{"id":1843,"date":"2017-09-05T19:13:35","date_gmt":"2017-09-05T19:13:35","guid":{"rendered":"https:\/\/www.sherin.com\/real-estate\/?p=1837"},"modified":"2021-04-22T18:42:37","modified_gmt":"2021-04-22T18:42:37","slug":"commercial-real-estate-tensions-in-due-diligence-2","status":"publish","type":"post","link":"https:\/\/www.sherin.com\/real-estate\/2017\/09\/05\/commercial-real-estate-tensions-in-due-diligence-2\/","title":{"rendered":"Commercial Real Estate: Tensions in Due Diligence"},"content":{"rendered":"<p>Whenever a buyer wants to acquire real estate, due diligence can make or break the deal.\u00a0 For obvious reasons a buyer wants not to buy a \u201cpig in a poke.\u201d\u00a0 (As an aside, do you know the origin of \u201cpig in a poke?\u201d It may surprise you. See\u00a0 <a href=\"http:\/\/www.phrases.org.uk\/meanings\/a-pig-in-a-poke.html\">http:\/\/www.phrases.org.uk\/meanings\/a-pig-in-a-poke.html<\/a>. This etymology has been authenticated by the Wordsmith of Rhode Island).<\/p>\n<p>The buyer wants ample time to inspect the property\u2019s structural integrity, zoning and environmental compliance, review the back title, and study the seller\u2019s books and records, including any leases.\u00a0 Is the cash flow for the property as represented by the seller?\u00a0 If there are liabilities to be assumed, what may they be? The purpose for due diligence is to give the buyer comfort that what has been offered for the property is justified by the facts on, under and over the ground.\u00a0 The buyer also wants enough time to obtain a commitment for financing since many sellers won\u2019t accept a financing contingency.<\/p>\n<p>If the results of the due diligence are not to the buyer\u2019s liking, but the property is still desired, a price adjustment may be negotiated.\u00a0\u00a0 But if the seller won\u2019t re-trade, the deal is off, and the buyer should be able to terminate the agreement and have the deposit returned.\u00a0\u00a0 An alternative may be additional representations and warranties of the seller to give the buyer further comfort.\u00a0 If the seller wants top dollar, the buyer may pay it, but only with representations and warranties and a survival period that the seller may ordinarily not give.<\/p>\n<p>The due diligence period, moreover, need not start from the date of the purchase agreement.\u00a0\u00a0 There is typically a signed letter of intent or offer between the parties and the buyer may have started examining title, zoning, and documents from the seller before the purchase agreement is signed.\u00a0 The seller may, therefore, require a shorter due diligence period in the purchase agreement.\u00a0 The seller wants the purchase agreement to \u201cgo hard,\u201d meaning the buyer\u2019s contingencies have been satisfied and any deposit becomes non-refundable except for the seller\u2019s default.\u00a0 The sooner a purchase agreement goes hard, the less risk of a re-trade with the buyer.<\/p>\n<p>The duration of the due diligence period may be a definite term of weeks or months. Alternatively, the parties may negotiate a due diligence period that starts to run only after the buyer receives certain documents from the seller such as a title commitment and survey. \u00a0However, the seller should avoid a due diligence period that only starts after \u201call due diligence documents\u201d are provided to the buyer unless the documents are identified in the purchase agreement and the seller confirms before signing are either in its possession or control.<\/p>\n<p>The parties may also negotiate different due diligence periods for certain items.\u00a0 There may be a shorter period for the buyer to review title and survey matters, and more time to review zoning, environmental, and other matters. The parties may also negotiate additional deposits for extensions of the due diligence period.\u00a0 Treatment of the additional deposits must also be negotiated. Are they applied to the purchase price at closing, added to the purchase price, escrowed or released to the seller before closing?<\/p>\n<p>The foregoing attempts to provide some of the salient deal points on due diligence typically negotiated in a purchase agreement for commercial real estate.\u00a0\u00a0 The real estate lawyers at Sherin and Lodgen are well versed and experienced and are more than willing and able to assist in these matters whether representing a buyer or a seller.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Whenever a buyer wants to acquire real estate, due diligence can make or break the deal.\u00a0 For obvious reasons a buyer wants not to buy a \u201cpig in a poke.\u201d\u00a0 (As an aside, do you know the origin of \u201cpig in a poke?\u201d It may surprise you. See\u00a0 http:\/\/www.phrases.org.uk\/meanings\/a-pig-in-a-poke.html. This etymology has been authenticated by [&hellip;]<\/p>\n","protected":false},"author":9,"featured_media":1840,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[],"tags":[],"class_list":["post-1843","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.2 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Commercial Real Estate: Tensions in Due Diligence - Real Estate<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.sherin.com\/real-estate\/2017\/09\/05\/commercial-real-estate-tensions-in-due-diligence-2\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Commercial Real Estate: Tensions in Due Diligence - Real Estate\" \/>\n<meta property=\"og:description\" content=\"Whenever a buyer wants to acquire real estate, due diligence can make or break the deal.\u00a0 For obvious reasons a buyer wants not to buy a \u201cpig in a poke.\u201d\u00a0 (As an aside, do you know the origin of \u201cpig in a poke?\u201d It may surprise you. See\u00a0 http:\/\/www.phrases.org.uk\/meanings\/a-pig-in-a-poke.html. This etymology has been authenticated by [&hellip;]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.sherin.com\/real-estate\/2017\/09\/05\/commercial-real-estate-tensions-in-due-diligence-2\/\" \/>\n<meta property=\"og:site_name\" content=\"Real Estate\" \/>\n<meta property=\"article:published_time\" content=\"2017-09-05T19:13:35+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-04-22T18:42:37+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.sherin.com\/real-estate\/wp-content\/uploads\/sites\/2\/2017\/09\/49186218_l.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"2510\" \/>\n\t<meta property=\"og:image:height\" content=\"1671\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Sherin and Lodgen\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Sherin and Lodgen\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.sherin.com\\\/real-estate\\\/2017\\\/09\\\/05\\\/commercial-real-estate-tensions-in-due-diligence-2\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.sherin.com\\\/real-estate\\\/2017\\\/09\\\/05\\\/commercial-real-estate-tensions-in-due-diligence-2\\\/\"},\"author\":{\"name\":\"Sherin and Lodgen\",\"@id\":\"https:\\\/\\\/www.sherin.com\\\/real-estate\\\/#\\\/schema\\\/person\\\/96bd34e7823afde2e3e7e561023c5a44\"},\"headline\":\"Commercial Real Estate: Tensions in Due Diligence\",\"datePublished\":\"2017-09-05T19:13:35+00:00\",\"dateModified\":\"2021-04-22T18:42:37+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.sherin.com\\\/real-estate\\\/2017\\\/09\\\/05\\\/commercial-real-estate-tensions-in-due-diligence-2\\\/\"},\"wordCount\":610,\"commentCount\":0,\"image\":{\"@id\":\"https:\\\/\\\/www.sherin.com\\\/real-estate\\\/2017\\\/09\\\/05\\\/commercial-real-estate-tensions-in-due-diligence-2\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.sherin.com\\\/real-estate\\\/wp-content\\\/uploads\\\/sites\\\/2\\\/2017\\\/09\\\/49186218_l.jpg\",\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.sherin.com\\\/real-estate\\\/2017\\\/09\\\/05\\\/commercial-real-estate-tensions-in-due-diligence-2\\\/\",\"url\":\"https:\\\/\\\/www.sherin.com\\\/real-estate\\\/2017\\\/09\\\/05\\\/commercial-real-estate-tensions-in-due-diligence-2\\\/\",\"name\":\"Commercial Real Estate: Tensions in Due Diligence - 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