The due diligence process is an extremely important aspect of a commercial property transaction. It allows buyers to conduct an investigation of the property using their own professional advisors and determine whether the property is the right one for them.
In most cases, the contract will stipulate that the seller will provide all the information and documents necessary for the buyer to conduct their due diligence. These include survey policies, title policies, and improvement location certificates (ILC’s), along with zoning matters and any prior zoning permits that could impact the property. Due diligence periods are typically negotiated to be between 30 and 60 days, depending on the specific requirements of the parties.
Once a buyer has completed their due diligence, they usually schedule the structural, engineering, and mechanical inspections. A box will be provided in the contract that identifies the date of due diligence and optional surveys. Upon these dates, the buyer will receive a report on the results of their inspections and can choose to either continue with the purchase or end the contract.
Another commonly negotiated item is the Association Documents Objection Deadline which gives the purchaser a certain period of time to review HOA documents, including architectural control, pet covenants and parking regulations, among other things. This is typically set at 10-14 business days following the MEC.
A new ILC or survey is required if a previous one was not current or there were problems with the property’s boundaries or lines. The New ILC/Survey deadline is a date that specifies the time by which the purchaser must receive this document and any objections or withdrawals must be made before this date.