Due diligence is a crucial time for commercial real property buyers. Commercial properties in contrast to residential real estate requires a thorough analysis and judgment in order to ensure that the purchase is a fair price. When conducting due diligence, buyers request structural and environmental inspections, in addition to building and mechanical ones. They also review the tax records for their property, confirm the zoning restrictions, and search for legacy obligations left by previous owners.
The contract usually outlines the timeline and deadline for the completion of due diligence. Due diligence documents may be provided within seven to fourteen business days of the contract acceptance date. The deadlines allow both the buyer as well as the seller the chance to resolve any issues that may arise during the due diligence process.
Another important deadline is the association’s document end date – the date on which the buyer can terminate the contract if they discover information in the HOA documents that makes the project unfinancially viable for them to pursue. It usually happens between 10 and 14 days after the MEC. The contract also specifies an objection resolution date – the date that the buyer has to resolve any issues with the seller which are not resolved satisfactorily. The contract will automatically terminate if there is no solution within the timeframe. Buyers should always seek a “Notice To Terminate” and an agreement to release earnest money from their broker in the event that they believe the information discovered during due diligence is so shocking that there is no resolution with the seller.
