Due diligence is a crucial moment for commercial real property buyers. Commercial properties are, unlike residential real estate, require a thorough examination and judgment to ensure that the purchase is an affordable price. When conducting due diligence, buyers request structural and environmental inspections, in addition to building and mechanical ones. They also review property tax records, confirm the zoning restrictions and look for any legacy debts left by previous owners.
The contract usually includes a timeline for completion of due diligence. For instance the due diligence documents delivery deadline could be anywhere from seven to fourteen days from date of acceptance of the contract. The deadlines give both the buyer and seller the opportunity to negotiate any issues that might arise during the due diligence process.
Another important date is the association’s documents termination date, which is the date that the buyer can terminate the contract if they discover information in the HOA documents that renders the project unfinancially feasible for them to pursue. This typically occurs 10-14 business days after the MEC. The contract also specifies an objection resolution deadline – the date that both parties must come to a solution to any issues that the seller has not effectively addressed. If there is no solution within the deadline, the contract will automatically end. If the information discovered during due diligence is so damaging, the buyer should be able to request an “Notice to terminate” from their real estate agent and a release of earnest money.
