A buyer considering a purchase of commercial real estate in California will have many details to consider before committing to a deal. In general, a seller should grant the potential buyer a period of time to conduct due diligence. This investigative period allows the buyer to weigh the asking price against factors that influence value and liability. Essential issues to check include the status of the title, zoning, compliance with environmental regulations, cash flow and lease agreements.
Due diligence does not have to wait for the signing of a purchase agreement to begin. The two parties could create a letter of intent to make an offer that specifies a period for property research. During this period, a seller could provide important documentation about the building, and the buyer could research other issues. When due diligence occurs prior to the signing of a purchase agreement, that final agreement will likely grant less time for continued investigation because the buyer’s contingencies should be resolved at that point.
If a buyer encounters delays when researching a property, the party could approach the seller and negotiate an extension. Granting an extension might be contingent upon the buyer providing a deposit. The agreement will need to address the treatment of the deposit, such as whether it would be applied to the purchase price or released to the buyer at an earlier date.
Buyers and sellers should consider all the terms leading up to the deal very carefully. An attorney familiar with commercial real estate could provide a person with vital insights during this process. The lawyer could examine documents and alert the client to potential problems. When tensions or outright disputes emerge between the buyer and seller, an attorney might resolve the situation with negotiations that establish fair protections for each side.
