The due diligence process is an extremely important part of a commercial real property transaction. Due diligence allows buyers to review the property with their professional advisors and determine whether the property is suitable for them.
In most cases, the contract will stipulate that the seller must provide all the information and documents necessary for the buyer to perform their due diligence. These include surveys, title policies, and improvement location certificates (ILC’s) as well as questions regarding zoning and prior zoning approvals that could affect the property. Due diligence periods typically range from 30 to 60 days, depending on the requirements of both parties.
After a buyer has conducted their due diligence, they typically schedule engineering, structural, building and mechanical inspections. The contract will usually contain a box which indicates the due diligence date and an optional survey date. Upon these dates, the purchaser will receive a written report of the results of their inspections. They can decide to continue with the purchase or end the contract.
The Association Documents Objection Deadline is another aspect that is often negotiated. It allows buyers a certain amount of time to review HOA documentation, which includes architectural control, pet and covenants and parking rules. This is typically set at 10-14 business days after the MEC.
Also a new ILC or survey may be required if the prior one is not up-to-date or if there are any issues about property lines or boundaries. The New ILC/Survey Deadline is a date which specifies when the buyer has to be provided with these documents, and any objections must be resolvable or withdrawn by this date.