Due diligence is a crucial moment for commercial real estate buyers. Unlike residential real estate where there are various consumer protection laws in force commercial properties require rigorous examination and judgement to ensure that the purchase is a sound acquisition at a reasonable cost. During due diligence, buyers plan for environmental, structural, building and mechanical inspections. They also verify the tax records for their property, confirm zoning restrictions, and look for legacy liabilities left by previous owners.
The contract usually specifies the timeline and deadline for the completion of due diligence. Due diligence documents might be delivered within seven or fourteen business days following the contract’s acceptance date. The deadlines offer both the buyer and the seller the chance to resolve any issues that may arise during the due diligence process.
Another important date is the association’s document end date – the date by which buyers are able to end the contract if they find information in the HOA documentation that makes the project financially unsuitable for them to pursue. This usually occurs 10-14 business days after the MEC. The contract also outlines an objection resolution date – the deadline at which the buyer has to resolve any issues with the seller that have not been satisfactorily resolved. The contract automatically ends if no solution is found within the timeframe. If the information discovered during due diligence is so egregious that the buyer is required to be able to request a “Notice to Terminate” from their real estate agent as well as an agreement to release the earnest money.
