Page 13 - The Suffolk Lawyer - May 2021 - Vol. 36, No. 3
P. 13

REAL ESTATE DEVELOPMENT • SPECIAL SECTION • REAL ESTATE DEVELOPMENT


                    Diligence Performance in a Pandemic and Beyond



                                                                       By Lynn Cosma Wenkert

                   ommercial real estate transactions in-    or chain of title issues. Purchaser may also    for investigating known defects, or request
                   corporate due diligence periods dur-      consider updating previously commissioned       a cost sharing agreement.  For example, if
            C ing which the purchaser may conduct            reports or surveys to save time and money.  the premises has known contamination the
            inspections and testing upon the premises to     Another strategy involves contingency based     costs of determining the extent of contami-
            determine whether or not to proceed.  En-        extensions.                                     nation and required remediation protocols
            suring the adequacy of this free look oppor-       Negotiate a due diligence provision which     could be capped or shared.
            tunity is critical to protecting the purchaser’s  gives the Purchaser the right to extend the       Customarily, a Purchaser will indemnify
            interests. This article focuses on the impact    period based upon specified contingencies,      the Seller from and against any damage or
            of the pandemic on due diligence perform-        such as, lender or municipal approvals. Draft   liability arising from the performance of Pur-
            ance and the consequent drafting and nego-       due diligence provisions which grant the Pur- chaser’s due diligence investigations upon
            tiating considerations.                          chaser an extension to obtain contract con-     the premises.  While historically this applied
               Adequate time to complete investigations      tingent approvals, or at a minimum, tailor      to physical damage to persons or property,
            presents a greater challenge.  One strategy      provisions to allow additional time for Pur- contagious disease carried by an agent now
            to avoid delay is better preparation. Sched-     chaser to achieve key goals in the approval presents a foreseeable risk and should be
            ules are easily derailed by delays in testing,   process, i.e., acceptable appraisal or subdi-   carved out from Purchaser’s indemnity.  Ad-
            environmental surveys, engineering inspec-       vision approval.                                ditionally, contractors can be required to in-
            tions and reports. Obtaining contractor pro-       This approach can be used to permit ex-       sert a provision into their proposals agreeing
            posals  before  going  to  contract  will  save  tension based on the continuance of a pan-      to comply with any industry recommended
            valuable time.  A request for a penalty in the   demic, or a government ordered shutdown.        safety protocols.
            event of the contractor’s delivery delay, even   Contingency based extensions are generally         Review of leases and representations re-
            if denied, will elicit a more realistic perform-  structured to allow an initial free extension,  garding their status should be given higher
            ance schedule.                                   followed by extensions for which Purchaser      priority. It may also be advisable to provide
               Order preliminary title searches, surveys     picks up a portion of the carrying charges or   for access to anchor tenants.
            and site plans before going to contract. Hav-    incurs a penalty if the transaction is termi-
            ing these resources allows you to plot the       nated.                                          Lynn Cosma Wenkert is a skilled advocate, who
                                                                                                             practices in the areas of corporate and commercial
            improvements, restrictions and easements to        Costs of goods and services have esca-
                                                                                                             real estate transactions. Ms. Wenkert has been
            avoid conflict with the proposed use, and        lated.  The Purchaser should negotiate a cap    advising the business community of Long Island
            gives the parties an edge on clearing any lien   on the amount they are required to expend       for over 35 years and is based in Commack.

























































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