I think it’s important to spell out and understand the due diligence and inspections that were agreed upon during the negotiation stage of the Agreement of Purchase and Sale. It’s recommended to be assertive and present ideas that will help finalize a transaction on the day of closing. Commercial transactions can be lengthy and depend on many variables, such as environmental issues, latent defects, unexpected municipal inspections, and other factors.
The first inspection after the acceptance of a agreement of purchase and sale is crucial and arranging it as soon as both parties have accepted the Agreement of Purchase and Sale will save time. After inspecting all the common areas, roof, utility rooms, lockers, etc., it’s time to look at the remaining suites you did not view during the sales showing. This inspection will confirm if what was represented during the sales showing and the negotiations of the Agreement of Purchase and Sale is true and to your liking.
As a buyer, it’s encouraged to inspect all units to make an informed decision. If the building is large, an inspection of random units may be suitable; however, all units should be available for inspection by the seller giving proper notice to all tenants. Giving proper notice to all the tenants will allow you the opportunity to randomly enter any unit. This random entry of suites will prevent the seller from selectivly picking suites and purposly miss represent the over all condition of the units.
The inspections required for everyone’s comfort level, including financing, are key components of any Agreement of Purchase and Sale. Listing these key components will prevent people from changing their minds. The extent of the inspections depends on the age and condition of the building and the level of knowledge of the buyer.
Some inspections require time, and there may be a waiting list for professionally organized inspections, such as engineers. It’s essential to know these timelines before negotiating condition dates. Signing amendments because these timelines were not understood or known can be time-consuming and cause a change of mind. Time is always the essence of all transactions, even if the time of the Essence Clause is not included in the Agreement of Purchase and Sale.
There will always be potential delays that are natural to the process, and these will be easier to deal with when all other dates have been adhered to. Adhering to timelines builds confidence in the eyes of the seller and their lawyer. It’s also important to ensure that any professional organizations that will be providing reports are accepted by the lending institution.
When doing any inspections, unless arranged as an extremely specific inspection, access to the entire building should be available to the investor. It’s in the seller’s best interest to allow full access when requested. You can help the process by doubling up on some inspections that can overlap, which will help by lessening the burden on tenants, management, and staff. This way, when professionals draft their reports, they can state they saw everything, and full access was granted. Many people will be relying on the reports throughout the process, and they need to feel comfortable with them.