Real Property: The Devil is in the Details or an Ounce of Prevention is Worth a Pound of Cure.
Nov. 1, 2019
A client approached me and asked for help with the closing of a purchase of a $2MM real property deal. The client wanted to use the property for a specific type of development following closing. The client entered into a purchase agreement for the property more than 120 days prior to the call to me.
So, as I was helping the client get documents straight and helping make certain the property was correctly conveyed and with the appropriate easements for access, I also checked with the local tax assessor’s parcel maps to review the properties. And what did I find? A few of the parcels to be purchased were unincorporated and unzoned (good for client’s proposed development), but others were in an incorporated municipality and zoned only for low density single-residence housing. That didn’t fit with client’s development scheme at all.
The problem? You may have guessed already, but the contract for the purchase of the property included a “due diligence” period of only 30 days. More than 90 days later, my client could have been out of luck if the client tried to pull out of the deal (and lose all earnest money and potentially have to pay the seller’s fees). The resolution was good – we managed to obtain a zoning letter from the city’s mayor and a promise from the seller to help with any re-zoning efforts – but it could have been a very bad result.
The moral here? Bring in your attorney on the front-end to make sure and avoid problems on the backside. A few thousand dollars in fees could save many thousands in lost deposits or millions in a deal that can’t work as intended.