Always Read Your Due Diligence Docs

February 2021

In this issue, we will continue the discussion of common mistakes buyers of real property make and how a trusted real estate attorney can help.  

A common mistake that the attorneys at Fetherston Edmonds, LLP see by buyers who do not read the underlying documents or if they do read them, do not fully comprehend what they mean. This sounds obvious, but it is surprising how often buyer’s do not read the documents referenced in the preliminary title report or the due diligence materials prepared for them by an expert.  The common rational we hear is that the buyer was trying to save money by not engaging in legal counsel or experts.  

A traditional commercial real estate purchase will generate a preliminary title report.  The report will list any licenses, easements, or recorded agreements that affect the property.  Those documents are crucial to understand what can or cannot be done with the property.  

An easy way to protect yourself or your client – and to save money and headaches in the future - is to read the licenses, easements or other written agreements affecting the properties.  Not only should you read them carefully, but you should engage legal counsel, land surveyors, and/or engineers to explain what the impact of those documents are on the property.  

A recent example is a buyer of industrial property who did not realize that there was an underground storage tank on the property.  The tank was identified in materials provided to the buyer during the due diligence phase.  For reasons that are unclear, the buyer was not aware of what this meant and the implications on development with the property.  Unfortunately for the buyer, the tank was discovered during construction on the property and lead to unforeseen costs and delays.  The mistake could have easily been avoided. 

In Oregon, common sales agreements require the buyer to obtain the property “AS IS” with any defects known or unknown.  During your due diligence phase, this is your change to understand the property and protect yourself from any issues. 

A buyer doing his or her homework can pay off.  Having a trusted real estate attorney review analyze the underlying items identified in a preliminary title report, provided by the seller, and/or experts, can prevent expensive problems down the road.

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