Summary of Commercial Real Estate Feasibility Period

When purchasing a commercial property, there is usually a feasibility period (due diligence period) that allows the Buyer to inspect all aspects of the property. The feasibility period usually begins after the opening of escrow. During the Feasibility period, the Seller has a certain number of days to deliver the property information to the Buyer (see below for an example of some of the items to be delivered from the Seller to the Buyer).  During the Feasibility Period, the Buyer may inspect, study and examine the property to determine if the property is suitable for them to purchase. If it is discovered the property is not going to work during the Feasibility Period, the Buyer may cancel the escrow, for any reason, and have their earnest money returned to them. Alternatively, as part of a negotiation, the Buyer may ask the Seller to correct the issue(s) or ask for a credit to the Buyer at close of escrow. Once Feasibility expires, the Buyer’s earnest deposit becomes non-refundable to the Buyer unless there is a default by the Seller.

The Seller is required to give the Buyer all information affecting the property such as:

  • Title Report (from the title company)
  • Leases, Estoppels
  • Service Contracts
  • Roof, air conditioning, electrical, plumbing, reports for previous and upcoming maintenance and repairs.
  • Alta Surveys, inspection reports, environmental studies (if in Seller’s possession)
  • Site plans
  • Property tax bills
  • Owner’s association info
  • Financial Statements and budgets

The Buyer is responsible for conducting its own due diligence (and not solely rely on the seller’s documents).  They should thoroughly review all of the documents supplied by the Seller. In addition, the Buyer should schedule property inspections, 3rd party reports including ALTA Surveys, Environmental Reports and appraisals.