USA - NEW JERSEY Law and Practice Contributed by: Steven Fleissig, David Freylikhman, Cory Mitchell Gray and David Jensen, Greenberg Traurig LLP
costal storm surge, tidal inundation, or river overflow? If so, how many times? In making the required disclosures, the dis - closure form must also include a notice that state-wide flood risks are increasing, and that the buyer may review these risks by going to the website that the New Jersey Department of Environmental Protection will manage. While no remedy is expressly stated for failure to make the required disclosures, the language pro - vides that the disclosure must be given before the buyer is obliged to purchase the property. This has resulted in a question as to whether the buyer will have a termination right for the seller’s failure to make the disclosure. 2.4 Real Estate Due Diligence It is generally advisable and customary for pur - chasers of real estate in New Jersey to conduct due diligence prior to closing. Typically, there is a period of time following execution of a contract, during which time all such diligence activity is conducted and, during such time, the deposit remains refundable to the purchaser in the event of a termination by the purchaser for any reason or no reason. This is often referred to as a “free look”. In a residential context, this is often as simple as a home inspection and a title review process handled primarily by the purchaser’s legal coun - sel. In a commercial context, the due diligence process is more complicated and the level of scrutiny would depend on the facts. Typically, this involves the review and inspection of the fol - lowing by the purchaser’s attorneys: title reports, surveys, rent calculations for compliance with rent regulations, leases and tenant estoppel cer - tificates, service contracts, warranties, property condition reports, zoning, environmental reports
(Phase I and Phase II), and certificates of occu - pancy. Sophisticated clients typically handle some of the above diligence activities on their own; specifically, review of rent rolls and rent calculations, operating statements, and service contracts on the property. This allocation of responsibilities has remained constant in recent years, though certain diligence services tradi - tionally performed by attorneys have adapted to innovations in technology. Examples include lease abstracting, where clients have outsourced to independent vendors for a fraction of the cost. It is worth noting that the diligence process in New Jersey is not dissimilar from the process in other jurisdictions; however, the environmental diligence is more nuanced as a result of New Jersey’s environmental laws. In this context, it is typical and often advisable for a seller of real estate to prohibit a prospective purchaser from using an LSRP from entering the property or oth - erwise having any involvement with purchaser’s investigations. 2.5 Typical Representations and Warranties In New Jersey, purchase and sale agreements have representations and warranties of both purchaser and seller. Typically, a seller’s repre - sentations and warranties are significantly more involved and are heavily negotiated, though sell - ers seek to limit representations to the types of discoveries that a purchaser would otherwise be unable to uncover with diligent efforts. A pur - chaser’s representations are typically limited to authority and financial ability to consummate the closing. In addition, it is common for a purchaser to insist that the purchase and sale agreement provide that the seller’s representations and warranties survive closing for a given period of time. Sur -
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