Due diligence is an important moment for commercial real estate buyers. In contrast to residential real estate, in which there are numerous consumer protection laws commercial properties require thorough examination and a careful judgment to ensure the purchase is an investment at a fair price. In the course of due diligence, buyers arrange for environmental, structural, building and mechanical inspections. They also review the tax records of the property, verify the zoning restrictions and look for legacy obligations left by previous owners.
The contract usually includes an estimated time frame and a date for the completion of due diligence. For example the due diligence documents deliver date could be set at seven to fourteen days from date of contract acceptance. The deadlines also give buyers and sellers the chance to discuss solutions to any issues that may arise during the process of due diligence.
Another important date is the association’s documents end date – the date that the buyer can terminate the contract if they find information in the HOA documents that renders the project unfinancially feasible for them to pursue. This usually occurs 10-14 business days after the MEC. The contract also sets an objection resolution deadline – the date when the buyer and seller must find a solution to any issues that the seller has not successfully resolved. The contract will automatically expire when no solution is discovered by the deadline. If the information discovered during due diligence is so damaging that the buyer is required to ask for an “Notice to end the contract” from their real estate agent, and a release for earnest money.