Buyers of commercial real estate are not protected by the same consumer protection laws as buyers of residential real estate. Purchase and Sale Agreements can be drafted to include a variety of Seller representations and warranties; however many commercial real estate properties are sold on an “As Is” “Where Is” basis without, or with very limited representations or warranties. The Buyer is on his/ or her own to conduct necessary and appropriate due diligence.
The almost universal norm for commercial real estate transactions is that the Buyer and Seller enter into a contract for the purchase and sale of the property, the Buyer places a deposit in escrow and has a period of time to conduct due diligence on the property. During the “Due Diligence Period” the Buyer has the right to cancel the purchase and sale agreement and receive a refund of the deposit. It is very important that the purchase and sale agreement be properly drawn and sufficient time allowed to complete the due diligence. Representation by a skilled and experience attorney is recommend for the Buyer so that appropriate due diligence is received from the Seller and for the Seller to be certain the representations, warranties and discovery duties are properly allocated.
Among the typical due diligence items for a commercial transaction are: (1) Tenant Estoppel Certificates, (2) Phase 1 Environmental Review, (3) Structural, mechanical, electrical and life safety system reviews and (4) code and zoning compliance.
These transactions are complex and typically carry long-term risks, so it is important that buyers and sellers alike protect their interests and cover their legal bases. Attorneys at Shulman, Hodges & Bastian LLP handle every kind of real estate transaction, including the purchase and sale of commercial property.