lubbock, Midland, Amarillo, El Paso) are at higher cold weather risk than coastal markets; but Uri proved even Houston commercial properties are vulnerable to sustained below-freezing temperatures
• Confirm: pipe insulation upgraded in exterior walls, hose bibs protected, sprinkler systems winterized, HVAC heat tape on exterior lines; request the post-Uri repair and upgrade records

Leases - Texas commercial terms

• Texas commercial leases are typically Triple Net (NNN); tenants pay base rent plus all operating expenses, property taxes, and insurance
• Property tax pass-through: confirm the base year, rate stop, and any property tax increase caps in each NNN lease; post-sale CAD reassessment to the acquisition price can significantly increase the property tax burden passed through to tenants
• Confirm no tenant lease has a co-tenancy clause (common in retail) that allows rent reduction or termination if an anchor tenant leaves; Texas retail centers often include anchor co-tenancy provisions

Compare Oklahoma's commercial property diligence process when running Southern Plains portfolio acquisitions. Oklahoma and Texas share oil and gas mineral rights complexity (both have dominant mineral estate doctrines), but Oklahoma has a state transfer tax (1.5% of face value for deeds) while Texas has none. Oklahoma's seismicity from wastewater injection wells is a structural risk that Texas markets don't carry at the same scale, though Texas also has injection well activity near the Permian Basin.

Insurance and valuation

• Commission an MAI appraisal using current Texas market data; major Texas commercial markets (DFW, Austin, Houston, San Antonio) have sufficient comparable data; smaller markets have thin comp sets
• Gulf Coast commercial properties (Corpus Christi, Galveston, Beaumont, Port Arthur, Brownsville): confirm TWIA (Texas Windstorm Insurance Association) windstorm insurance eligibility and coverage; TWIA is the insurer of last resort for the 14 Texas coastal counties
• Flood insurance: for Houston commercial assets in or near FEMA SFHAs, confirm NFIP coverage; the NFIP commercial building cap of $500,000 means private excess flood insurance is needed for larger commercial buildings
• Loss run: for any Houston commercial property: request 10-year loss run to capture Harvey (2017), Imelda (2019), and any other major flood events

Track all document reviews in Ellty. If the environmental consultant is repeatedly accessing the TCEQ Spills database and the HCFCD flood records, the environmental and flood risk questions are building simultaneously. Know before the formal reports land.

Texas permits and zoning

• For Houston: pull all deed restrictions from the county deed records; confirm no commercial use restrictions apply to the intended business
• For Austin, Dallas, Fort Worth, San Antonio: pull the zoning certificate from the city planning department; confirm the current use and the intended use are both permitted under the zoning classification
• Building permits: pull permit history from the city; Texas cities vary significantly in their online permit record availability
• Certificate of Occupancy: confirm the C of O reflects the current use; confirm all final inspections are complete

Seller KYC and AML

• Pull the Texas Secretary of State entity filing for the selling entity; confirm active status
• Texas is a major market for foreign investment (particularly from Latin American and Gulf investors); perform enhanced UBO analysis for any entity with offshore or foreign affiliations
• CFIUS review: foreign acquisitions of agricultural land in Texas, or commercial assets near military bases (Ft. Hood, Ft. Bliss, Dyess, Lackland, etc.) may trigger CFIUS national security review under FIRRMA; assess before closing
• Run OFAC, UN, and EU sanctions checks on all principals

How due diligence works in a Texas commercial deal

Step 1 - Title and mineral rights

Day one: order the ALTA title commitment and, for any property in an oil and gas producing area, engage a Texas landman for a mineral abstract. Both are parallel workstreams that must close before any binding commitment.

For the mineral abstract: trace the mineral conveyance history from the current surface deed backward through all prior owners. A common Texas pattern: an original owner sells the surface but "reserves unto grantor and grantor's heirs" the mineral rights. Those minerals don't come with the surface sale unless expressly conveyed. A landman who specializes in county deed records is the right resource; general real estate attorneys often lack the specialized mineral title skills needed.

Step 2 - Flood and environmental

For Houston area commercial assets: Harvey inundation mapping from HCFCD is the first environmental check - even before Phase I ESA. If the building was flooded in Harvey, the Phase I and building condition inspection need to specifically address flood damage remediation and mold risk.

For any petrochemical corridor asset: commission Phase I ESA from a TCEQ-experienced environmental firm on day one. The Ship Channel and Texas City area require Phase II intrusive investigation for most industrial or former industrial sites.

Step 3 - Deed restrictions (Houston) or zoning

For Houston: pull all deed restrictions before investing time in lease review. A deed restriction that prohibits the intended commercial use is a dealbreaker; finding it after lease analysis wastes weeks.

For other Texas cities: confirm the zoning certificate covers the current and intended use. Austin's commercial zoning has become increasingly complex with its Land Development Code revisions since 2023; engage a local Austin land use attorney for any Austin commercial acquisition with development or redevelopment plans.

Load all documents into Ellty. Your landman sees the mineral chain documents. Environmental consultant sees TCEQ and Phase I records. Flood risk engineer sees HCFCD and Harvey mapping. Each advisor works from a separate scoped link.

Step 4 - Property tax modeling

Request 3 years of CAD assessed values and tax bills. Model the property tax at the acquisition price (assume the CAD reassesses to the sale price). For suburban Houston properties in MUDs: confirm the total rate (CAD + MUD) and the MUD's financial health and infrastructure status.

For any commercial deal in a tax increment reinvestment zone (TIRZ): confirm whether the TIRZ captures incremental taxes that would otherwise fund the CAD rate; TIRZ participation is usually neutral for buyers but should be confirmed.

Step 5 - Closing

Texas commercial closings are typically title company-driven with escrow. Attorneys for buyer and seller review documents but the title company handles the closing mechanics. There is no state transfer tax to calculate; the only fees are nominal county recording fees (typically under $100).

What makes Texas different

The mineral rights split is Texas's most distinctive commercial real estate diligence feature. In most US states, when you buy land, you buy everything: surface, subsurface, and mineral rights. In Texas, the mineral estate can be and frequently has been severed from the surface estate; millions of Texas land parcels have separate surface and mineral ownership chains. When you buy a commercial property in Texas without mineral rights, the mineral rights owner has a dominant right of surface access. This is standard in Texas but genuinely surprising to buyers from most other states.

Houston's flood risk is not fully captured by FEMA maps. This is documented, not theoretical. Harvey flooded tens of thousands of Houston commercial properties that were outside the FEMA 100-year floodplain. FEMA maps in Harris County have been updated post-Harvey but still don't fully reflect actual risk in some subwatersheds. The only reliable flood risk assessment for Houston commercial property uses Harvey actual inundation mapping from HCFCD alongside FEMA FIRMs. Both maps together, not one alone.

Texas property taxes are the ongoing operating cost that resets the cap rate math. With no state income tax, Texas relies heavily on property taxes levied by county appraisal districts. Commercial property in the major Texas metros (DFW, Austin, Houston) is regularly assessed at or near market value, and the rates applied to that assessed value run 2-2.5% annually. On a $10M commercial asset, that's $200,000-$250,000 in annual property taxes. For NNN-leased assets, the tenants pay it; for gross-lease or mixed assets, the landlord absorbs it. Model it explicitly.

No state transfer tax in Texas is a genuine cost advantage. On a $50M commercial acquisition, avoiding a 1-2% transfer tax saves $500,000-$1,000,000 compared to California, New York, or most European markets. That cost advantage is real and it's part of why Texas commercial real estate has attracted significant domestic and international institutional capital.

Timeline and cost in Texas

Weeks 1-2 cover kickoff: ALTA title commitment order, mineral abstract engagement (for oil-producing areas), TCEQ database search, Phase I ESA commission, Harvey inundation mapping pull (for Houston), deed restriction research (for Houston), CAD property tax record review, and lease abstraction initiation. Legal and landman fees in this phase run USD 5,000-20,000.

Load all files into Ellty before advisors engage. Texas commercial deals move fast; institutional buyers expect 30-45 day close timelines in competitive markets. Centralized document management from day one keeps pace with deal velocity.

Weeks 2-5 cover deep review: Phase I ESA delivery, mineral abstract completion and title opinion, Harvey flood risk analysis, deed restriction compliance confirmation, property tax modeling at acquisition price, lease abstraction, NNN expense reconciliation review, and building condition inspection (including Uri freeze protection review). Costs in this phase: USD 15,000-50,000.

Weeks 5-8 handle resolution: Phase II ESA (if triggered), mineral rights negotiation (if severed minerals create surface use exposure), deed restriction compliance plan, and title exception clearance.

Texas total acquisition costs: no state RETT + ALTA title insurance + recording fees (under $100) + legal fees + landman (mineral abstract). Total acquisition cost runs approximately 1-2% of purchase price - significantly lower than most US states with transfer taxes. The high annual property tax (2-3% of assessed value) is the ongoing NOI cost that must be modeled throughout the hold period.