The due diligence period is a crucial time for any commercial real estate purchaser. In contrast to residential real property where there are a myriad of consumer protection laws in force commercial properties require rigorous examination and judgement to ensure that the purchase is an investment at an appropriate price. When conducting due diligence, buyers arrange for environmental, structural, building and mechanical inspections. They also seek property tax records, verify zoning restrictions and check for legacy liabilities from past owners.
The contract usually includes an outline of timeframe and deadline for the completion of due diligence. For instance, the due diligence documents delivery deadline might be seven to 14 days from the date of contract acceptance. The deadlines also allow both parties a chance to negotiate solutions for any issues that might arise during the process of due diligence.
Another important deadline is the association’s document termination date, which is the date on which buyers can end the contract if they find information in the HOA documentation that makes the project financially unsuitable for them to pursue. This typically occurs 10-14 business days after the MEC. The contract also specifies an objection resolution date – the deadline that the buyer has to resolve any problems with the seller that have not been resolved satisfactorily. The contract automatically ends if no solution is found within the timeframe. If the information uncovered during due diligence is so indecent that the buyer is required to seek a “Notice to End” from their real estate agent as well as a release of earnest money.
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