USA – NEW YORK Law and Practice Contributed by: Lindsey E. Haubenreich, Joseph P. Heins, Timothy P. Moriarty and Kimberly R. Nason, Phillips Lytle LLP
2.4 Real Estate Due Diligence Depending on the complexity of the acquisition, purchasers of real estate typically engage third parties such as: • attorneys;
• no pending or threatened eminent domain or condemnation proceedings against the real property; • no pending or threatened changes in the assessed valuation or tax rate applicable to the real property; • no pending or threatened changes in the zon - ing classification of the real property; • no known environmental defects with the real property or any actions being taken by any agency with respect to the environmental condition of the real property; and • the existence and good standing of all per - mits and certificates necessary for legal use or occupancy of the real property. There are generally no representations or war - ranties provided for under state or local law. This is not true of residential transactions. For instance, with respect to newly built homes, each sale is subject to certain warranties regard - ing the quality of construction under the Housing Merchant Implied Warranty. For pre-built homes, sellers are required to make certain disclosures with respect to the condi - tion of the real property in a Property Condition Disclosure Statement. These forms require the owner to represent certain facts, including gen - eral historical, environmental, mechanical, and structural information with respect to the prop - erty. Remedies and Protections The remedies against a seller that breaches a representation are typically defined in the con - tract, including termination of the purchase agreement, specific performance, and mon - etary damages for out-of-pocket costs incurred by the purchaser owed to attorneys and third parties engaged to assist with purchaser’s due diligence.
• institutional lenders; • real estate brokers;
• appraisers; • engineers; • surveyors; • architects; • general contractors; • title insurance/search companies; • accountants; • insurance agents;
• environmental consultants; • zoning research companies; • representatives from local municipalities; and • other third parties. Sophisticated purchasers often communicate directly with the above-referenced third parties. Contracts for the purchase and sale of real prop - erty typically provide the purchaser a specific time period in which to conduct all real estate due diligence. 2.5 Typical Representations and Warranties While representations and warranties in a pur - chase and sale contract can vary greatly, in com - mercial transactions, the following representa - tions and warranties are common: • authority and capacity to execute the agree - ment and perform the obligations under the agreement; • no pending or threatened lawsuits against the parties or the subject real property;
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